Ethical and Legal Constructs of a Contract - Case Study Example

Pertinent to the case is the determination of whether parties should rescind a contract because of a mutual mistake of fact, ethics in the parties’ actions in the case, provisions of the Uniform Commercial Code on the case, and possible winners or losers in a rescinded contract due to mutual mistake.

The parties should be able to rescind the contract under mediated caution. Rescission of a contract, based on mutual mistake, involves both legal and ethical considerations that should be made in justifying it. A legal approach to the issues identifies termination of a contract under mutual mistake because this makes a contract void per se. Such positions have been held in judicial decisions such as in the case of Bell v Lever in which an agreement to terminate employees under compensation was rescinded because the employees had, at the time of the agreement, breached their contract and neither party was informed of the breach (Wishart, 247). The breach established a mutual mistake in the employment condition. Equitable doctrines of equal treatment under the law therefore imply that contracts made under mutual mistakes are void and the parties should be allowed to rescind such contracts (Miller and Cross, 15). Ethical considerations however limit such discretionary right to rescind a contract because of mutual mistake. Utilitarianism doctrine, from Halbert and Ingulli’s perspective of business law and ethics, requires the evaluation of consequences and decisions that maximizes the good of all involved stakeholders in a case (14). The parties should therefore be allowed to rescind a contract under fair terms, because of mutual mistake, on equitable terms that minimize potential loss to each party.

Neither party acted unethically in the case. The scope of the contract, sale of a good contract, provides for obligations and rights after the formation of a contract and the seller did not incur such expenses as purchase cost for demand because the subject matter never existed. Josh’s decision to rescind the contract would therefore present no adverse consequences to the seller but instead relieve the seller of the burden of honouring the contract. Similarly, the sellers’ decision to rescind the contract would facilitate Josh’s economic interest in fuel conservation. Deontology ethics also justify the party's actions because a mutual mistake on the subject matter made the contract void and therefore relieved both parties of any rules and obligations that would compromise deontological morality (Halbert and Ingulli, 14- 17).

The Uniform Commercial Code is silent on the case, as it does not define rescission. Cosson and Mazeaud explain that rescission, under the Code, is only derivable from its related terms such as termination (373). Provisions of the code on rescission are also limited to “misrepresentation and fraud” and do not guide cases of rescission under a mutual mistake of facts (Rossman and Moskin, 9-114).

No party, based on the context of contract law, is a loser or a winner when a contract is rescinded because of a mutual mistake. This is because of the legal definition of rescission that involves legal rights and obligations to a case. Rescission restores involved parties to their original position before the contract with its core provision that all transferred benefits are returned and all established rights and obligations are cancelled. Complete reversal of rights and obligations was held in the case of Car and Universal Finance Co v Caldwell (1965) and on the doctrine of applicability to all forms of mistakes. The courts held that a rescission of the contract reversed the title of sold commodity, a car in the case, and no further rights or obligations existed (Wishart, 230). There may however be winners and losers beyond the context of contract law because the law does not recognize some losses. Personal initiatives towards completion of a subject contract may for example not be considered under provisions for restitution to identify non-legal financial loss.