First one was compromise of a doubtful claim, wasn't it?  And wasn't the expert's view just an opinion?





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From: Academy of Legal Studies in Business (ALSB) Talk <[log in to unmask]>

To: [log in to unmask] <[log in to unmask]>

Sent: Thu Apr 15 16:13:51 2010
Subject: What's the difference in these cases involving consideration and mistake?



Hi Colleagues:



 



Those of you who use Mann and Robert’s “Smith and Roberson’s Business Law” text may be familiar with these cases.



 



The first one is Mathis v St. Alexis Hospital (650 NE2d 141, Ohio App. 1994).  To paraphrase the facts: Plaintiff’s mother died in the hospital; he sued it for her wrongful death.  Before the case was heard, his experts determined the hospital was not at fault, and plaintiff “voluntarily dismissed the wrongful death action.”  Plaintiff and Hospital then entered into a covenant not to sue: Plaintiff agreed not to sue the hospital (ever again) and the Hospital agreed not to sue Plaintiff for attorneys’ fees and costs incurred in mounting a defense to the “frivolous” lawsuit that was dismissed by Plaintiff himself.  



 



Subsequently Plaintiff determined he did have a case against the hospital, and he “asked the court to rescind the covenant not to sue,” claiming that because he actually did have a valid claim against the hospital, it could not have pursued him for a frivolous claim, and therefore it gave no consideration when it agreed not to do that which it could not have done.  Plaintiff lost on summary judgment.  The court held that “a promise to forbear pursuit of a legal claim can be sufficient consideration to support a contract when the promisor has a good faith belief in the validity of the claim.”  The hospital’s subjective belief that it could have pursued Plaintiff was good enough.



 



Okay, now the second case.  This appears in the “Problems” section at the end of  Chapter 11 (I quote):



 



Doris mistakenly accused Peter's son, Steven, of negligently burning down her barn.  Peter believed that his son was guilty of the wrong and that he, Peter, was personally liable for the damage, since Steven was only fifteen years old.  Upon demand made by Doris, Peter paid Doris $2,500 for the damage to her barn.  After making this payment, Peter learned that his son had not caused the burning of Doris's barn and was in no way responsible for its burning.  Peter then sued Doris to recover the $2,500 he had paid her.  Will he be successful?



 



And the answer (again, quoting): Yes, judgment for Peter for $2500 against Doris.  The payment was made under a mutual mistake of material fact.  Both Peter and Doris mistakenly believed that Doris’s barn had been negligently burned by Peter’s son, Steven, while as a matter of fact Steven did not cause the burning of Doris’s barn and was in no way responsible for its burning.  A payment made under a mutual mistake of fact is recoverable under the doctrine of quasi-contract.



 



So, why in the first case was the Hospital’s good-faith belief in the validity of its claim sufficient consideration to support a contract, even though that belief was apparently mistaken, and in the second case Doris’ good-faith belief in the validity of her claim was insufficient to support a contract, even though it was apparently mistaken?  In both cases there was, it seems, a mutual mistake of fact.  Is it because in the first case there was a forbearance to sue, and in the second there was actually a payment that resulted in unjust enrichment?  



 



If the hospital had sued Mathis for the frivolous suit, and the parties settled by Mathis paying the hospital, and then it was determined that Mathis had a case, would he be entitled to reimbursement as Doris was in the hypothetical?



 



Whattya think?



 



Thanks.



 



Dan 



 



Daniel M. Warner



Professor, Dept. of Accounting



(Business Legal Studies)



MS 9071, WWU



516 High St.



Bellingham, WA 98225



360 650-3390