When Two Parties Are Involved in a Mutual Mistake (Misunderstanding)

question 50

Multiple Choice

When two parties are involved in a mutual mistake (misunderstanding) as to the meaning of a term of the contract, which of the following is usually applied by the court to settle the matter?

• A) The equitable remedy of rectification
• B) Caveat emptor
• C) The reasonable person test
• D) The court will find that there is no contract because there is no meeting of the minds.
• E) Non est factum

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Definitions:

Convergence

The phenomenon where the futures price of a commodity tends to approach the spot price as the contract expiration date nears.

Margin

The practice of buying an asset by using funds borrowed from a broker, often used in stock trading to leverage investments.

Futures Contract

A standardized legal agreement to buy or sell a specific commodity or financial instrument at a predetermined price at a specified time in the future.

Zero Coupon Interest Rate

An interest rate that applies to a bond or loan that does not pay periodic interest, only paying the face value at maturity.