Sherwood v. Walker

Hiram Walker agreed to sell a cow named Rose 2d of Aberlone to Theodore Sherwood for $80, which reflected the price of beef cattle. Both parties believed the cow was barren and incapable of breeding. Before delivery, Walker discovered that Rose was in fact pregnant, making her worth between $750 and $1,000 as a breeding cow. Walker refused to deliver the cow, and Sherwood sued for replevin to obtain possession.

Justice Morse, writing for the majority, distinguished between mistakes that go to the substance or essence of the thing bargained for and mistakes that go merely to quality, value, or some collateral fact. If the cow had been sold as a breeding cow but turned out to be of slightly different quality, that would be a mistake in quality that would not justify rescission. But the difference between a barren cow (worth $80 as beef) and a breeding cow (worth $750-$1,000) was so fundamental that it constituted a difference in the very nature of the thing contracted for. The parties had contracted for one thing (a barren cow for slaughter) and the actual subject matter was something entirely different (a valuable breeding cow). The court reasoned that mutual assent requires agreement on the same subject matter, and when both parties are mistaken about what that subject matter actually is, there is no true agreement.

Sherwood v. Walker became the leading American case on mutual mistake of fact and is included in nearly every Contracts casebook. The substance-versus-quality distinction, while criticized as difficult to apply, remains influential and has been incorporated into the Restatement (Second) of Contracts Section 152, which allows avoidance when both parties share a mistake about a basic assumption on which the contract was made that has a material effect on the agreed exchange. The case generated extensive academic debate about the line between mistake in substance and mistake in quality.