Plaintiff Beachcomber Coins, Inc., a professional coin dealer, purchased from defendant Boskett, a non-merchant seller, a 1916-D Mercury dime—a highly collectible and valuable coin—after both parties examined it and agreed it was genuine. The parties used customary methods of inspection, including magnification and reference to known diagnostic features; both believed in good faith that the coin was authentic. Relying on that shared belief, Beachcomber paid approximately $500 for the dime. Shortly thereafter, upon further expert evaluation, the coin was determined to be counterfeit (the added "D" mint mark was not original). Beachcomber promptly tendered return of the coin and sought rescission and restitution of the price. The trial court denied relief, effectively concluding that the buyer, as an expert who inspected the coin, bore the risk of mistake. Beachcomber appealed.
Whether a buyer may rescind a contract for the sale of a coin on grounds of mutual mistake when both parties believed the coin was genuine but it was in fact counterfeit, and whether the buyer's status as an expert and opportunity to inspect shifted the risk of that mistake to the buyer.
A contract is voidable for mutual mistake when (1) both parties were mistaken at the time of contracting as to a basic assumption on which the contract was made, and (2) the mistake has a material effect on the agreed exchange of performances, unless (3) the adversely affected party bears the risk of the mistake. A party bears the risk if: (a) the risk is allocated to that party by agreement, (b) the party is aware at the time of contracting that they have only limited knowledge with respect to the facts but treats that limited knowledge as sufficient (conscious ignorance), or (c) the court finds it reasonable to allocate the risk to that party under the circumstances. See Restatement (Second) of Contracts §§ 152, 154. A mistake as to authenticity or identity of the subject matter is a mistake as to a basic assumption, not merely a mistake in value.
Reversed and remanded with directions to grant rescission. The counterfeit nature of the coin constituted a mutual mistake as to a basic assumption that materially affected the exchange; the buyer did not, by virtue of expertise or inspection, assume the risk. The buyer was entitled to rescission and restitution of the purchase price upon return of the coin.
The court characterized the parties' common belief in the coin's authenticity as a basic assumption that went to the very essence of the bargain. A genuine 1916-D Mercury dime and a counterfeit dime are not the same thing; authenticity is not merely a factor influencing price, but a defining attribute of the subject matter. Because the mistake concerned identity/authenticity rather than mere value or quality, it met the threshold for mutual mistake. The mistake had a material effect on the exchange: the consideration paid for an authentic, rare coin was grossly disproportionate to the value of a counterfeit coin. Consequently, unless the buyer bore the risk, rescission was appropriate. The court found no contractual allocation of risk (no "as is" clause, no disclaimer, and no express assumption of risk by the buyer). Nor did the buyer proceed in conscious ignorance—both parties believed, after reasonable inspection, that the coin was genuine. The buyer's expertise and the opportunity to inspect, standing alone, did not shift the risk to the buyer; the law of mutual mistake does not penalize diligence by converting expert inspection into a risk-allocation mechanism absent agreement or conscious gambles on uncertainty. The court distinguished cases involving mistakes in market value from those involving authenticity. It aligned with precedents (e.g., cases involving counterfeit art or misattributed instruments) that permit rescission when both parties are wrong about the identity of the thing sold. Finally, permitting rescission serves equitable principles by restoring the parties to their pre-contract positions without rewarding either side for an innocent, material error about the subject matter's authenticity.
Beachcomber Coins is frequently cited in Contracts to clarify the mutual mistake doctrine: errors about authenticity/identity are qualitatively different from errors about value. It illustrates the Restatement framework for determining when rescission is available and shows that expertise, inspection, and even negligence do not alone bar relief where there is no risk allocation. For students, it is a touchstone for issue-spotting the distinction between value versus identity mistakes, analyzing material effect, and applying the three pathways by which risk can be allocated to defeat rescission.
Beachcomber Coins v. Boskett stands for the proposition that when both parties contract under a shared, fundamental misapprehension about the identity or authenticity of the subject matter, equity permits unwinding the transaction. The case confirms that such errors are not mere valuation problems; they are foundational mistakes that materially alter the exchange.