166 N.J. Super. 442 (App. Div. 1979), 400 A.2d 78
Beachcomber Coins, Inc. v.
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.
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.