Last Wednesday, the Third District Court of Appeal sitting on en banc resolved a conflict between itself and the other four District Courts of Appeal, holding that rescission of a contract based on a unilateral mistake does not require inducement as an element of proof. DePrince v. Starboard Cruise Services, Inc., Case No. 3D16-1149 (Fla. 3rd DCA, August 1, 2018).
Boiling the facts down to the essence, cruise ship passenger DePrince visited the ship’s jewelry store operated by Starboard and inquired for a fifteen to twenty carat loose diamond. After the store communicated with its land-based vendor, the store provided DePrince and his partner Crawford whom was a certified gemologist, pricing of $235,000.00 to $245,000.00. The salesperson did not realize that the vendor’s quote was per-carat, not total; however, Crawford the gemologist checked with DePrince’s sister whom warned “that something was not right because the price for a diamond of that size should be in the millions and recommended not buying the diamond.” Nevertheless, DePrince bought the diamond using his American Express card. Shortly thereafter when Starboard realized its mistake it reversed the credit card charges to cancel the transaction.
DePrince sued to enforce the sale contract. Starboard defended on the basis of unilateral mistake. After two trials and two appeals the Third District Court of Appeal sat en banc on the issue of what are the elements of unilateral mistake. Procedurally, the en banc court commented that it is not bound by the District’s precedent but is “allowed to take a fresh look”. The court would be bound by Supreme Court precedent to which it cited Maryland Cas. Co. v. Krasnek, 174 So.2d 514, 542 (Fla. 1965), which held that a contract may be rescinded based upon unilateral mistake.
The en banc court found three reasons to recede from its earlier precedent requiring inducement as an element:
1. Inducement is inconsistent with Krasnek. Supporting citations in Krasnek were to contracts rescinded based on unilateral mistake without inducement. Perhaps more important, the facts recited in Krasnek did not include inducement; thus, inducement could not have been a basis for the decision.
2. The Supreme Court’s most recent discussion of the unilateral mistake test in In re Standard Jury Instructions – Contract & Bus. Cases, 116 So.3d 284, 323-24 (Fla. 2013) included instruction that did not include inducement, citing an earlier Third District decision, Penn Nat'l Mut. Cas. Ins. Co. v. Anderson, 445 So.2d 612, 613 (Fla. 3d DCA 1984).
3. The other four District Courts Appeal interpreted Krasnek to be consistent with the lack of an inducement element.
Moving forward, the court held that the three elements for setting aside a contract on the basis of unilateral mistake of material fact are
1. The mistake was not the result of an inexcusable act of due care;
2. Denial of release from the contract would be inequitable; and,
3. The other party to the contract has not so changed its position and reliance on the contract that rescission would be unconscionable.
The court also favorably quoted from Anderson recognizing that when there is a mistake there is undoubtedly some negligence; however, that does not always mean that there is a “inexcusable act of due care.”
Thus, the en banc panel vacated the panel opinion in the case, DePrince v. Starboard Cruise Servs, Inc., 43 Fla. L. Weekly D171 (3rd DCA January 17, 2018), and related cases were receded from, judgment for Starboard being affirmed.
This decision will undoubtedly increase the use of the defense of rescission for a unilateral mistake, particularly in the Third District. By aligning itself with the other districts, the Third District appears to remove the potential of the Florida Supreme Court exercising conflict jurisdiction to revisit the Krasnek decision. There is always the potential of certification of great public importance; however, with all five Districts aligned providing greater certainty in this area of the law, the need for certification would seem to be reduced.
Of course, after reading the decision it is hard to repress the temptation to recite “don’t leave home without it.”
Best wishes for a great week.
Michael J. Gelfand
Real Property, Probate and Trust Law Section
of The Florida Bar
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© 2018 Michael J. Gelfand
Michael J. Gelfand
Florida Bar Board Certified:
Real Estate Attorney
Condominium & Planned Development Law
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Civil Circuit Court & Civil County Court
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The only thing necessary for the triumph of evil is for good men to do nothing.
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