Monarch Marking System Co. v. Reed’s Photo Mart, Inc. Case Brief Summary | Law Case Explained
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Monarch Marking System Co. v. Reed’s Photo Mart, Inc. | 485 S.W.2d 905 (1972)
A unilateral mistake is a mistake one contracting party makes regarding the contract’s terms or subject matter. In Monarch Marking System versus Reed’s Photo Mart, we explore whether a unilaterally mistaken party is entitled to rescission.
Monarch Marking System sold labels. Reed’s Photo Mart wanted to buy five different types of labels from Monarch. Alan Tromer, Reed’s vice president, filled out a purchase order for the labels. For the first four types of labels, Tromer indicated that Reed’s wanted to buy a quantity of quote, Two M, unquote. For the fifth type of label, Tromer indicated that Reed’s wanted to buy a quantity of, quote, Four M M, unquote. Monarch understood the phrase Four M M to refer to four million. Accordingly, Monarch printed and shipped four million of the fifth type of label to Reed’s. Upon receiving the shipment, Reed’s rejected it and advised Monarch that there’d been a serious mistake.
Monarch sued Reed’s in Texas state court to recover the price of the four million labels. Reed’s asked the court to rescind the contract because it was the result of a mistake.
At trial, Monarch introduced evidence that pursuant to custom and usage in the label industry, the phrase M M means one million. The jury accepted Monarch’s argument that M M means one million. The jury rejected Reed’s claim that Monarch knew the order amount was a mistake. The trial court entered judgment on the jury’s verdict and awarded Monarch the reasonable value of the labels plus attorney’s fees.
The Texas Court of Civil Appeals reversed and remanded for a new trial. In so doing, the appellate court found that the trial court should’ve submitted an issue to the jury regarding whether Monarch should’ve known that the 4 M M order amount was a mistake. Monarch appealed to the Texas Supreme Court. There, Monarch argued that rescission isn’t available in the case of a unilateral mistake unless the nonmistaken party can be returned to the position it was in prior to the transaction. Monarch further argued that rescission wasn’t available in this case because Reed’s made a unilateral mistake and Monarch couldn’t be returned to the precontractual status quo. Accordingly, Monarch asserted that the trial court’s alleged failure to submit an issue to the jury regarding whether Monarch should’ve known about Reed’s mistake was irrelevant.
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