In a New York divorce case, the law of contracts governs many disputes over the enforceability or even the validity of prenuptial, postnuptial, and other agreements between spouses. People often ask a court to rescind an agreement in whole or in part, effectively eliminating some or all of its obligations. A person may also ask a court to reform a contract, modifying its terms to repair a defect or deficiency. The wife in a divorce case in Monroe County, New York recently sought to rescind or reform a prenuptial agreement based on the “mutual mistake” doctrine, which allows a court to invalidate a contract if it finds that neither party made a fully informed decision. The burden of proving a “mutual mistake” is very high, and the court’s ruling in Hosmer v. Hosmer held that the wife did not satisfy it.
One of the fundamental elements of a binding contract is mutual assent. Both parties to a contract must have reached an informed agreement, with full knowledge and understanding of any obligations they are undertaking and any benefits they expect to receive. This is commonly known as a “meeting of the minds.” The doctrine of “mutual mistake” states that a contract is not valid if both parties made an error regarding some key aspect of their agreement.
Rescission or reformation of a contract due to a mutual mistake is an “exceptional remedy,” according to the court in Hosmer. The court quoted a 2012 New York Court of Appeals decision, Simkin v. Blank, which held that the mistake in question “must be so material that it goes to the foundation of the agreement” and that, as a result, the contract “does not represent the meeting of the minds of the parties.”
Three years before marrying the wife, the husband in Hosmer purchased a house for $446,200. His equity at the time of the purchase was $150,000, and he made numerous improvements to the property. The wife, according to the court, made no contributions to the property prior to the marriage. The parties signed a prenuptial agreement stating that the fair market value of the property at that time was about $750,000, that the husband’s net equity was about $450,000, and that this $450,000 amount would remain the husband’s separate property.
When the parties initiated divorce proceedings, an appraisal showed a fair market value for the house of $542,000. The net equity in the property was just under $283,000. Since this amount was less than his $450,000 separate property interest, the husband argued that the wife had no marital property interest in the house. The wife argued that the prenuptial agreement’s fair market value estimate of $750,000 was a mutual mistake, and the agreement should be reformed to show that the fair market value at that time was around $450,000. The court ruled in the husband’s favor, finding that the wife had not established any of the elements required to show mutual mistake.
For more than 30 years, New York City divorce lawyer Ingrid Gherman has guided clients through difficult legal questions in divorce cases and other family law matters, helped them understand their rights and obligations, and advocated for their interests in the courtroom and elsewhere. Contact us online or at (212) 941-0767 today to schedule a confidential consultation to see how our skilled and experienced team can help you.
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New York City Court Allows Marital Fraud Lawsuit to Proceed, New York Divorce Attorney Blog, October 20, 2016
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Setting Aside a New York Marital or Separation Agreement, New York Divorce Attorney Blog, August 28, 2015