The California Court of Appeal for the First District (Division 5) recently confirmed that a party neglects a legal duty by failing to make a reasonable inquiry or effort to understand the meaning and content of the contract. In Estate of Eskra (2022) 78 Cal.App.5th 209, a husband had told his soon-to-be wife shortly before their wedding that she would need to see a lawyer to review a pre-marital agreement he was having drafted. The husband had a 9-year-old daughter by a former marriage, and the original draft of the pre-marital agreement covered both divorce and the husband’s death; that is, the wife would not have any interest in her husband’s separate property assets should they get divorced or if he should pre-decease her. In the event of his death, his daughter would inherit his estate.
The wife met with an attorney who reviewed and explained the pre-marital agreement to her, and she was very upset when she learned it waived her rights on her husband’s death. The attorney recommended that they try to get that provision removed and sent a list of provisions she wanted excised to the husband’s attorney. Inexplicably, that communication did not address the issue of the applicability of the pre-marital agreement in the event of the husband’s death. The husband’s attorney excised the meaningless provisions and returned it to the wife’s attorney.
The wife did not meet with her attorney again to review revised agreement, but instead signed it in the office of husband’s attorney without looking at it. Her attorney was not present, there was no discussion of the agreement, and she assumed the requested changes were made. In fact, the change regarding the wife’s rights in the event of the husband’s death was not made.
After the husband’s untimely death in a logging accident in 2018, the wife challenged the pre-marital agreement alleging mistake of fact. The trial court heard testimony that the husband intended to leave all of his property to his daughter in the event of his death, and it held that the doctrine of mutual mistake did not apply because the husband was not mistaken when he signed the agreement. Moreover, the court held that the wife’s unilateral mistake was insufficient to justify rescission because there was insufficient evidence that the husband had encouraged or fostered that mistaken belief.
After the trial court found that the wife bore the risk of her mistake because she did not act “with reasonable care” when she failed to read the agreement or consult with her attorney after it was revised, she appealed. The Court of Appeal affirmed the trial court’s holding, confirming that a party may rescind a contract when consent was given by mistake, but only when the mistake is not caused by the neglect of a legal duty on the part of the person making the mistake. That is, the Court of Appeal, reasoned that the wife had a legal duty to read and understand the contract she signed, and that the “[f]ailure to make reasonable inquiry to ascertain or effort to understand the meaning and content of the contract upon which one relies constitutes neglect of a legal duty such as will preclude recovery for unilateral mistake of fact.” Failure to read a contract before execution does not permit a party to escape the contract’s terms.
The lesson, as always, is to ensure you have read and fully understand any agreement you are signing, whether it is a pre-marital agreement, post-nuptial agreement, post-marital agreement or otherwise. It is important to work with an attorney to assist you with understanding these contract terms before you put pen to paper.