A.S. v. Office for Dispute Resolution (Quakertown Community School District)

DISSENTING OPINION BY

President Judge PELLEGRINI.

I respectfully dissent because I agree with the Hearing Officer that Agreement Two should be rescinded because it was the result of a mutual mistake.

After the School District’s Counsel and the Parents’ Counsel believed that they had arrived at a settlement of what special education services the District would provide to the Parents’ son, S.S., the School District’s Counsel sent Agreement One to the Parents’ Counsel. Parents informed their counsel that the agreement was unacceptable. No one informed the School District’s Counsel that Agreement One, which she believed resolved the matter, was rejected.

The Parents’ Counsel then prepared Agreement Two and sent it to the Parents. Unlike what happened in the past, neither the Parents nor their counsel referred Agreement Two to the School District’s Counsel, but instead Parents, unbeknownst to even their counsel, signed the agreement and the Student’s mother took it to the School District and left it with a receptionist at the School District’s Administrative Office. Everyone at the School District, including the School District’s Counsel, assumed that Agreement Two was really Agreement One and it was approved by the School Board and duly executed. Upon realizing the mistake, the School District sought rescission through the Pennsylvania Office of Dispute Resolution which assigned a Hearing Officer who found that there was no meeting of the minds and rescinded Agreement Two.

Reversing the Hearing Officer, the majority denies rescission of Agreement Two because the mistake was unilateral and the Hearing Officer did not find that the mistake was the result of fraud or bad faith on the Parents’ part. I disagree with the majority because the Hearing Officer found, without saying so, that there was a mutual mistake on the part of both parties as to what had been agreed to by both parties.

The doctrine of mutual mistake of fact serves as a defense to the formation of a contract and occurs when the parties to the contract have an erroneous belief as to a basic assumption of the contract at the time of formation which will have a material effect on the agreed exchange as to either party. A mutual mistake occurs when the written instrument fails to set forth the true agreement of the parties. The language on the instrument should be interpreted in the light of subject matter, the apparent object or purpose of the parties, and the conditions existing when it was executed. [Hart v. Arnold, 884 A.2d 316, 333 (Pa.Super.2005), appeal denied, 587 Pa. 695, 897 A.2d 458 (2006)] (citations and quotations omitted). If a contract is entered into under a mutual misconception regarding an essential fact, the contract may be reformed if “(1) the misconception entered into the contemplation of both parties as a condition of assent, and (2) the parties can be placed in their former position regarding the subject matter of the contract.” Id. (citing Gocek v. Gocek, [612 A.2d 1004, 1006 (Pa.Super.1992)]). We further note that “to justify reformation of a contract on the basis of mutual mistake, evidence of the mistake must be clear and convincing.” Jones v. Prudential Prop. & Cas. Ins. Co., 856 A.2d 838, 844 (Pa.Super.2004), [appeal denied, 583 Pa. 673, 876 A.2d 396 (2005)].

Voracek v. Crown Castle USA, Inc. 907 A.2d 1105, 1108 (Pa.Super.2006), appeal denied, 591 Pa. 716, 919 A.2d 958 (2007).

Without saying so, this was the basis on which the Hearing Officer found that Agreement Two should be rescinded. In her “Discussion and Conclusions of Law” she reasoned:

Agreement One: When the attorneys representing the parties believed they had concluded their negotiations, in the words of the District’s former counsel, that they had a “deal”, they moved to the next step, reducing the settlement to writing. Agreement One, drafted by the District’s former attorney, represented the Offer, the first essential element of a contract.

Acceptance may be explicit or implicit. While not all terms need be expressed in an Offer or the Acceptance, the contract must be clear enough so that a reasonable person would understand what they were agreeing to. Upon reviewing the Offer, the Parents did not confer Acceptance as they disagreed with some of the terms contained in the Offer and identified other terms they wanted included that were not.

Agreement One was an Offer from the District without Acceptance from the Parents. Therefore Agreement One was not a valid settlement agreement, a contract.

Agreement Two: Rather than give Acceptance, the Parents and their former counsel produced a counter-offer in the form of Agreement Two. However, a fundamental principle of contract law is that the party proposing the Offer [in this case the Parents proposing a counter-offer] cannot suppose, believe, suspect, imagine or hope that an Offer has been made. An Offer must be communicated to the offeree [at this juncture the District] in an intentional [and] definite manner. The evidence is persuasive that neither the Parents nor the Parents’ former counsel communicated the counter-offer to the District and/or the District’s former counsel in an intentional and definite manner. In Pennsylvania, if the party seeking to prove the existence of a contract does not show that a distinct Offer was made, then there is no contract. The District was not aware that a Counter-Offer had been made, and could not then freely and willingly confer Acceptance.

Agreement Two was neither a distinct Offer as it was not communicated in an intentional and definite manner, nor was there or could there be Acceptance, as the District did not understand what it was being asked to agree to. Therefore, Agreement Two was not a valid settlement agreement, a contract.

Conclusion: The District’s written proposal of the terms negotiated by counsel for the parties [Agreement One] is not a contract without the Parents’ Acceptance. The Parents’ revised proposal of terms [Agreement Two] is not a contract without their making it an Offer in an intentional and definite manner. Once the Parents’ proposal was eventually made clear, without the District’s Acceptance, there is no contract. Moreover, case law in the Eastern District of Pennsylvania has clearly established that where offers have been made but rejected, or believed agreements repudiated, then there is no contract to enforce. Neither Agreement One nor Agreement Two is a valid settlement agreement. (Footnotes omitted)

(Hearing Officer’s 5/3/13 Decision at 18-19). Essentially, what the Hearing Officer found is that the School District believed that it had settled the matter on Agreement One, the Parents believed that they had settled the matter on Agreement Two, which means that there was a mutual mistake on the part of both parties thereby justifying rescission.

Accordingly, I would affirm the Order of the Hearing Officer.