A building subcontractor submitted a bid for construction of a portion of a high-rise office building. The bid contained material computational errors. The general contractor accepted the bid with knowledge of the errors. Which of the following statements best represents the subcontractor's liability?
a. Not liable because the contractor knew of the errors.
b. Liable because the errors were unilateral.
c. Liable because the errors were material.
d. Not liable because the errors were a result of gross negligence.
Choice "a" is correct. Unilateral mistake is a defense to a contract if the nonmistaken party knew or should have known of the mistake. Here, the contractor knew of the error.
Choice "d" is incorrect. Whether the mistake was due to ordinary negligence or gross negligence is irrelevant in determining whether the mistake will constitute a contract defense.
Choice "b" is incorrect. Unilateral mistake is a defense to a contract if the nonmistaken party knew or should have known of the mistake.
Choice "c" is incorrect. While mistake is grounds for a defense only if the mistake is material, materiality is not all that is necessary. When the mistake is unilateral, as it is here, the nonmistaken party must also have known of the mistake (or had cause to know of the mistake).