Multistate Bar Examination Practice Question

The correct remedy is rescission. Rescission is available when there is a mutual mistake of a basic assumption on which the contract was made, the mistake has a material effect on the agreed exchange, and the adversely affected party did not bear the risk of the mistake. Here, both parties were mistaken about the gemstone's nature (natural vs. treated), which was a basic assumption that materially affected its value and the fairness of the exchange. The collector, as the adversely affected party, can rescind the contract, which cancels the deal and restores both parties to their pre-contractual positions. Reformation is not appropriate as there is no prior agreement to conform the contract to; it is used to correct a writing that fails to express the parties' actual agreement. Specific performance is not relevant as the collector wants to undo the deal, not enforce it. Expectation damages are typically sought in a breach of contract action, not for a claim based on mutual mistake seeking to avoid the contract.