R2d § 154
When a Party Bears the Risk of a Mistake
A party bears the risk of a mistake when (a) the risk is allocated to him by agreement of the parties, or (b) he is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient, or (c) the risk is allocated to him by the court on the ground that it is reasonable in the circumstances to do so.
Professor's notes
Elements: a party bears the risk of a mistake when (a) the risk is allocated to him by agreement of the parties; or (b) he is aware, at the time of contracting, that he has only limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient; or (c) the risk is allocated to him by the court on the ground that it is reasonable in the circumstances to do so.
Wood v. Boynton operationalizes (b): seller knew she didn't know what the stone was but sold anyway. Conscious ignorance bars rescission.
Common misunderstanding: students treat §§ 152/153 as standalone tests. They are not. § 154 is the gating question: does the adversely affected party BEAR the risk? If so, no rescission, even when the mistake was mutual and material. § 154(b) (conscious ignorance) is the silent killer of most mistake claims.
Cases that operationalize this rule
Text
R2d § 154. When a Party Bears the Risk of a Mistake.
A party bears the risk of a mistake when
(a) the risk is allocated to him by agreement of the parties, or
(b) he is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient, or
(c) the risk is allocated to him by the court on the ground that it is reasonable in the circumstances to do so.