Reilley v. Richards

Thomas Reilley (plaintiff), a lawyer with no special experience in real estate law, entered a purchase contract to buy land from David Richards (defendant). After Reilley and Richards signed the real estate purchase agreement, Reilley discovered that nearly half the property was in a flood-hazard area. Reilley had planned to build a house on the property. There was a portion of the flood-hazard area on which nothing could be built according to a local ordinance. Even where it might have been possible to get permission to build within the flood-hazard area, Reilley’s intended builder did not want to build in the floodplain due to warranty concerns. Neither party knew about the floodplain at the time the contract was formed. The purchase agreement did contain an escape clause giving Reilley 60 days to rescind the contract if Reilley found any unacceptable conditions on the land. Reilley’s builder inspected the property within the 60-day timeframe but did not discover—and could not have discovered—the floodplain. By the time Reilley learned about the flood-hazard zone, the 60 days had passed. After making the discovery, however, Reilley sued Richards to rescind the purchase agreement on the basis of the parties’ mutual mistake. The trial court ruled in favor of Reilley. Richards appealed, and the appellate court ruled in favor of Richards on the grounds that Reilley was negligent in failing to hire engineers to discover the floodplain within the 60 days. Reilley appealed.