## Facts

- Reed’s Photo Mart, a small retail store, submitted a written purchase order to Monarch Marking System Co. for five types of adhesive pricing labels.
- Reed’s vice-president wrote quantities of “2M” for four items and “4MM” for a fifth item described by an attached sample label.
- In the label industry, “M” denotes 1,000 and “MM” denotes 1,000,000 by trade usage; Monarch processed the order consistent with that meaning.
- Monarch’s salesman treated the order as regular on its face, converted the fifth item to 4,000,000 labels, and forwarded it for manufacture.
- Reed’s actually intended to order only 4,000 labels of the fifth type; its use of “MM” was a mistake.
- Monarch shipped seven large cartons; Reed’s refused delivery and immediately reported a major mistake.
- The price for 4,000 labels was about $13, while 4,000,000 labels cost $2,680.
- Monarch sued to recover the contract price for the 4,000,000 labels and attorney’s fees.

## Issues

1. Whether Reed’s could avoid liability based on unilateral mistake when trade usage gave “MM” a settled meaning and Monarch lacked knowledge (actual or imputable) of Reed’s error.
2. Whether the trial court committed reversible error by refusing a jury submission asking whether Monarch “should have known” of Reed’s mistake.
3. Whether rescission was available where the goods were specially manufactured and restoring the status quo was not feasible.

## Decision

- The Supreme Court of Texas reversed the court of civil appeals and reinstated the trial court’s judgment for Monarch.
- The Court enforced the written quantity term as understood under established trade usage and the jury’s findings.
- The Court held Reed’s unilateral mistake did not justify rescission or defeat Monarch’s recovery absent Monarch’s knowledge of the mistake.
- The Court found no reversible error in the omission of a separate “should have known” submission on these facts.
- Monarch recovered $2,680 plus $750 in attorney’s fees.

## Legal Principles

- A unilateral mistake generally does not permit rescission or avoidance when the other party neither knows nor has reason to know of the mistake and relies in good faith.
- Trade usage may supply the meaning of technical or abbreviated terms in a commercial writing, and parties may rely on that usage in performance and enforcement.
- Rescission for unilateral mistake is equitable and requires the ability to restore the parties substantially to the status quo; where specialized goods are manufactured in reliance on an order, rescission may be denied.
- Objective manifestations in a written contract control over undisclosed, contrary intent when the writing is regular on its face and interpreted by applicable usage.

## Conclusion

The Texas Supreme Court enforced the purchase order according to trade usage and held that Reed’s could not avoid payment based on its unilateral quantity mistake because Monarch reasonably relied on the written term and rescission would not fairly restore the parties to their pre-contract positions.


Monarch Marking Sys. Co. v. Reed's Photo Mart, Inc., 485 S.W.2d 905 (Tex. 1972)