BUSINESS LAW Chapter 6 PowerPoint Notes & Assignment Genuine Agreement

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1 BUSINESS LAW Chapter 6 PowerPoint Notes & Assignment Genuine Agreement SECTION FRAUD AND MISREPRESENTATION Genuine Agreement If the offeror makes a valid, and the offeree has made a valid, then a genuine agreement has been reached. The courts describe this type of agreement as a meeting of the. Fraud ** is a deliberate deception intended to secure an unfair or unlawful gain. Remedies for Fraud You may **, or cancel, the contract. You may for money damages. You may also try to collect damages which is designed to punish the wrongdoer for their conduct. The Five Elements of Fraud To succeed in a lawsuit for fraud, the following five elements must be demonstrated: 1. A representation of fact. 2. of the falsity by the party making the false representation. 3. Intent to by the party making the false representation. 4. Reasonable reliance ( ) by the innocent party. 5. An actual must be suffered by the innocent party. False Representation of Fact Fraud requires a representation of a material, existing fact. A ** is one that is important; it matters to one of the parties. Under some circumstances, individuals can make false representation by choosing to reveal important information. This is known as **, or passive fraud. Representation Known to Be False To be held accountable for fraud, the party making the false representation must be that it is false. This may be shown by: proving knowledge showing the statement was made

2 False Representation Intended to Be Relied Upon To prove fraud, the person making the misrepresentation must that the other party will rely upon the information as part of the contract negotiations. False Representation Actually Relied Upon To prove fraud, the false representation must be relied upon by the other party when the agreement is made. Resulting Loss In proving fraud, the innocent party must show some loss. Innocent Misrepresentation ** is the act of making an innocent statement that turns out to be false, when the person honestly believed the statement was true at the time it was made. Remedy for Misrepresentation the right to the contract you may not damages SECTION MISTAKE, DURESS, AND UNDUE INFLUENCE Genuine Agreement In addition to fraud and misrepresentation,, duress, and undue influence can also create a defective agreement. Mistake People sometimes enter into contracts believing that certain information is when it is actually not, or that information is true when it really is. Unilateral Mistake A ** is an error on the part of of the parties to the contract. Through words or actions, one party has created reasonable on the part of the other party to the contract. Those expectations should not be blocked because one of the parties has made an, or mistake. A person usually cannot a contract because of such a mistake There are two types of unilateral mistakes. 1. Mistake as to the of the agreement 2. Mistake as to the of a party Mistake as to the Nature of the Agreement People who sign an agreement are bound to it, even if they have not it or are mistaken about what it says.

3 Mistake as to the Identity of a Party If you make an offer by letter to one party, but the wrong person mistakenly receives the offer, the mistake may be cause to the contract. If you make the same offer face-to-face with a person whose identity you have mistaken, your mistake as to the identity will prevent a binding contract. Bilateral Mistake When parties to a contract are mistaken about some important fact, this is called a **, or mutual mistake. When this mistake occurs, party may avoid the contract. There are two types of bilateral mistakes. 1. Mistake as to the possibility of 2. Mistake as to the matter Mistake as to the Possibility of Performance If parties enter into a contract believing that the duties described in the agreement can be, when in fact, they cannot, either party may avoid the contract. Mistake as to the Subject Matter parties can be mistaken as to the identity of the subject matter when they enter into a contract. The contract may be avoided by either one of the parties. Duress ** is overcoming a person s will by use of force or threat of force or bodily harm. Types of Duress Physical duress is when physical violence is used to force a person to enter a contract. Emotional duress is when the of physical force is used to force a person to enter a contract. ** is when threats to a person s business or professional reputation are used to force a party to enter a contract. Undue Influence ** occurs when a person uses unfair and improper persuasive pressure to force another person to enter into an agreement. Circumstances such as ill, old age, and mental immaturity may put a person in a weaker position.

4 Chapter 6 Assignment Genuine Agreement Section 6.1 True/False Indicate whether each of the following statements is True or False. Write out the word. 1. The courts describe genuine agreements as the meeting of the minds. 2. One of the remedies for fraud is to sue for money damages. 3. One of the elements of fraud is that an actual loss must be suffered by the innocent party. 4. A material fact is one that is important to both parties. 5. Fraud requires a true representation of a material, existing fact. 6. Passive fraud is also known as concealment. 7. To be held accountable for fraud, the party making the false representation does not have to be aware that it is false. Section 6.1 You re the Judge For each of the following cases, indicate your decision (Yes, No). Then, in your own words, state the ethical or legal principle or reason that applies in the case. 1. Foster purchased two horses from Mills: a two-year-old named Pandy and a yearling named Andy. Mills gave Foster the registration papers for Pandy and told Foster the papers for Andy would arrive later. Mills assumed that Andy was also registered. Foster later learned that Andy was not registered. Foster would not have bought the horse if this had been known. Foster eventually sold Andy at a loss. Can Foster win a lawsuit against Mills? Explain your answer. 2. Estelle Petkins put her summer cottage up for sale. Edith Ong, who was interested in buying it, asked if it had termites. Petkins was not aware of a termite problem her answer was no. Ong bought the cottage and later found termites. Does Ong have any recourse against Petkins for fraud? Explain your answer. Section 6.1 Assessment Questions On your own paper, write or type your answers to Assessment questions 1-4 page 132. Keep it for your Unit packet.

5 Section 6.2 True/False Indicate whether each of the following statements is True or False. Write out the word. 1. People sometimes enter into contracts believing that certain information is true when it is actually not, or that information is not true when it really is. 2. One of the unilateral mistakes is a mistake as to the identity of a party. 3. If you have not read the agreement, but sign it, you cannot be bound to it. 4. When a bilateral mistake is made, either party may avoid the contract. 5. A mistake as to the subject matter is a unilateral mistake. 6. Emotional duress is when actual physical violence is used to force a person to enter a contract. 7. Physical duress is when the threat of physical force is used to force a person to enter a contract. 8. Ill health, old age, and mental immaturity may put a person under undue influence. Section 6.2 You re the Judge For each of the following cases, indicate your decision (Yes, No). Then, in your own words, state the ethical or legal principle or reason that applies in the case. 1. Helena Crump was hired to take care of Lorna Boff, an elderly lady who was in poor health. Crump was a strong, persuasive person, and Boff was weak and ill. After caring for Boff for three weeks, Crump talked Boff into signing a contract agreeing to transfer all property to Crump. On what legal grounds may this contract be attacked? Explain your answer. 2. Akeo Shimazu signed a form without reading it. He assumed the form was a request for a sample copy of an expensive book. When his order arrived, he found that he had actually signed an order form for the book itself. Shimazu refused the book, claiming he was not bound by the agreement because of his mistake. Is Shimazu legally bound by the agreement? Explain your answer. Section 6.2 Assessment Questions On your own paper, write or type your answers to Assessment questions 1-4 page 139. Keep it for your Unit packet.

Define genuine agreement and rescission. Identify when duress occurs. Describe how someone may exercise undue influence.

Define genuine agreement and rescission Identify when duress occurs Describe how someone may exercise undue influence. Genuine Agreement/Assent: meeting of the minds Must be willful and voluntary Must