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 not contain fraud, misrepresentation, undue influence, duress, or a mistake Voidable Contract: Injured party can withdraw if there was not genuine assent Ends the contract
Rescission: Backing out of a contract Getting back what you have already put into a contract. Giving back what you ve already received To Be Effective Rescission Must: Be prompt Occur before contract is ratified Ratification: Conduct suggesting you intend to be bound by the contract.
Duress: When one party uses an improper threat or act to obtain an of agreement. Contract is voidable when it occurs The law focuses on the nature of the threat what was the threat? Threats of illegal conduct Threats to report crimes Threats to sue Economic threats
Threats of Illegal Conduct Committing an act of violence or threatening to do so to obtain a signature on the contract Contract will be voidable if person signs because of this Threats to Report Crimes You witness a crime and threaten to report unless the individual enters into contract with you Also is a type of extortion
Threats to Sue Threatening to sue to get what you want Example Husband may threaten to sue for custody of the kids unless he receives control of the house this is duress. He s only threatening to sue for the kids because he wants the house
Economic Threats Using the economic power you have over someone to negotiate a more favorable modification of a contract Example A manufacturer has a contract to supply a $15 part for a special computer The computer doesn t run without the part The supplier might threaten to withhold the part unless the buyer agrees to pay $20 If this causes harm to the buyer it s duress
Undue Influence When one party to a contract is in a position of trust They wrongfully dominate the other party. Two Elements of Undue Influence Relationship of Trust there must be a relationship of trust, confidence or authority between to the two people Parent & child, husband & wife, teacher & student Wrongful or Unfair Persuasion Contract must be unfair Hard to determine Undue influence can be overcome by proving the contract was fair to both parties
Get with a partner Think Critically About Evidence p. 130 #12 P 135 # 9 Read the case, and prepare an argument to support your answer.
Describe the kinds of mistakes that can make a contract void or voidable. Determine when misrepresentation occurred. Identify when fraud has occurred. Discuss the remedies for mistake, misrepresentation, and fraud.
Mistake, Misrepresentation, and Fraud
Unilateral Mistake Occurs when one party holds an incorrect belief about the facts related to a contract. Generally doesn t affect validity of a contract You re still responsible for fulfilling the contract Example Not fully reading the terms of your lease Signing a contract written in another language Recognized Unilateral Mistake If it s major, and other party knew court can grant rescission Induced Unilateral Mistake One party encourages the mistake it can make contract voidable
Mutual Mistake (Bilateral Mistake) Occurs when both parties have an incorrect belief about an important fact. Contract is void if it s a mutual mistake Material Facts Important facts that influence the parties decisions about the contract.
Mistake About the Subject Matter Mistake involves specific aspects of the contract Example A buyer and seller of land think that the property is 41 acres They agree to terms based on that belief They later learn it s only 28 acres Mutual mistake of fact contract is void. Mistake of the Law If the mistakes involves not knowing the applicable law, contract is still valid. Why? Ignorance of the law is not a defense.
Innocent Misrepresentation You don t intentionally mislead someone in regards to details of a contract Example: Seller might say a car has 70,000 miles on it. The car might actually have 150,000 if the previous owner replaced the odometer If the seller didn t know this, it s innocent misrepresentation. Fraudulent Misrepresentation the seller knows the statements are untrue Contract is voidable under both circumstances
Statements are Misrepresentation if: Untrue statements is one of fact : Must be a fact rather than opinion Expert opinions can be considered facts Statement is material to the transaction: It would cause a reasonable person to contract. The offeror knew offeree would rely on statement. Offeror knew statement was false. Victim reasonably relied on statement: Must purchase item based on stated facts that were false
Fraud Intentional misrepresentation of an existing important fact same elements of misrepresentation must be proven plus intent and injury Must be a deliberate lie (it was intentional) Must cause injury (person was harmed in some way)
Remedies for Fraud Rescission: Contract is voidable Anything received must be given back. Damages: Can ratify contract and receive damages based on the difference in value Suing for money (Punitive)