Chapter 7 Genuine Agreement (Genuine Assent) Business Law Ms. Turner
Genuine Agreement (Genuine Assent) Agreement to enter into a contract that is evidenced by words or conduct between parties
If there is no genuine agreement...... Contract is voidable and the injured party can rescind (back out of the contract)... Rescission must be made promptly and before ratification (conduct suggesting you intend to be bound)
5 Situations when there is no Genuine Assent There is no Genuine Assent if... 1. Duress one party makes an improper threat or act to obtain an expression of agreement
Duress Threat of Illegal Conduct threat to commit a crime or tort to get agreement (ex. threatening family...) Threat to Report Crimes you have a duty to report crimes; threatening to report a crime to gain acceptance is extortion
Duress (continued) Threat to Sue threatening to sue for a purpose unrelated to the suit is duress (ex. suing for custody of kids if contract is not signed for property)
Duress (continued) Economic Threat making changes to a contract that would otherwise cause economic loss (ex. withholding parts unless $20 each instead of agreed upon price of $15) Courts look at the threat and the alternatives available to threatened party If threatened party had no choice, duress exists
5 Situations when there is no Genuine Assent (continued) 2. Undue Influence when one party to the contract is in a position of trust and wrongfully dominates the other party
2 Elements of Undue Influence 1)Relationship Trust, confidence, or authority must exist (Ex. lawyer/client, parent/child, minister/congregation member,...) 2)Unfair Persuasion Evidenced by unfair terms Evidence of lack of free will (parent selling home to child for ½ value) Nagging or persuasion is NOT necessarily undue influence issue of fact to be decided by jury
5 Situations when there is no Genuine Assent (continued) 3. Mistake 1) Unilateral Mistake when ONE party holds an incorrect belief about the facts related to the contract (Ex. Not reading or not carefully reading a contract, signing a contract with unfamiliar language)
2 Types of Unilateral Mistakes Recognized Unilateral Mistake If mistake is big and the other party is aware of the mistake, rescission may be granted to the other party Induced Unilateral Mistake If one party encouraged the other party to make mistake, voidable (Ex. Jewels)
2 Types of Unilateral Mistakes (continued) 2)Mutual Mistake (Bilateral Mistake) BOTH parties hold an incorrect belief about an important fact (material fact) ------ contract is VOID
2 Types of Mutual Mistakes Mistake about Subject Matter When both parties are mistaken about the subject Mistake of Law Varies by state In some states, contract is valid because all parties should know the law In other states, it is treated the same as other mutual mistakes
4. Misrepresentation 5 Situations when there is no Genuine Assent (continued) 1) Innocent Misrepresentation when the party making the statement doesn t know it is untrue 2) Fraudulent Misrepresentation when the party making the statement knows it is untrue Contract is voidable
3 Requirements of Misrepresentation It is treated as Misrepresentation if... 1) Untrue Statement of Fact about a past or existing fact (if about the future, it is opinion); when EXPERTS express an opinion, it is treated as a statement of fact Active Concealment substitute for false statement of fact (ex. painting ceiling to cover water stains) Silence no half truths (drag racing); when truth is made false by subsequent events (leaky roof) Mistaken Assumption when party makes assumption that is incorrect
3 Requirements of Misrepresentation It is treated as Misrepresentation if... 2) Material (Important) Material if... Statement causes reasonable person to contract (miles on a car) If defendant knew plaintiff would rely on statement If defendant knew statement was false All 3 conditions must be met
3 Requirements of Misrepresentation It is treated as Misrepresentation if... 3) Reasonable Reliance Even if statement is material, there is no misrepresentation unless the victim relied on it
5 Situations when there is no Genuine Assent (continued) 5. Fraud based on misrepresentation + intent and injury Deliberate concealing of material fact to induce victim to contract Must have proof of injury if misrepresentation, but no injury then no fraud
1) Rescission 3 Remedies for Fraud 2) Actual or Compensatory Damages damages are available for innocent misrepresentation for goods only (UCC) 3) Punitive Damages to punish the offender
Th-th-th-that s all, folks!