Business law Chpt 11

Mutual Mistake

both parties to a contract have an incorrect belief about an important fact

duress

compulsion, force

Two types of fraud

fraud in the execution and fraud in the inducement

fraud

A deliberate deception intended to secure an unfair or unlawful gain

Nonfraudulent Misrepresentation

A material, false statement that induces another to rely justifiably but is made without scienter

includes positive assertion of something that is not true, concealment of a fact, expressly denying knowledge of a known fact, or statement of a misleading half-fact. Silence (non-disclosure) alone is not automatically false representation unless the fact cannot be reasonable discovered (hidden) or in the case of a fiduciary who owes duty of trust, loyalty, and confidence. They must disclose everything they know

False representation

________ prevents agreement from being knowingly given.

Fraud

A misrepresentation that deceived the other party as to the nature of a document ( during the signing doesn't know what they are signing ) evidencing the contract; rendered the agreement void (extremely rare). (Through the deception the party can not reasonable know - what they are signing. )

Fraud in the execution

During the signing of a contract, the person doesn't know what they are signing

Fraud in the execution

An intentional misrepresentation of material fact by one party to another, who then consents to a contract ( he knows he is signing a contract, but there is a misrepresentation of the facts they are signing for ) in justifiable reliance on the misrepresentation; this renders the contract voidable by the defrauded party (victim)

Fraud in the inducement

Someone does understand that they are entering into the contract but the terms they were entering on were misguided representation

Fraud in the inducement

fraud in the inducement

Fraud that occurs when the party knows what he or she is signing but has been fraudulently induced to enter into the contract

In case of mistake in meaning of terms, if one party knows that the other party has a different understanding, the contract stands with the ___________ __________ interpretation of terms

Innocent party's

Scienter

Knowledge by the misrepresenting party that material facts have been falsely represented or omitted with an intent to deceive. (Guilty knowledge)

Threatening to sue is allowed is allowed if there is a _____/________ debt

Lawful/ real

(scienter) and can consist of (a) actual knowledge , (b) lack of belief in the statement, or (c) reckless indifference to the truthfulness.

Made with knowledge of its falsity and the intention to deceive

An understanding that does not match existing fact

Mistake

in some cases a term of the contract can have different meanings for the seller and the buyer, without either party knowing that the other party has a different understanding, this renders the contract void. If , however, one party knows that the other party has a different understanding, the contract stands with the second party's (the innocent party) interpretation of the terms.

Mistake in meaning of terms

both parties have a common but erroneous belief forming the basis of the contract (has material effect on the agreed exchange); renders the contract voidable by either party.

Mutual mistake

made without due care in maintaining its truthgulness; renders agreement voidable

Negligent misrepresentation

________ and ________ misrepresentation both render contracts voidable

Negligent, innocent

Is a subjective test easy to prove?

No

Is there assent with fraud in the execution

No

No intention to deceive - a material false statement that induces the other paty to rely justifiably, but without scienter.

Non-fraudulent misrepresentation

Unilateral Mistake

Occurs when only one party enters a contract under a mistaken assumption

(not just an opinion) an event that actually took place or something that actually exists, not just a belief or a prediction of a future event. May or may not include a statement of law. If stating what the statute is - fact. If stating what the legal consequences will be - opinion. (Sales Puffery of a value - not fraud; its opinion - not a fact) opinion based on expertise can be treated as statement of fact.

Of a fact

Undue Influence

Unfair and improper persuasive pressure within a relationship of trust

when only one of the parties is mistaken; usually no relief for unilateral mistake unless the error is known or should be known by the non-mistaken party or the mistake was caused by the non mistaken party

Unilateral mistake

Fraud effects/ damages the _______ of assent

Validity

Fraud in the execution renders the contract _______

Void

Mistake in meaning of terms renders the contract _______

Void

Physical compulsion renders the agreement _______

Void

Fraud in the inducement renders the contract _______ by the defrauded party

Voidable

Mutual mistake renders the contract _______ by either party

Voidable

Subjective test makes the contract ______ at the option of the coerced party

Voidable

The law demands that agreement be _______, _______, _______ and entered into by parties who have contractual capacity

Voluntary, knowing, legal

A subjective test is used to determine

Whether the threat actually intended assent on the part of the person claiming to be the victim of duress

(victim) if the misrepresentation did not influence the complainer;'s decision, he has (Must conplete contract because no fraud) he had to have justifiably relied on the false representation

Which representation is justifiably relied on by the other party

Fraud in the execution is rare?

Yes

mistake

a bad or wrong decision; error

5 requisite elements of fraud in the inducement

- False representation - Of a fact - That is material - Made with knowledge of its falsity and the intention to deceive - Which representation is justifiably relied on by the other party

subjective test

A test which requires the markers to evaluate and not just to follow a mark sheet.

the law demands that agreements be voluntary, knowing, legal and entered into by parties who have ________ _______. (Consent)

Contractual capacity

You can't threaten ________ prosecution

Criminal

A person who is being _______ is not really being given the correct information

Defrauded

Leaves the victim with no reasonable alternative/ they feel they have no choice

Duress

Wrongful act or threat that overcomes the free will of the party

Duress

Wrongful act or threat that overcomes the free will of the party. (Leaves the victim with no reasonable alternative/ they feel they have no choice)

Duress

Defenses to contracts include situations in which the manifested consent was not knowingly and voluntarily given such as (a) ________, (b) ________ _________, (c) _______, (d) _________ ________ ________ and (e) _________.

Duress, undue influence, fraud, non fraudulent misrepresentation, mistake

EX. If told no need to read it, its a standard contract > should have read it. The fault is on you.——- this is an example of ?

Effect of fault upon mistake

the mistaken party cannot avoid the contract obligation if she simply did not read what she was signing. generally people are held to what they sign as long as they had reasonably opportunity to read it. EX. If told no need to read it, its a standard contract > should have read it. The fault is on you.

Effect of fault upon mistake

Using economic and social coercion, leaving the victim with no reasonable alternative to agreeing with the more powerful party; threat may be explicit or inferred from words or conduct.

Improper threats

Using economic and social coercion, leaving the victim with no reasonable alternative to agreeing with the more powerful party; threat may be explicit or inferred from words or conduct. A Subjective Test (evidence that the party in the case was reasonably reacting/ had reason to believe they felt forced) is used to determine whether the threat actually intended assent on the part of the person claiming to be the victim of duress (often difficult to prove); it makes the contract voidable at the option of te coerced party.

Improper threats

When a party coerces another to agree to a contract through actual physical force

Physical compulsion

When a party coerces another to agree to a contract through actual physical force; renders the agreement void.

Physical compulsion

evidence that the party in the case was reasonably reacting/ had reason to believe they felt forced

Subjective test

(relating to something of importance to the contract) Must be likely to induce a reasonable person to manifest assent (or the maker must know that the recipient is likely to do so.) The recipient is likely to enter a contract.

That is material

Effect of Fault upon Mistake

The mistaken party cannot avoid the contract obligation if they simply did not read what they were signing.

Fraud in the Execution

lying about the nature of a document in order to obtain a person's signature

Negligent Misrepresentation

misrepresentation made without due care in ascertaining its truthfulness; renders agreement voidable

innocent misrepresentation

misrepresentation made without knowledge of its falsity but with due care; renders contract voidable

Mistake in Meaning of Terms

no contract if material mistake in terms and neither party is to blame