Business Law Ch. 15

Voluntary Consent

Voluntary agreement to a proposition or an act of another. A concurrence of wills.

Misrepresentation by Conduct

When a party takes specific action to conceal a fact that is material to the contract. Therefore, if a seller, by her or his actions, prevents a buyer from learning of some fact that is material to the contract, such behavior constitutes misrepresentation by conduct.

Contract may be unenforceable if the parties have not genuinely assented to its terms by:

-Mistake. -Misrepresentation. -Undue Influence. -Duress.

Innocent Misrepresentation

A false statement of fact or an act made in good faith that deceives and causes harm or injury to another. When an innocent misrepresentation occurs, the aggrieved party can rescind the contract but usually cannot seek damages.

2 Types of Mistake

1. Mistake of Fact 2. Mistake of Value or Quality

Latent Defect

A defect that is not obvious or cannot readily be ascertained.

Bilateral Mistake (mutual mistake)

A mistake made by both of the contracting parties. As a result: contract can be canceled by either party.

Unilateral Mistake

A mistake made by only one of the parties. As a result: contract cannot be canceled unless... 1. Other party knew or should have know that mistake was made or 2. Mistake was due to substantial mathematical error, made inadvertently and without gross negligence.

Mistake of Value

A mistake that concerns the future market value or quality of the object of the contract. Generally, contract is enforceable by either party Exception: Mistake of value because of a mistake of fact.

Negligent Misrepresentation

A representation made with an honest belief in its truth may still be negligent due to: 1. A lack of reasonable care in ascertaining the facts, 2. The manner of expression or 3. The absence of the skill or competence required by a particular business or profession. In negligent misrepresentation, culpable ignorance of the truth supplies the intention to mislead, even if the defendant can claim, "I didn't know."

Fraudulent Misrepresentation

Consists of the following Elements: 1. Misrepresentation of Material Fact. 2. Intent to Deceive. 3. Reliance on Misrepresentation. 4. Injury to the Innocent Party. Contract is voidable by innocent party.

Misrepresentation of Law

Does not entitle a party to relief

Scienter

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

Mistake of Fact

Only a mistake of fact makes a contract voidable. Also, must involve some "material fact"-- a fact that a reasonable person would consider important when determining his or her course of action. 2 types of mistake of fact: bilateral & unilateral

Misrepresentation by Silence

Ordinarily neither party has duty to disclose facts. However, seller will be liable if she knows of material defect that cannot be reasonably discovered by buyer.

Statement of Opinion

Statement of Opinions are not actionable. Opinions from Experts can be actionable, and injured party can seek rescission or reformation