BLS CH 17- Legal Assent

Legal Assent

-A promise the courts will require that parties to obey -best practice firms aim for legal assent in their contracts

Rescinded

-Canceled voidable contracts. Permits the person who concealed the contract to require the return of everything she gave the other party

Mistake

-People may misunderstand either some facts about a deal/exchange or the value of what is being exchanged. -Unilateral or Mutual

Misrepresentation

-Untruthful assertion by one of the parties about the material of fact; prevents the parties from having the mental agreement necessary for a legal contract. -Parties only appeared to agreed, so contract lacked legal assent. -3 types: 1. innocent Misrepresentation 2. Negligent Misrepresentation 3. Fraudulent Misrepresentation

innocent Misrepresentation

-a false statement about a fact material to an agreement that the person making it believed to be true. -VOIDABLE -Scienter- the person had no knowledge of the claim's falsity -misled party can rescind the contract -aggrieved party CANNOT sue for damages.

Fraudulent Misrepresentation

-consciously false representation of a material fact intended to mislead the other party -also referred to as intentional misrepresentation -3 Elements: 1. False Assertion of Fact 2. Intent to deceive 3. Justifiable Reliance on the false assertion -The effect of negligent misrepresentation and a fraudulent misrepresentation is that the victim can either rescind the contract or keep the contract and sue for damages, whereas if the mistake is innocent, the victim can seek only rescission.

Mistake of fact

-erroneous belief about the facts of the contract at the time the contract is formed. -legel assent is absent when this occurs. -DO NOT result form untrue statements

Justifiable Reliance on the false assertion

-injured party cannot rely on false assertion if falsity would have been clear to anyone who inspected the item, however, duty to inspect is declining -Falsity cannot be obvious, or else injured party has no justifiable claim.

Mutual Mistake

-mistake shared by both parties to the agreement -DECISION OR VOIDABLE -either party can choose to rescind the contract. -ambiguity prevented a true meeting of the minds -Peerless story: parties agreed the vessel, Peerless, would deliver the cotton they were exchanging. 2 ships were named Peerless, which parties didn't know. The court rescinded the contract. -People should anticipate ambiguity in material facts and clarify them in advance to prevent mutual mistake.

Unconscionability

-one of the parties has so much bargaining power than the other that they dictate the terms of the agreement -no free will -adhesion contract-result of unconscionability -difference between undue influence is the adhesion contract. -Unfair statements in the actual contract -Rather, undue influence is how to get the parties to enter into the contract.

Duress

-one party is forced into agreement by the wrongful act of another. -3 Triggers for duress -Injured party makes duress claims when the threat left no reasonable alternatives -contract is VOIDABLE by innocent party

Negligent Misrepresentation

-one party makes a material fact that he thinks is true. -if he could have known the truth by using reasonable care to discover or reveal it, then negligent -CAN sue for damages -if damages are found, defrauded party must have been injured by the misrepresentation

Unilateral Mistake

-result of an error by one party about a material fact, a fact that is important in the context of the particular contract. -does not generally void a contract -on rare occasions, recession is permitted under one of these conditions: 1. one party made a mistake about a material fact, and the other party knew or had reason to know the mistake 2. mistake was caused by clerical error that was accidental and didn't result from gross negligence. 3. The mistake was so serious that the contract is unconscionable , that is, so unreasonable that it is outrageous.

Intent to deceive

-scienter occurs to injured party -party making false statements claims implies having personal knowledge of its accuracy

Undue Influence

-special relationships in which one party knowingly takes advantage of a dominant position in a relationship to unfairly persuade and INFLUENCE the other and interfere with that person's ability to make their own decision -VOIDABLE - 5 factors that enter into the finding of undue influence

False Assertion of Fact

1. Concealment: active hiding of the truth about a material fact. ex: removing 20,000 miles on odometer before selling car 2. Nondisclosure: failure to provide pertinent information about the projected contract. Not always used because not obligation to bring up any and all facts. -A relationship of trust exists between the parties to the contract -there is failure to correct assertions of fact that are no longer true -A statute requires the disclosure -The nondisclosure involves a dangerous defect -Nondisclosure and actual false assertion have same legal effect.

3 Triggers for duress

1. Physical harm or extortion to gain consent to a contract is threatened 2. Threatens to file criminal lawsuit unless consent is given 3. Economic interest are threatened.

For mutual mistake to interfere with legal consent, all of the following must be present

1. basic assumption about the subject matter of the contract 2. material effect on the agreement 3. An adverse effect on a party who did not agree to bear the risk of mistake at the time of the agreement.

5 factors that enter into the finding of undue influence

1. did dominant party rust the other party to consent? 2. Did dominant party gain undue enrichment from the agreement? 3. Was non dominant party isolated from other advisors at the time of the agreement? 4. Is the contract unreasonable because it overwhelmingly benefits the dominant party? 5. Court looks at mental condition of the person relying on the guidance of dominant person.

Major obstacles to legal assent

1. mistake 2. Misrepresentation 3. undue influence 4. Duress 5. Unconscionability