BMGT380 Chapter 13: Reality of Consent
Wood v Boynton
*** Mutual mistake- Value: Jeweler never seen an uncut diamond, not an expert, so she lost case no relief given.
Person seeking to rescind a contract on the grounds of either innocent or fraudulent misrepresentation must be able to prove:
1. An untrue assertion of fact was made 2. The fact asserted was material or the assertion was fraudulent 3. The complaining party entered the contract because of his reliance on the assertion 4. The reliance of the complaining party was reasonable *5. for tort actions in which plaintiff is seeking to recover damages for deceit, the plaintiff would have to establish a fifth element injury. He would have to prove that he had suffered actual economic injury because of his reliance on the fraudulent assertion.
Criteria for intentional tort of fraud
1. False Assertion 2. Knowingly made 3. Justifiable Reliance 4. Injury
Criteria for innocent Misrepresentation
1. False Assertion 2. Justifiable Reliance 3. Injury **NOTE absence of scienter
Two Types of Misrepresentation
1. innocent (not intentionally deceptive) 2. Fraudulent (made with knowledge of falsity and intent to deceive) **Either innocent misrepresentation or fraud gives the complaining party the right to rescind a contract.
Example of Fraud
Buy house on creek. Ask if it floods. Seller says no despite signing petition about flood. Relief granted on fraud.
Requirement for Mutual Mistake
Exists when both parties to the contract have erroneous assumptions about the same fact. can be avoided when ALL elements present: 1. Mistake relates to basic assumption on which contract was made 2. Mistake has a material effect on agreed upon exchange (prove imbalance so severe) 3. The party adversely affected by the mistake does not bear the risk of the mistake (even if 2 elements present person harmed by mistake cannot avoid contract if he is considered to bear the risk).
Election of Remedies
In some states, a person injured by fraud cannot rescind the contract and sue for damages for deceit; choose between the two.
Misrepresentation
Is an assertion that is not in accord with the truth. If person enters contract because of reliance on misrepresentation about important fact, contract is voidable.
What needs to be satisfied for relief for unilateral contracts?
JUST 1 SATISFIES 1. Party has reason to know the mistake 2. Party can be restored 3. Computational error and not of judgement
Contract remedy for fraudulent misrepresentation
Recission. Tort liability for fraud vs. innocent misrep. is different. Fraud may be liable for damages (punitive) for the tort of deceit.
Scienter
The legal term for this knowledge of falsity which distinguishes fraud from innocent misrepresentation.
What is necessary of a rescission
To rescind a contract based on fraud (etc) she must act promptly and unequivocally. Object promptly upon learning the facts that give her the right to rescind and must clearly express her intent to cancel the contract. **Also avoid behavior that would suggest that she affirms or ratifies the contract .(Ratification of a voidable contract means that a person who had the right to rescind has elected not to do so) it ends the right to rescind. *example unreasonable delay.
Contracts are voidable when:
contracts are induced by misrepresentations, fraud, mistake, duress, or undue influence Means that the person whose consent was not real has the power to rescind (cancel) the contract. A person who rescinds a contract is entitled to the return of anything he gave the other part.
Unilateral Mistake
courts more likely to allow avoidance of contract when both parties are mistaken than when only one is. -At least 1 party assumption about the facts was correct.
Fraud
is a type of misrepresentation that is committed knowingly, with the intent to deceive. Intent to deceive can be inferred from the fact that the defendant knowingly made a misstatement of fact to a person who was likely to rely on it. intentinoal tort tha tyou can sue for damages. Also defnese to brech of contract.