Ch. 15

innocent misrepresentation

A false statement of fact or an act made in good faith that deceives and causes harm or injury to another.

Which mistake is likely to be voidable?

Bilateral mistake

What factors must be present to prove fraudulent misrepresentation in a contract? Choose 3 answers.

1. A misrepresentation of a material fact has occurred. 2. The innocent party has justifiably relied on the misrepresentation. 3. There has been an intent to deceive.

What are the possible remedies for a contract formed under duress? Choose 3 answer choices.

1. Allow duress as a defense for breach of contract. 2. Rescind the contract. 3. Make the contract voidable.

Which of these contracts would be enforceable, despite the existence of a mistake? Choose 2 answer choices.

1. Christopher agrees to sell his washer and dryer to Ella. Ella thinks the dryer uses gas instead of electricity, but she is incorrect. 2. Christopher agrees to sell his washer and dryer to Ella in "as is" condition. Ella thinks the set is in excellent condition and is willing to take a chance on buying it. Neither works after a few weeks of use.

Which of the following elements are required to show fraudulent misrepresentation in a contract? (Select all that apply)

1. Damages 2. Justifiable reliance on the fact by the innocent party 3. Misrepresentation of a material fact 4. Scienter

What must a plaintiff prove to show duress in the formation of a contract? Choose 2 answer choices.

1. The defendant committed a wrongful or illegal act. 2. The plaintiff was incapable of voluntarily agreeing to the contract.

A misrepresentation of fact may occur in a contract, by silence, when: (Choose 2 answers.)

1. a party is under a duty to speak (such as a professional from whom the other party is seeking an opinion) 2. the seller knows of a serious problem that the buyer in unlikely able to discover

What remedies are available in the case of a unilateral mistake in making a contract? Choose 2 answers.

1. rescission 2. reformation

Which of the following may constitutes duress? (Choose 2 answers.)

1. threatening to financially harm someone 2. threatening to physical harm someone

adhesion contract

A "standard-form" contract, such as that between a large retailer and a consumer, in which the stronger party dictates the terms.

latent defects

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

bilateral mistake

A mistake that occurs when both parties to a contract are mistaken about the same material fact.

Unilateral Mistake

A mistake that occurs when one party to a contract is mistaken as to a material fact.

Jamal purchases a refrigerator from Appliances For You under an installment agreement. The price of the refrigerator is $1,500. Jamal is required to pay very low monthly payments, but the payments are to be made over a period of several years. By the end of the contract, Jamal will have paid $12,000 for the refrigerator. Jamal signs the agreement anyway, because he really needs a refrigerator. If Jamal later tries to rescind the contract:

Jamal may rescind the contract because it is a contract of adhesion.

voluntary consent

Knowing and voluntary agreement to the terms of a contract. If voluntary consent is lacking, the contract will be voidable.

scienter

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

Anwah runs an antique store that specializes in paintings and other types of artwork. Lionel visits Anwah's antique store and discovers a beautiful old painting in a gilded frame. Lionel is excited because it looks like a painting by Gomez that he saw in his art review class that is worth $5,000. Lionel asks Anwah to confirm that the painting is indeed a Gomez original. Anwah smiles and winks at him. Lionel purchases the painting from Anway for $1,500. When Lionel takes the painting to an art dealer, he discovers that the painting is not a Gomez original and is only worth $20. If Lionel tries to rescind the contract with Anwah:

Lionel will be able to successfully rescind the contract because Anwah committed fraud.

Selma wants to buy Matilda's house. Selma has been admiring the house for a long time and has asked Matilda repeatedly to sell the house to her, but Matilda has always refused. Finally, Selma tells Matilda that if Matilda does not sell Selma the house, Selma will kill Matilda's daughter. Afraid for her daughter's life, Matilda signs the contract to sell the house to Selma. If Matilda later tries to rescind the contract:

Matilda may rescind the contract on the grounds that she signed the contract under duress.

You collect antiques and regularly travel the country looking for good deals. In your wanderings, you find an old fiddle and offer the owner $5. The owner accepts, and you take your treasure home. After you get the fiddle home and do your research on it, you discover the fiddle is actually worth $5,000. What a find! What do you think would happen if the owner tried to cancel the contract and get the fiddle back?

Mistake of value is not a valid defense to a contract, so the owner could not get his fiddle back.

Would one party's mistaken belief about the law governing a contract be enough to rescind the contract?

No, because it is unilateral and concerns the law.

Will a mistake in value of the subject of the contract allow a contract to be rescinded?

No, even if both parties were mistaken.

Kellen is selling a vehicle which has been previously been in an accident and which shows obvious damage. If he does not tell the buyer about the accident, has he committed fraudulent misrepresentation?

No, if the buyer does not ask about the vehicle history.

Undue Influence

Persuasion that is less than actual force but more than advice and that induces a person to act according to the will or purposes of the dominating party.

What is the result of a contract in which both parties are wrong about a material fact of the contract?

The contract is voidable.

In a contract where there was a bilateral mistake of fact:

both parties misunderstood a word or term in the contract.

Forcing a party to agree to the terms of a contract through the use of threats or blackmail is called:

duress

Dora has been in a nursing home for three years and rarely has visitors. Vanita works at the nursing home and regularly takes care of Dora. Vanita and Dora have become very close, and Dora depends on Vanita to help her with decisions about her finances. Just before Dora dies, Vanita and Dora enter into a contract to sell Dora's family home to Vanita for $20,000. The home is worth $100,000. If Dora's children try to void the contract between Vanita and Dora:

the children may be able to void the contract based on undue influence.

duress

the use of force or threat of force made to force another party to enter into a contract

If Ramona changes her will at age 88 to leave the bulk of her fortune to her home health care nurse instead of her children, what factor will the courts consider in judging whether or not her will is valid?

undue influence

Negligent Misrepresentation

Any manifestation through words or conduct that amounts to an untrue statement of fact made in circumstances in which a reasonable and prudent person would not have done that which led to the 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.

Huseyin and Ashish are negotiating the details of a new garage that Ashish plans to build on Huseyin's property. They agree on the building specs, the delivery date, and a price of $25,000. Ashish draws up the contract and sends it to Huseyin to sign. Huseyin reviews the contract and notices the price is listed as $2,500 instead of $25,000. Elated at the unbelievably low price, Huseyin quickly signs the contract and sends it back to Ashish, who signs it as well. If Ashish later tries to rescind the contract due to the mistaken price:

Ashish will be successful, because it is a mathematical mistake that Huseyin was aware of.