chapter 14: voluntary consent

Typically, fraud involves the following elements:

1. A misrepresentation of a material fact must occur. 2. There must be an intent to deceive. 3. The innocent party must justifiably rely on the misrepresentation. 4. To collect damages, a party must have been harmed as a result of the misrepresentation.

A unilateral mistake cannot be cancelled unless:

1. The other party to the contract knows or should have known that a mistake of fact was made. 2. The error was due to a substantial mathematical mistake in addition, subtraction, division, or multiplication and was made inadvertently and without gross (extreme) negligence. If, for instance, a contractor's bid was significantly low because of a mistake in totaling the estimated costs, any contract resulting from the bid normally may be rescinded.

what is latent defect?

A defect that is not obvious or cannot readily be ascertained (must be disclosed )

what is negligent misrepresentation?

A misrepresentation that occurs when a person makes a false statement of fact because the person did not exercise reasonable care or use the skill and competence required by the person's business or profession.

What is innocent misrepresentation?

A misrepresentation that occurs when a person makes a false statement of fact that they believe is true. (NOT FRAUD)

what is a unilateral mistake? (contract)

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

what is a bilateral mistake?

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

Q: In a contract where there was a bilateral mistake of fact: a: both parties misunderstood a word or term in the contract. b. both parties misunderstood the value of the subject of the contract. c. one party misunderstood a word or term in the contract. d. one party misunderstood the value of the subject of the contract.

a: both parties misunderstood a word or term in the contract.

What is undue influence?

arises from relationships in which one party can greatly influence another party, thus overcoming that party's free will.

Q: A misrepresentation of fact may occur in a contract, by silence, when: a. when the buyer is unsophisticated b. the seller knows of a serious problem that the buyer in unlikely able to discover c. a party is under a duty to speak (such as a professional from whom the other party is seeking an opinion) d. when the seller knows there is an obvious defect in a product

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

Q: Forcing a party to agree to the terms of a contract through the use of threats or blackmail is called: a. adhesion. b. undue influence. c. duress. d. usury.

c. duress

Q: Will a mistake in value of the subject of the contract allow a contract to be rescinded? a. Yes, if both parties were mistaken. b. Yes, but only if the contract is for less than $250. c. No, if only one party was mistaken. d. No, even if both parties were mistaken

d. No, even if both parties were mistaken

what is duress?

forcing another person to enter a contract by means of threats (must be illegal or wrongful and show person incapable of free will)

what is scienter?

guilty knowledge; Knowledge on the part of a misrepresenting party that material facts have been falsely represented or omitted with an intent to deceive.

What type of mistake makes a contract voidable?

mistake of fact

voluntary consent may be lacking because of.. (4)

mistake, fraudulent misrepresentation, undue influence, or duress.

what is misrepresentation by conduct?

occurs when a party takes specific action to conceal a fact that is material to the contract

Q: What remedies are available in the case of a unilateral mistake in making a contract? Choose 2 answers. punitive damages rescission reformation enforcement

rescission reformation

Q: Which of the following may constitutes duress? (Select two) threating to boycott a company threatening to physical harm someone threatening to sue someone threatening to financially harm someone

threatening to physical harm someone threatening to financially harm someone

what are the two forms of mistakes of fact that can make a contract voidable?

unilateral and bilateral

Q: Would one party's mistaken belief about the law governing a contract be enough to rescind the contract? a. No, because it is unilateral and concerns the law. b. Yes, even if the other party had no knowledge about the mistake. c. Yes, because it is a mistake about the law. d. No, because a mistake about the law is not factual.

a. No, because it is unilateral and concerns the law.

Q: What is the result of a contract in which both parties are wrong about a material fact of the contract? a. The contract is voidable. b. The contract is void. c. The contract is enforceable by both parties as both parties assumed the risk in making the contract. d. The contract must be nullified and renegotiated.

a. The contract is voidable.

Q: What factors must be present to prove fraudulent misrepresentation in a contract? Choose 3 answers. a. The innocent party has justifiably relied on the misrepresentation. b. There has been an intent to deceive. c. A misrepresentation of a material fact has occurred. d. The defrauding party must have exerted undue influence on the innocent party.

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

Q: 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? mistake duress fraudulent misrepresentation undue influence

undue influence