Chapter 7-2

Unilateral mistake

one party holds an incorrect belief about the facts or law related to a contract. Does not void the contract.

Caveat emptor-

"Let the buyer beware."

Mutual mistake

(bilateral mistake) Both parties have an incorrect belief about an important fact or the applicable law. Does void a contract.

Seller may not stay silent if:

1. Half-truths cannot be used to conceal or mislead. 2. If the truth later because false by subsequent events, the truth must be disclosed. 3. When one party knows that the other party has made a basic mistaken assumption, the truth must be told.

Untrue statements determined as Material:

1. If the statement would cause a reasonable person to contract. 2. If the defendant knew the plaintiff would rely on the statement. 3. If the defendant knew the statement was false.

Fraud Remedies

1. Recession: anything you receive must be returned. 2. Damages: damages are available if fraud is proven.

Misrepresntations

1. The untrue statement is one of fact or there is concealment. 2. The statement is material or fraudulent. 3. The victim reasonably relied on the statement.

Fraud Must Include:

Intent: deliberate lies or concealing important material facts to induce the victim to contract. Injury: if there is not injury, there is no fraud.

Active Concealment

a substitute for a false statement of fact.

Material facts

important facts that influence the parties decisions about a contract.

Fraud

intentional misrepresentation of an existing important fact.

Fraudulent misrepresentation

party a contract knows that a statement he or she made is untrue. The contract is voidable.

Innocent misrepresentation

party to a contract does not know that a statement he or she made is untrue. The contract is voidable.