218 Ch.11 Reality of Assent

what are the two elements of fraudulent misrepresentation and then add a third necessary element:

-a false statement about a past or existing fact that is material to the contract -intent to deceive -justifiable reliance on the false statement by the innocent party to the agreement

examples of duress

-one party threatens physical harm one party threatens to file a criminal lawsuit one party threatens the other's economic interest (economic duress)

Courts will now find nondisclosure as having the same legal effect as an actual false assertion under certain conditions:

1. A relationship of trust exists between the parties to the contract: In this situation the relationship provides a reasonable basis for one person's expectation that the other would never act to defraud him or her 2. There is failure to correct assertions of fact that are no longer true in light of events that have occurred since the initial consent to the terms of the agreement: An illustration is my failing to inform you of the recent outbreak of rust on my "rust free" car that you have agreed to purchase next month.

For a mutual mistake to interfere with legal consent it must involve what?

1. basic assumption about the subject matter of the contract 2. a material effect on the agreement 3. an adverse effect on a party that did not agree to bear the risk of mistake at the time of the agreement. -courts will not void contracts for reason of mutual mistake if even one of the preceding attributes is missing

what re the three conditions that permit a court to invalidate a contract on grounds of a unilateral mistake?

1. one party made a mistake about a material fact and the other party either knew or had reason to know about the mistake 2. the mistake was caused by a clerical error that did not result from gross negligence 3. The mistake was so serious that the contract is unconscionable, this is so unreasonable that it is outrageous

intent to deceive

Scienter is present when the party accused of making the fraudulent assertion believed that the assertion was false or made the claim without any regard for whether it was true or false. Alternatively, intent to deceive is present when the party making the false statement claims or implies that he or she has personal knowledge of the accuracy of the assertion. Any resulting assent is not legal because the injured party was not allowed to join the mind of the deceiving party. The party with scienter or intent to deceive wanted the contract to be fulfilled on the basis of a falsehood.

justifiable reliance on the false assertion

What responsibilities does the injured party have in instances where a false assertion was made by the other party? The injured party has no justifiable claim of fraud when he or she relied on assertions that should have been obviously false....

what is mistake of fact?

Where both the parties enter into an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void

what is nondisclosure

a failure to provide pertinent (relevant) information about the projected contract

Intentional misrepresentation

a false representation of a material fact made by a party who either knows or believes that the factual claim is false or knows that there is no basis for the assertion. Scienter is clear.

what is innocent misrepresentation

a false statement about a fact material to an agreement that the person who made the statement believed to be true. The person who made the false statement had no knowledge of the falsity of the claim. We say the person lacked scienter (deliberately or knowingly) The aggrieved party cannot sue for damages.

voidable

a term applied to a contract that one or both parties have the ability to either withdraw from or enforce

what is mistake in contract law?

an erroneous (wrong) belief about the facts of a contract at the time the contract is concluded. They DO NOT result from the untrue statements of the other party to the contract.

What is misrepresentation

an untruthful assertion by one of the parties about a material fact. One party said something that prevented the parties from having the mental agreement necessary for a legal contract. The parties only appeared to agree, so their contract lacked legal assent.

Caliber v. Wave

earthquake policy case

who is at fault in negligent misrepresentation?

even though there was no actual intent to deceive, the party making the false statement is treated in contract law as if the intent were present. Courts think the party making the false statement SHOULD have known the truth.

what is fraudulent misrepresentation

false representation of a material fact that is consciously (aware) false and is intended to mislead the other party. Scienter (intent of wrongdoing is clear)

How do get damages from fraudulent misrepresentation?

if damages are sought, the defrauded party must have been injured by the misrepresenation

what is a mutual mistake?

in cases where both parties to a contract are mistaken about either a current or a past material fact, either party can choose to rescind the contract

what are the types of misrepresentation

innocent, negligent, fraudulent

what is concealment

involves the active hiding of the truth about a material fact. ex. removing 500 miles from the odometer on your car before selling it to me

what are major obstacles to genuine assent?

mistake, misrepresentation, undue influence, duress

what is duress

much more visible and active interference with free than undue influence. Duress is found when one party was forced into the agreement by the wrongful act of another

do unilateral mistakes void a contact?

no, generally it will still be binding. Courts are hesitant to interfere with a contract in a situation where one of the parties has correct understanding of the material facts of the agreement. Rescission (cancelation) is sometimes permitted for unilateral mistakes.

Raffles v. Wichellaus

peerless case

what is undue influence

refers to those special relationships in which one person has taken advantage of his or her dominant position in the relationship to unduly persuade the other person. The persuasive efforts of the dominant person must have interfered with the ability of the other person to make his or her own decisions

when a contract is voidable, it may be...

rescinded, or canceled

what is the cancelation of a contract?

the cancellation of a contract permits the person who canceled it to require the return of everything she have the other party. At the same time, the person who rescinds the contract must herself return whatever she has received from the other party.

unilateral mistake

the result of an error by one party about a material fact

What is the important of genuine assent?

to make business transactions smoother and more dependable, the law has developed rules about when "yes" means "yes"

types of mistakes

unilateral and mutual

what is mistake of law?

when a party enters into a contract, without the knowledge of the law in the country, the contract is affected by such mistakes but it is not void

what is negligent misrepresentation

when the party making the statement would have known the truth about the fact had he used reasonable care to discover or reveal it.