Chapter 15: Mistakes, Fraud & Voluntary Consent

2 exceptions

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 with- out gross (extreme) negligence. Must still involve some material fact.

Adhesion Contract

A "standard-form" contract, written exclusively by one party and presented to the other party on a take-it- or-leave-it basis.

Latent Defects

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

Innocent Misrepresentation

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

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 (or failed to do) that which led to the misrepresentation.

Voluntary Consent

Consent given by free will, without any force or undue pressure/influence or coercion on the person giving it on his or her own initiative.

unilateral

Mistake made by only one of the parties.

mistakes of value or quality.

concerns the future market value or qual- ity of the object of the contract, the mistake is one of value, and the contract normally is enforceable.

Scienter "guilty knowledge"

intent to deceive. Scienter clearly exists if a party knows a fact is not as stated. Scienter also exists if a party makes a statement that he or she believes is not true or makes a statement recklessly, without regard to whether it is true or false. Finally, this element is met if a party says or implies that a statement is made on some basis, such as personal knowledge or personal investigation, when it is not.

Reliance on the Misrepresentation

justifiable reliance. The deceived party must have a justifiable reason for relying on the misrepresentation. Also, the misrepresentation must be an important factor (but not necessarily the sole factor) in inducing the deceived party to enter into the contract.

mistakes of fact

makes a contract voidable. must involve some material fact—a fact that a reasonable person would consider important when determining his or her course of action.

fiduciary relationship

one of trust, such as partners, physician and patient, or attorney and client

bilateral

or mutual, mistake is made by both of the contracting parties.

Fraudulent Misrepresentation

refers only to misrepresentation that is consciously false and is intended to mislead another. 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.

Undue Influence

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

Duress

terms of a contract is not voluntary if one of the parties is forced into the agreement. Must be proof of a threat to do something that the threatening party has no right to do. must be wrongful or illegal, and it must render the person incapable of exercising free will.