Chapter 17 Legal Assent

Courts are giving an increasing responsibility to the person who made the

"erroneous assertion"

What is fraudulent misrepresentation?

-provides basis for rescission -the agreement was not voluntary and can be rescinded on the ground that there was no meeting of the minds "is a consciously false representation of a material fact intended to mislead the other party" also referred to as intentional misrepresentation The scienter is clear and obvious that they were misleading them.

For a mutual mistake to interfere with legal consent, all of these conditions MUST BE MET unless courts will not void the contract

1. A basic assumption about the subject matter of the contract. A mistake must be about the existence, quality or quantity of the items to be exchanged. 2. A material effect on the agreement: The mistake must affect the essence of the agreement. 3. Protects those who bargain with someone who agreed at the time of the agreement to bear the risk of mistake but then later wishes to avoid that risk when the contract does not work well in their favor.

The requirements for finding of fraudulent misrepresentation include......(3 elements)

1. A false statement about a past or existing fact that is material to the contract 2. Intent to deceive, which can be inferred from the particular circumstances. 3. Justifiable reliance on the false statement by the innocent party to the agreement For example a homeowner could NOT justifiably rely on that if the gardener to apply special fertilizer to her trees once a week, the trees would never die

Courts will not find "Nondisclosure" as having the same legal effect as an actual false assertion under certain conditions when

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/her. 2. There is failure to correct assertions of fact that are no longer true. Carolines failure to inform Vito of the recent outbreak on her "rust-free" car that VIto agreed to purchase next month is nondisclosure. 3. A statute requires the disclosure, such as mandatory disclosures under residential real estate sales laws. 4. The nondisclosure involves a dangerous defect, such as bad brakes in a car that is being sold.

What are the main obstacles to legal assent?

1. Mistake 2. Misrepresentation 3. Undue influence 4. Duress 5. Unconscionablity

When unilateral mistakes permit rescission (3)

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

What are the following triggers towards a successful request for rescission on grounds of duress?

1. One party threatens physical harm or extortion to gain consent to a contract 2. One party threatens to file a criminal lawsuit unless consent is given to terms of the contract (Threats to bring civil cases against a party to a lawsuit do not constitute duress unless the suit is frivolous) 3. One party threatens the other's economic interests(economic duress) A person refuses to perform according o a contract unless the other person either signs another contract with one making the threat or pays that person a higher price than specified in the original agreement

Factors that enter into the finding of undue influence are the following

1. Was the dominant party rushing the other party to consent 2. Did the dominant party gain undue enrichment from the agreement? 3. Was the nondominenat party isolated from other advisers at the time of the agreement 4. Is the contract unreasonable because it is overwhelmingly benefits the dominant party

False assertion of Fact: It can be two things, doesnt have to be actual assertion

For fraudulent misrepresentation to be the basis for a contract rescission, the statement of fact need not be an actual assertion. It can also be an act of 1)concealment or 2) nondisclosure.

Although unconsionablity has traditionally been limited to the sale of goods under the UCC, many courts have ______ followed that tradition

NOT

What is undue influence?

Refers to those special relationships in which one person takes advantage of a dominant position in a relationship to unfairly persuade the other and interfere with that person's ability to make his or her own decision.

legal assent

To make transactions smoother and more dependable, courts have developed rules about when an assent to do something is a legal assent, that is a promise the courts will require the parties to obey.

1. Mistake

We focus on the misunderstandings about facts b/c they are the only issues that raise the potential of rescission Mistaken beliefs about the subjective value of an item do not affect the validity of the contract

Scienter means

We say he or she lacked scienter( from the latin root of the word meaning "knowledge")

Unconscionability

When one parties has so much more bargaining power than the other that he or she dictates the terms of the agreement. Such an agreement can be rescinded on the grounds of unconscionability.

When can a contract be voidable?

Without legal assent the contract can be voidable and this can cost a business large profits when the transaction is significant. For example Jamal may think he has sold his tutoring services o Harrison but wi/o legal assent the contract is voidable.

The courts insist that there must be ____________________ for a valid contract

a meeting of the minds , Thus they might rescind a contract even though the person making the false assertion was entirely innocent of any intentional deception.

Mistake of fact is an ____________

erroneous belief about the facts of the contract at the time the contract is concluded. Legal assent is absent when a mistake of fact occurs.

Courts will find negligent misrep only when the party making the ________ should have known the truth using skills and competence required of a person in his position or profession

false statement

Nondisclosure:

is a failure to provide pertinent information about the projected contract. Courts are hesitant to use this b/c it is a passive form of misleading conduct.

Concealment

is the active hiding of the truth about a material fact for example, removing 20,000 miles from the odometer on your car before selling it

The best-practice firms aim for __________

legal assent in their contract

Misrepresentation is found in

marketing or advertising careers, We must exercise special care when developing product labels, packaging and advertisements

Or Mistakes can be __________ which is ___________. Both of these mistakes allow us to see which ones are voidable.

mutual, shared by both parties to the agreement.

Duress

occurs when one party is forced into the agreement by the wrongful act of another

Intent to deceive

occurs when the party making the false statement claims to have or implies having personal knowledge of its accuracy. The party with scienter or intent to deceive wanted the contract to be fulfilled on the basis of falsehood. Any resulting assent is not legal because the injured party was not allowed to join the mind of the deceiving party.

What is negligent misrepresentation

one party makes a statement of material fact that he thinks is true. If he could have known the truth by using reasonable care to discover or reveal it

A voidable contract can be ___________ or __________ permitting the person who canceled the contract to require the return of everything she gave the other party. This can result in a __________

rescinded or cancelled, waste-of-time

Mutual mistake is fair for __________ because any agreement was an __________ meaning

rescission, illusion: ambiguity prevented a true meeting of the minds

What is innocent misrepresentation

results from a false statement about a fact material to an agreement that the person making it believed to be true. The person had no knowledge of the claims falsity

In order for damages are sought.....

the defrauded party must have been injured by the MisREP

Adhesion contract

the disproportionate amount of power possessed by one party to the contract has made a mockery of the idea of free will, a necessity for legal consent.

Innocent misrepresentation permit

the misled party to rescind the contract

The injured party makes the case for duress by demonstrating that....

the threat left no reasonable alternatives and that the free will necessary for legal consent was removed by the specifics of the threat

Mistakes can be 2 things. The first being _____________ which is the result of an error by________ party about a material fact that is, a fact that is important in the context of the particular contract.

unilateral, 1

Misrepresentations are similar to mistakes in that least one of the parties is in error about the fact material to the agreement, BUT a misrepresentation is an ____________

untruthful assertion by one of the parties about the material fact; it prevents the parties from having the mental agreement necessary for a legal contract. They only appeared to agree, so their contract lacked legal assent

A unilateral mistake does not generally _______ a contract

void For example a widow seeking to rescind her and her husbands decision to have retirement benefits paid over his life was not allowed to receive survivors pension benefits.

Courts will not _________ contracts for reason of mutual mistake if even one of these conditions is missing

void, ALL OF THESE CONDITIONS MUST BE MET