Reality of Assent (chapter 12)

3 requirements to void a contract based on mutual mistake

-A basic assumption about the subject matter of the contract. to rise to the level of a basic assumption, the mistake would need to be about the existence, quality, or quantity of the items to be exchanged. -A material effect on the agreement. To meet the this condition, the mistake must involve the essence of the agreement. A fact is material when it provides a basis for a person's agreement to enter into the contract. This element is not satisfied when the person attempting to avoid the contract simply claims that the item to be exchanged is not the one he had intended to exchange. -An adverse effect on a party that did not agree to bear the risk of mistake at the time of the agreement. This situation might arise, for instance, if the adversely affected party had agreed in the contract to accept the items as is but later felt they were not worth the price paid.

fraudulent/intentional misrepresentation and necessary elements for it

-A false representation of a material fact that is consciously false and is intended to mislead the other party. -necessary elements: false statement about material fact, intent to deceive, justifiable reliance -contract is voidable and can sue for damages

negligent misrepresentation

-A false statement of material fact made by a party who thinks it is true but who would have known the truth about the fact had he or she used reasonable care to discover or reveal it. -contract is voidable and can sue for damages

examples of acts that would trigger a successful request for rescission on grounds of duress:

-One party threatens physical harm or extortion to gain consent to a contract. -One party threatens to file a criminal lawsuit unless consent is given to the terms of the con- tract. (Threats to file a civil case against a party do not constitute duress unless the suit is frivolous. -One party threatens the other's economic interests (this is known as economic duress). For instance, Jim refuses to perform according to a contract unless Ellen either signs another contract with him or pays him a higher price than that specified in the original agreement.

mutual mistake

-The result of an error by both parties about a material fact, that is, one that is important in the context of a particular contract. -either party can rescind contract in this case about current or past material fact

unilateral mistake

-The result of an error by one party about a material fact, that is, one that is important in the context of a particular contract. -this type of mistake USUALLY does not void a contract -Any of the following conditions would permit a court to invalidate a contract on grounds of 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, that is, so unreasonable that it is outrageous.

rescind

-cancellation of a contract. This may happen when a contract is voidable -person who rescinds can require other party to give back everything they received from the the party

innocent misrepresentation

-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. - contract is voidable -Innocent misrepresentations permit the party that was misled by the false statement to rescind the contract. However, because the party that made the false statement had no intent to mislead, the aggrieved party cannot sue for damages.

requirements for nondisclosure

1) A relationship of trust exists between the parties to the contract. 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.

mistake

An erroneous belief about the facts of a contract at the time the contract is concluded. When a mistake occurs, legal assent is absent.

durres

Any unlawful act or threat exercised on a person whereby the person is forced to enter into an agreement or to perform some other act against his or her will.

T/F For fraudulent misrepresentation to be the basis for a contract rescis- sion, the statement of fact need not be an actual assertion

TRUE. Either concealment or nondisclosure can be treated as the equivalent of an actual assertion. Concealment involves 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 to me. Nondisclosure is different because it involves a failure to provide pertinent information about the projected contract.

undue influence

The situation in which one person has taken advantage of his or her dominant position in a relationship to persuade the other person unduly to the extent that the dominant person's persuasive efforts have interfered with the other person's ability to make his or her own decision.

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. Courts may rescind contract even if the deception was not intentional

voidable contract

both parties have ability to withdraw from contract

major obstacles to genuine assent

mistake, misrepresentation, undue influence, duress

mistakes of fact vs mistakes of subjective value

mistakes of fact: possibly void mistakes of subjective value: not void