The Reality of Consent

What must the party be able to do to establish rescission on the basis of misrepresentation?

(i) An untrue assertion of fact was made. --past/present (ii) the fact asserted was material (iii) The complaining party entered the contract because of his RELIANCE on the assertion. (iv) The reliance of the complaining party was REASONABLE/JUSTIFIABLE RELIANCE.

What are the requirements for Mutual Mistake to be resulted in avoidance of the contract?

(i) The mistake relates to a basic assumption on which the contract was made. (ii)The mistake has a material effect on the agree-upon exchange (iii) the party adversely affected by the mistake does not bear the risk of the mistake.

What must the party that had entered a contract based on fraud or any of the other doctrines must act to protect her rights?

(i) she must object promptly upon learning the facts that give her the right to rescind (ii) must clearly express her intent to cancel the contract (iii) must AVOID ANY BEHAVIOR that would suggest that she AFFIRMS/RATIFIES the contract.

What are thefive doctrines that permit people to avoid their contracts because of the ABSENT OF REAL CONSENT?

(i)Misrepresentation (ii)Fraud (iii)Mistake (iv)Duress (v)Undue Influence All of these do not = real consent/mutual consideration

How does Erroneous mistakes take form in MUTUAL MISTAKES?

--erroneous expression of an agreement, frequently caused by a clerical error in drafting or typing a contract, deed, or other document, REMEDY=REFORMATION:modification of the written instrument to express the agreement that the parties made but failed to express correctly

What is scienter?

A legal term meaning fraud.

What is the remedy for fraud?

A tort liability/liable for damages, possibly including punitive damages, for the tort of deceit (legal claim involving fraud).

How can one avoid ratification?

Avoiding unreasonable delay om notifying the other party of her recision, and, Avoiding any conduct that would send a "mixed message" --> such as accepting benefits from the other party or behaving in any other way that is inconsistent with her expressed intent to rescind.

How can an assumption not be considered a basic assumption?

It will not IF it concerned a MATTER that BEARS an INDIRECT or COLLATERAL RELATIONSHIP to the SUBJECT MATTER of the contract. e.g. mistakes about party's financial ability/market conditions

Are the elements for rescission the same as establishing rescission on the basis of fraud?

No (i) Untrue assertion of fact (or equivalent).) --past/present (ii) assertion made with knowledge of falsity (scienter) and intent to deceive. (iii) actual reliance (iv) Justifiable reliance (v) Economic loss (in tort action for damages.)

Does the remedy of fraud apply to all states?

No, In some states, a person injured by fraud cannot rescind the contract and sue for damages for deciet; he must elect (choose) between these remedies. In other states, however, an injured party may pursue both rescission and damage remedies and does not have to elect between them.

Can making an opinion or a promise/prediction about some future happening constitute an untrue assertion?

No.

Explain Material effect on Agreed-upon Exchange.

The Party must show that the imbalamce

What if the complaining party knew that the assertion was false or was not aware that an assertion had been made?

There is no reliance.

How does Mutual Mistake exist?

When both parties to the contract have erroneous assumption about the same fact.

Can Nondisclosure also be the equivalent of an assertion of fact?

Yes, because while concealment involves the active hiding of a fact, Nondisclosure is the FAILURE to volunteer information.

What is concealment?

a fact through some active conduct intended to prevent the other party from DISCOVERING the fact. IT IS EQUIVALENT OF AN ASSERTION. --> It is the basis of misrepresentation/ fraud.

What is Material?

a fact to be considered material if it is likely to play a significant role in --inducing a reasonable person to enter the contract or -- if the person asserting the fact knows that the other person is likely to rely on it.

What does voidable mean?

a person having the power to rescind because of consent not being real.

What is Ratification?

a person who had the right to rescind has elected not to do so; ending the right to rescind.

Translate the second resteatment section 172:

a relying party's failure to discover facts before entering the contract does not make his reliance justifiable unless the degree of his fault was so extreme (grossly negligent) as to the amount to the failure to act in good faith and in accordance with reasonable standard of fair dealing.

Whats is Misrepresentation?

an assertion(a confident statement of fact or belief) that is not in accord with the truth. Can be EITHER "innocent" (not intentional deceptive) or "neglegent."

Explain the mistake about a basic assumption.

if the mistakes concerns a BASIC ASSUMPTION on which the contract was based ASSUMPTIONS: -about the identity, -existence, -quality of the subject matter of the contract among the basic assumptions on which contracts typically are founded. Assumption can be so basic, it can be taken for granted e.g. buying a house and assuming its legally permissible for residence.

What is Fraud?

made with knowledge of falsity and intent to deceive. It is committed knowingly, with the intent to deceive.

What is reliance?

means that a person PURSUES some course of action because of his faith in an assertion made to him.

What does the 2nd restatement section 157 say about the MISTAKEN party's mistake?

states that a person's fault in failing to know or discover facts before entering the contract will not bar relief unless his fault amounted to a FAILURE TO ACT IN GOOD FAITH.

What is Rescind?

the power to cancel the contract. the person is entitled to the return of ANYTHING HE GAVE the other party. He must also OFFER to return anything he has RECEIVED from the other party.

Explain the Doctrine of Mistake.

to prevent unexpected and unbargained for losses that result when the parties are mistaken about a fact to their contract.

Can misrepresentation be voidable?

yes, even if the person making the person making the misrepresentation believes in good faith that what he says is true. Still gives the complaining party the right to rescind a contract.