Chapter 12 e-book

___________ is a much more visible and active interference with free will than is undue influence

Duress

___________ mistake does not void a contract

Unilateral

innocent misrepresentation-

a false statement about a fact material to an agreement that the person who made the statement believed to be true

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

voidable-

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

legal assent is ______ when a legal mistake occurs

absent

anticipate _________ in the material of fact and clarify them in advance to save yourself headaches later

ambiguity

Such assent in duress is not legal assent because...

coercion interferes with the threatened party's free will.

Mistakes are ...

erroneous beliefs about the material facts of a contract at the time the agreement is made.

The courts permit rescission for _________ misrepresntation

fraudulent

Fraudulent misrepresentation is _____________ ____________

intentional misrepresentation

courts are hesitant to interfere with a contract when one of the parties has a correct understanding of the .......

material facts of the agreement

In cases of mutual mistake, the agreement was not based on a ....

meeting of the minds, a basic criterion for legal assent.

the person who rescinds the contract must herself return whatever she has....

received from the other party

when a contract is voidable, it may be ________ or _________

rescinded or canceled

rescind-

to cancel a contract

Only under certain rare conditions is a _____________ mistake a basis for rescinding a contract.

unilateral

if assent is not genuine, or legal, a contract may be ____________

voidable

When people are bargaining with their attorney, doctor, guardian, relative, or anyone else in a relationship involving a high degree of trust, they can be persuaded by unusual pressures unique to that relationship, resulting in a contract that is....

voidable due to undue influence.

However courts will now find non disclosure as having the same legal effect as an actual false assertion under 2 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 persons 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 failure 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 all of the following 3 things:

1. a 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

concealment-

The active hiding of the truth about a material fact ex= removing 20,000 miles from the odometer on your car before selling it to me

Nondisclosure-

a failure to provide pertinent information about a projected contract The courts have until recently been hesitant to use nondisclosure as a basis for rescinding a contract bc it is a passive form of misleading conduct.

fraudulent misrepresentation

a false representation of a material fact that is consciously false and is intended to mislead the other party

If the misrepresentation is negligent, that is, made when the defendant would have known the statement was false had he taken reasonable care before making the statement, the misrepresentation is treated the same as ...

a fraudulent misrepresentation

for a contract to be valid, the courts insist that there must be ..

a meeting of the minds

for fraudulent misrepresentation to be the basis for a contract rescission, the statement of fact need not to be an __________ ___________

actual assertion

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.

Either _______ or _____________ can be treated as the equivalent of an actual assertion.

concealment non disclosure

When a misrepresentation is fraudulent, any assent that is given is gained by _________

deceit

when both parties to a contract are mistaken about either a current or a past material fact, _________ _________ can choose to rescind the contract

either party rescinding such a contract is fair bc any agreement between the parties was an illusion; an ambiguity in some key fact prevented the parties from being in actual agreement

In addition to requiring false assertion and the intent to deceive, fraudulent misrepresentation also requires .....

justifiable reliance on the assertion by the innocent party

Under ordinary situations associated with a _________ _________, it is not the obligation of one party to bring up any and all facts he or she might possess.

legal bargain Each individual is, to a large extent, treated as a responsible decision maker.

The injured party makes the case for duress by demonstrating that the threat left him or her....

no reasonable alternatives. The point is that the free will necessary for legal consent had been removed by the specifies of the threat.

the second 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

To form a contract you need a _________ and ________

offer acceptance

Mistakes in contract law do NOT result from the _________ _________ of the other party to the contract

untrue statements

To understand the requirements for a finding of fraudulent misrepresentation, start with the 2 elements from the definition: 1. 2. Then add a 3rd necessary element: 3.

1. a false statement about a past or existing fact that is material to the contract 2. Intent to deceive. Intent can be inferred from the particular circumstances 3. Justifiable reliance on the false statement by the innocent party to the agreement. Justifiable reliance is generally present unless the injured party knew, or should have known by the extravagance of the claim, that the false statement was indeed false.

Any of the 3 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 These are rare, but it is important to be aware of them bc any rescission can be costly in terms of time and lost oppurtunities

The wrongful act in duress may come in various forms. Any of the following 3 would trigger 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 the terms of the contract. (Threats to file a civil case against a party do not constitute duress unless the suit is frivolous) 3. One party threatens the others economic interest (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.

if someone believes undue influence has occurred, asking the following 4 questions can help establish whether there was undue influence:

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 non dominant party isolated from other advisers at the time of the agreement? 4. is the contract unreasonable bc it overwhelmingly benefits the dominant party? The more of these questions that are answered in the affirmative, the more likely a court is to undue influence.

the value of performance of a contract-

American courts to interfere with a contract just because the value of the item in question has changed since the agreement. The parties are assumed to have accepted the risk, when they made the contract, that the value might change later.

ambiguity

An event or situation that may be interpreted in more than one way.

duress-

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. is found when one party was forced into the agreement by the wrongful act of another

What responsibilities does the injured party have when 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. Anyone who pays for a house in reliance on the claim that it was built before the founding of our country cannot later try to rescind the contract on grounds of fraudulent misrepresentation

Misrepresentation is ...

an intentionally untruthful assertion by one of the parties about material fact.

misrepresentation-

an untruthful assertion by one of the parties about a material fact

the third condition is necessary to protect those who agreed, at the time of the agreement, to bear the risk of mistake but then later wants to ....

avoid that risk when the contract does not work out as well as he or she had planned this situation may arise, 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.

Parties to contracts cannot successfully claim they justifiably relied on a false assertion of fact when the error in the statement would have been ....

clear to anyone who had inspected the item being exchanged However, even this duty to inspect is declining in modern contract law. Increasing responsibility is being placed on the person who made the erroneous assertion.

When legal assent is present, both parties to the agreement are assumed to have made their own choices based on complete freedom to ....

consent to or reject the terms of the bargain

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.

if damages are sought, the _________ party must have been injured by the misrepresentation

defrauded

Nondisclosure is especially likely to provide the basis for rescission when one party has information about a basic assumption of the deal that is unavailable to the other party. As a result of tis logic, sellers have a special duty to ....

disclose because they know more about the structural makeup of the item being purchased

if both parties to a contract are mistaken about a material fact, who can opt to rescind the contract?

either

to meet the second condition, the mistake must involve the _______ of the agreement

essence

The cancellation of a contract permits the person who canceled it to require the return of .....

everything she gave to the other party

to rise to the level of a basic assumption, the mistake would need to be about the _________ , __________ , or __________ of the items to be exchanged

existence, quality, or quantity

It is important for people to understand the circumstances under which ________ ____ ____________ may render their contracts voidable

failure of assent

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.

The party with scienter or intent to deceive wanted the contract to be fulfilled on the basis of a ___________

falsehood

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 bc the injured party was not allowed to join the mind of the deceiving party.

Duress occurs when...

one party threatens the other with a wrongful act unless assent is given.

Undue influence refers to the ....

persuasive efforts of a dominant party who uses a special relationship with another party to interfere with that others free choice of the terms of a contract.

The injured party must demonstrate that the duress left no reasonable alternatives to agreeing to the contract, in order for the court to ...

rescind the agreement.

innocent misrepresentations permit the party that was misled by the false statement to ....

rescind the contract However, bc the party that made the false statement had no intent to mislead, the aggrieved party cannot sue for damages. The reasoning in such cases is similar to the arguments in a mutual mistake case, as you might expect.

any fraud on the part of a party to a contract provides a basis for ________

rescission

The person who made the false statement had no knowledge of the falsity of the claim. We say the person lacked ________

scienter

with fraudulent misrepresentation ___________ is clear

scienter

The party making the misrepresentation either knows or believes that ....

the factual claim is false or knows that there is no basis for the assertion.

Which party may rescind a contract? with innocent misrepresentation

the misled party

An innocent misrepresentation occurs when...

the party making the false assertion believes it to be true.

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

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

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

The parties cannot be said to have assented when one of the parties was....

tricked into the agreement by a fraudulent misrepresentation. Thus the agreement was not voluntary and can be rescinded on the grounds that there was no meeting of the minds.

Any relationship in which one party ahs an unusual degree of trust in the other can trigger concern about...

undue influence in gaining the assent of the more dependent party

sometimes, however, rescission is permitted for even _________ mistakes

unilateral Because our economic well being depends so heavily on reliable contracts, we want to be fully aware of the circumstances under which unilateral mistakes permit rescission.

Mistake may either be ___________ or ___________

unilateral or mutual

Mistakes may be either ___________ or ______________

unilateral or mutual