Voidable Contracts
What are the elements of fraud?
1. "A" made a misrepresentation of material fact with intent to deceive. 2. "B" reasonably relied on it. 3. "B" suffered injury as a result
When is it not duress?
1. Fear is just of making someone unhappy 2. Threatened action is lawful(not wrongful) 3. Mere economic duress
What are the exceptions to caveat emptor?
1. Hidden defects(duty on seller) 2. Fiduciary relationship 3. Superior knowledge by one party
What are the elements of intent to deceive?
1. Knew or should've known about the falsity 2. Demonstrated reckless disrgard
What are other types of mistakes as lack of genuine consent?
1. Mistake regarding provision of contract 2. Mistake regarding value of subject matter
What are the requirements for a binding contract?
1. Offer and acceptance. 2. Meeting of the minds 3. Consideration.
What are the remedies of fraud?
1. Rescind the contract(returns parties to status quo) 2. Affirm the contract, keep consideration, and then sue for breach of contract Or, some UCC code says you can recover damages in addition to rescinding it.
What are the elements of duress?
1. Wrongful act or threat of wrongful act 2. Causing general and reasonable fear of injury or harm 3. Intended to induce person to enter into contract against their will.
What is a voidable contract?
A contract that can be set aside by one of the parties, even though all requirements are present.
What are the two classifications of mental impairment?
Adjudicated insane and insane in fact.
What is misrepresentation of material fact?
Any word or conclusion that causes the other party to reach an erroneous conclusion about some fact that it important to the other party
What is the rule for silence regarding fraud?
If both parties have roughly the same knowledge and don't have a fiduciary agreement, then no obligation to disclose material facts(caveat emptor).
What are the remedies for mistake as lack of genuine consent?
If mistake of opinion or judgement, then no remedy. If mistake about fact, then rescinding is possible if it were a bilateral contract who's mistaken fact was crucial to the contract
What is unilateral mistake of fact?
If only one party was mistaken
What are the remedies for unilateral mistake?
If only one party was mistaken, then no rescission unless the other party knew or should have known about it.
What kind of mentally impaired people cannot enter into contacts?
Includes senile old folk, mentally retarded, or mentally ill.
What are the usual grounds that a contract is voided on?
Lack of capacity and lack of reality of consent.
What does insane in fact mean?
Never been ruled insane, but still can't understand the nature and effect of the current agreement. Contracts made are voidable.
What is NOT a statement of fact?
Predictions, looks into the future, and opinions on something, unless that person is an expert.
What does adjudicated insane mean?
That the person was actually ruled insane by a psychologist. All contracts entered into are void, even if not disaffirmed
What does capacity mean?
The ability to be able to enter into a binding contract. Competence in the eyes of the law.
How is fraud characterized?
The intention of misleading another about a material fact.
Are intoxicated people able to void contracts?
The intoxicated person must establish that they were so intoxicated that they did not understand the terms of the agreement. Can disaffirm once sober, if they returned consideration.
How is injury from misrepresentation of material fact defined?
The victim did not receive benefits from the bargain
What are statements of value treated as?
These are usually treated as opinion and not enforceable for fraud, unless person is expert.
Is a criminal suit duress?
Threat of criminal yes, civil no.
What is the modern trend regarding mistake of law?
Treated the same as mistake of fact. Rescission allowed for bilateral mistake, but not unilateral(unless other party knew).
What are some reasons capacity can be lacking?
Under 18s, intoxication, and mental instability
How are statements of the law by non lawyers treated?
Usually as opinion, unless person has job that requires legal knowledge
How is reliance defined?
Victim must show the false statement influenced the decision in an actual and reasonable manner.
When is genuine consent to a contract lacking?
When consent was obtained through fraud, duress, or mistake.
How is duress as lack of genuine consent defined?
When the party claims they were forced to enter the contract against their will.
What is the remedy for innocent misrepresentation?
You can only rescind here, and proof of injury is not required.
