chapter 7 genuineness of assent

Law for Business and Personal UseLaw for Business and Personal Use© Thomson South-Western

CHAPTER 7Genuineness of Assent

7-1 Duress and Undue Influence

7-2 Mistake, Misrepresentation, and Fraud

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7-17-1 Duress and Undue Influence

GOALS Recognize when genuine assent

(agreement) is not present Identify the two key elements in undue

influence

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FOCUSScenario The Thompsons were told that if they did not

sign a contract to repay a $2,000 loan at 40 percent interest, their son would be in danger of physical harm. Afraid that their son would be hurt, the Thompsons signed the contract.

Questions Is the contract enforceable? Why or why not?

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GENUINE ASSENT (Agreement)

Genuine assent True and complete agreement A valid offer has been made by the offeror,

and a valid acceptance has been exercised (made) by the offeree

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Duress

Duress—improper threat or act to obtain an expression of agreement. Threats of illegal conduct (crime or tort) Threats to report crimes Threats to sue Economic threats

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List the various forms of legal duress.

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UNDUE INFLUENCE AND ASSENT

Undue Influence Occurs when one party to the contract is

in a position of trust and wrongfully dominates the other party. (Unfair and improper persuasive pressure within a relationship of trust.)

Two Key Elements: Relationship Unfair persuasion

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The relationship—a relationship of trust, confidence, or authority must exist between the parties to the contract.

Ex: Teacher = Student

Grandparent = Adult Child

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Unfair persuasion—to prevent a claim of undue influence, the stronger party should act with total honesty, fully disclose all important facts, and insist that the weaker party obtain independent counsel before contracting.

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What are the key elements in undue influence?

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7-27-2 Mistake, Misrepresentation, and Fraud

GOALS Recognize the types of mistakes that

can make a contract voidable or void List the criteria for a statement to be

treated as a misrepresentation Define fraud and describe the remedies

for it

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WHAT ARE THE TYPES OF CONTRACTUAL MISTAKES?

Unilateral mistakes—occurs when only one party holds an incorrect belief about the facts related to a contract.

Mutual mistakes—(bilateral) both parties have an incorrect belief about an important fact.

Material Facts—important facts that influence the parties’ decisions about a contract.

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FOCUSScenario Jane contracts with Mike to purchase one of

his two skateboards. Jane thinks she has bought the red one, a premier skateboard. Mike thinks Jane has bought the blue one, his less valuable skateboard.

Question Does a contract exist?

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Name the types of mistakes that can make a contract voidable or void.

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What are the types of Misrepresentation?

Innocent Misrepresentation—party makes a statement that turns out to be untrue.

Fraudulent Misrepresentation—seller knowingly makes untrue statements.

Both are voidable by the party to whom the misrepresentation is made.

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Criteria for a statement to be treated as a misrepresentation:

1. The untrue statement is one of fact or there is active concealment, and

2. The statement is material to the transaction or is fraudulent, and

3. The victim reasonably relied on the statement.

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WHAT IS MISREPRESENTATION?

Untrue statement of fact Active concealment—substitute for a false

statement of fact (to cover up) Silence—keeping silent about defects

Omitting important info True statement is made false by subsequent

events One party knows the other party has made a

basic mistaken assumption

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Materiality—3 ways an untrue statement can be made Statement would cause a reasonable

person to contract Defendant knew the plaintiff would rely on

the statement Defendant knew the statement was false

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Reasonable reliance—relying upon the information to complete the contract (or sale). If victim knows info is incorrect but still completes sale, then there is no reliance

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What are the three criteria for a statement to be treated as a misrepresentation?

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FRAUD

The misrepresentation must be intentional or reckless

The misrepresentation or concealment must injure

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REMEDIES FOR FRAUD

Rescission Damages Punitive damages

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What are the remedies available for fraud?

chapter 7 genuineness of assent

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