Genuine Genuine AgreementAgreement

Mr. Sherpinsky’s Business Law ClassMr. Sherpinsky’s Business Law Class

Preview

Five (5) circumstances that might create a defective agreement:

1. Fraud2. Misrepresentation3. Mistake4. Duress5. Undue Influence

Fraud – Deliberate DeceptionFraud:

Deliberate deception intended to secure an unfair or unlawful gain

Fraud – Deliberate DeceptionFive elements must

exist to prove fraud:1)1) Must be false misrepresentation of Must be false misrepresentation of

factfact

2)2) Party making the Party making the misrepresentation must misrepresentation must knowknow it is it is falsefalse

3)3) False misrepresentation must be False misrepresentation must be made with the made with the intent that it be intent that it be relied uponrelied upon

4)4) Innocent party must Innocent party must reasonably reasonably rely upon the false representationrely upon the false representation

5)5) Innocent party Innocent party must actually suffer must actually suffer some monetary loss or actual harmsome monetary loss or actual harm

Fraud – Deliberate DeceptionOptions if you’ve been induced Options if you’ve been induced

to enter into a contract by to enter into a contract by fraud:fraud:

1. Rescind2. Cancel3. Sue for damages

False Representation of Fact Material fact –

A fact that is important Matters to one of the partiesCannot be a promise of something

that will happen in the future Sales talk (sales puffery)

Allowed (Certain amounts)“This car is really flashy…”“You’ll get plenty of dates with this

car…”

False Representation of Fact Material False

RepresentationsNot confined to oral or

written statements.○ Actions intended to deceive

Concealment:Know as passive fraud or

nondisclosureChoosing not to reveal

information

Resulting Loss Unless you suffer loss as a

result of fraud, you cannot win a lawsuit

Types of Misrepresentations Negligent Misrepresentation

Occurs when the defendant carelessly makes a representation while having no reasonable basis to believe it to be true.

Innocent Misrepresentation occurs when the representor had

reasonable grounds for believing that his or her false statement was true○ Most common relief is recission

Mistake, Duress, and Undue Influence

Unilateral Mistakes

Defined:Defined: Error on the part of one of the parties to

the contract A person usually cannot avoid a contract

because of such a mistake. People who sign an agreement are

bound by it, even if you didn’t read it!

Expectations have been establishedContract should not be blocked by errors on the

part of one party

Unilateral Mistakes Mistakes as to the nature of the

agreement

Example:Example: The Town of Sharonville received four

bids for construction of new city hallAngelini Construction won the lowest bidA few days later the General Manager of

Angelini discovered a $500,000 error.The bid should have been higher.

Is the company bound to the bid?Is the company bound to the bid?

Unilateral Mistakes

Mistake as to the identity of the partyCause to void a contract

Example:Example:Genevieve Sands sent a letter offering baby-sitting

services at a certain rate to Jill Gomez, a mother of toddlers in the neighborhood.

The letter carrier mistakenly delivered it to another Jill Gomez, who happened to live across town and also had children.

This Jill Gomez liked the offer and accepted the deal.

Is the contract voidable?Is the contract voidable?

Bilateral Mistake (mutual mistake)Mistake as to the possibility of Mistake as to the possibility of

performanceperformanceExampleExample Both parties to an agreement enter into the

agreement thinking something can be done In fact, they find it cannot be done. In this situation either party can get out of the

contract because this is a bilateral mistake**Generally, you can not get out of a contract because

of a unilateral mistake, but you can get out of a contract because of a bilateral mistake.**

Bilateral Mistake (mutual mistake)Mistake as to the subject matterMistake as to the subject matter

Both parties can be mistaken as to the identity of the subject matter when they enter into a contract

Either party can void the contract ExampleEllery Weimer agreed to sell Alvin McCormick 5 vacant lots

on Indiana Ave in Parkersburg.McCormick refused to go through with deal after discovering

the lots where on a different Indiana Ave in Pakersburg then he original thought.

WHAT DO YOU THINK?WHAT DO YOU THINK?

Duress Overcoming a person’s will by use of

force or by threat of force or bodily harm

Agreements made defective by duressPhysical duressPhysical duressEmotional duressEmotional duressEconomic duressEconomic duress○ Threats to a person’s business or

income that cause him or her to enter a contract without real consent

Elements of Undue InfluenceOccurs when a person/relationship uses

unfair and improper persuasive pressure to force another person in the relationship to enter into an agreement

A dependency relationshipA dependency relationship Poor health, old age, or mental immaturity

Unfair or improper pressureUnfair or improper pressure Independent person uses force against dependent person

A beneficial contractA beneficial contract Independent party benefits at expense of dependent

party

Review

Name 5 circumstances that might create a defective agreement:

1. Fraud2. Misrepresentation3. Mistake4. Duress5. Undue Influence

Classwork

Exam Friday54 Questions○Four Essays○25 True/False○15 Multiple Choice○10 Drop Down Selection

○ Or less