Genuineness of Genuineness of AssentAssent

Chapter 5Chapter 5

Genuineness of AssentGenuineness of Assent

► A contract may be A contract may be voidablevoidable if the parties if the parties have not genuinely assented to its terms. have not genuinely assented to its terms. Assent may be lacking because of Assent may be lacking because of

Mistakes,Mistakes, Misrepresentation,Misrepresentation,

FraudFraud Undue influenceUndue influence, or , or Duress Duress ► A party who has not truly assented can A party who has not truly assented can

choose to avoid the transaction. choose to avoid the transaction.

Mistakes Mistakes

It is important to distinguish between It is important to distinguish between

mistakes made as to mistakes made as to valuevalue or or quality quality and and

mistakes made as to mistakes made as to facts. facts.

Only mistakes of fact have legal Only mistakes of fact have legal significance. significance.

Mistakes of FactMistakes of Fact

►Mistakes of fact occur in two forms—Mistakes of fact occur in two forms—

UnilateralUnilateral (mistake by only one of (mistake by only one of

the contracting parties)the contracting parties)

Mutual / BilateralMutual / Bilateral. (Mistake by both . (Mistake by both parties)parties)

MisrepresentationMisrepresentation

Misstatement of a Misstatement of a material fact justifiable material fact justifiable relied upon.relied upon.

Injury to the Innocent Party Injury to the Innocent Party

Most courts do not require a showing of Most courts do not require a showing of injury when the action is to rescind injury when the action is to rescind (cancel)(cancel)

the contract. These courts hold that the contract. These courts hold that because rescission returns the parties to because rescission returns the parties to thethe

positions they held before the contract was positions they held before the contract was made, a showing of injury to the innocentmade, a showing of injury to the innocent

party is not necessary.party is not necessary.

Fraudulent Misrepresentation Fraudulent Misrepresentation

The deference between innocent The deference between innocent misrepresentation and fraud ismisrepresentation and fraud is

ScienterScienter (pronounced sy-en-ter) (pronounced sy-en-ter)Knowledge by the misrepresenting Knowledge by the misrepresenting party that material facts have been party that material facts have been falsely represented or omitted with an falsely represented or omitted with an intent to deceive. Fraud is also a tort intent to deceive. Fraud is also a tort and a party can sue for monetary and a party can sue for monetary damages if injury has occurred. damages if injury has occurred. (Including punitive damages.)(Including punitive damages.)

IntentIntent

Intent to deceive occurs if a partyIntent to deceive occurs if a party

(1) knows a fact is not as stated; (1) knows a fact is not as stated;

(2) makes a statement he or she believes not (2) makes a statement he or she believes not to beto be

true or makes it recklessly, without regard true or makes it recklessly, without regard to the truth; or to the truth; or

(3) says or implies that a statement is made (3) says or implies that a statement is made on a basis such as personal knowledge when on a basis such as personal knowledge when it is not. it is not.

Undue Influence Undue Influence

►Undue influence arises from Undue influence arises from specialspecial kinds of kinds of relationshipsrelationships in in which one party can greatly which one party can greatly influenceinfluence anotheranother party, thus party, thus overcomingovercoming that party's that party's free free willwill..

DuressDuress

Force or threat of force inducing the Force or threat of force inducing the other party to enter the contract.other party to enter the contract.

Generally, the threatened act must be Generally, the threatened act must be wrongful or illegal. Threatening to wrongful or illegal. Threatening to exercise a legal right usually does not exercise a legal right usually does not constitute duressconstitute duress