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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement BELL QUIZ ON CHAPTER 5 1.What is any agreement that is enforceable by law? 2.There are six elements of a contract. Name TWO. 3.How many promises does a bilateral contract contain? 4.Who is the person making the offer? 5.There are five ways to terminate an offer. Name TWO.

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement ANSWERS TO BELL QUIZ CHAPTER 5 1.Contract 2.Offer, acceptance, genuine agreement, consideration, capacity, legality 3.Two 4.Offeror 5.Revocation, rejection, counteroffer, expiration of time, death or insanity

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SECTION OPENER / CLOSER: INSERT BOOK COVER ART Fraud and Misrepresentation Section 6.1

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Section 6.1 Fraud and Misrepresentation Section 6.2 Mistake, Duress, and Undue Influence 6 Chapter Genuine Agreement

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Why Its Important Learning the elements of fraud may prevent you from being victimized or help you claim your rights if you are defrauded.

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement If the offeror makes a valid offer, and the offeree has made a valid acceptance, then a genuine agreement has been reached. The courts describe this type of agreement as a meeting of the minds. Genuine Agreement

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement 6.1 Several circumstances might create a defective agreement: Fraud Misrepresentation Mistake Duress Undue Influence

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Fraud Fraud is a deliberate deception intended to secure an unfair or unlawful gain.

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement You may rescind, or cancel, the contract. You may sue for money damages. You may also try to collect punitive damages which is designed to punish the wrongdoer for their conduct. Remedies for Fraud

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement 1.A false representation of fact. 2.Knowledge of the falsity by the party making the false representation. The Five Elements of Fraud

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement 3.Intent to deceive by the party making the false representation. 4.Reasonable reliance (trust) by the innocent party. 5.An actual loss must be suffered by the innocent party. The Five Elements of Fraud

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement False Representation of Fact Fraud requires a false representation of a material, existing fact. A material fact is one that is important; it matters to one of the parties.

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement False Representation of Fact Under some circumstances, individuals can make false representation by choosing not to reveal important information. This is known as concealment, or passive fraud.

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Representation Known to Be False To be held accountable for fraud, the party making the false representation must be aware that it is false. This may be shown by: proving actual knowledge showing the statement was made recklessly Example 1 page 130

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement False Representation Intended to Be Relied Upon To prove fraud, the person making the misrepresentation must intend that the other party will rely upon the information as part of the contract negotiations. Example 2 page 131

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement False Representation Actually Relied Upon To prove fraud, the false representation must be reasonably relied upon by the other party when the agreement is made. Example 3 page 131

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Resulting Loss In proving fraud, the innocent party must show some monetary loss.

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Innocent Misrepresentation Misrepresentation is the act of making an innocent statement that turns out to be false, when the person honestly believed the statement was true at the time it was made.

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Remedy for Misrepresentation the right to rescind the contract you may not win damages

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement After Mrs. Grayson died, her neighbor, Joel, asked her son, Tom, if he would sell her TV. Before giving Tom $100, Joel asked, It works, doesnt it? and Tom answered, As far as I know. However, when Joel plugged it in, it did not work.

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Can Joel claim there was false representation? Why or why not?

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement ANSWER Probably not. As far as I know, would probably be considered innocent misrepresentation.

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SECTION OPENER / CLOSER: INSERT BOOK COVER ART Fraud and Misrepresentation Section 6.2 Mistake, Duress, and Undue Influence

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Why Its Important Recognizing how mistake, duress, and undue influence can affect agreements will help you make better decisions in such situations.

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement In addition to fraud and misrepresentation, mistake, duress, and undue influence can also create a defective agreement. Genuine Agreement

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Mistake People sometimes enter into contracts believing that certain information is true when it is actually not, or that information is not true when it really is.

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Unilateral Mistake A unilateral mistake is an error on the part of one of the parties to the contract. Through words or actions, one party has created reasonable expectations on the part of the other party to the contract.

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Unilateral Mistake Those expectations should not be blocked because one of the parties has made an error, or mistake. A person usually cannot avoid a contract because of such a mistake Example 5 page 133

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Unilateral Mistake There are two types of unilateral mistakes. 1.Mistake as to the nature of the agreement 2.Mistake as to the identity of a party

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Mistake as to the Nature of the Agreement People who sign an agreement are bound to it, even if they have not read it or are mistaken about what it says!!!

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Mistake as to the Identity of a Party If you make an offer by letter to one party, but the wrong person mistakenly receives the offer, the mistake may be cause to void the contract.

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Mistake as to the Identity of a Party If you make the same offer face-to- face with a person whose identity you have mistaken, your mistake as to the identity will not prevent a binding contract.

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement 6.2 Remedies for Unilateral Mistakes 1.Mistake as to the nature of the agreement. 2.Mistake as to the identity of a party 1.Mistake as to the nature of the agreement. 2.Mistake as to the identity of a party Unilateral Mistake RemedyRemedy 1.Rescission will not be granted. 2.Rescission may be granted. 1.Rescission will not be granted. 2.Rescission may be granted. Type of Mistake

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Bilateral Mistake When both parties to a contract are mistaken about some important fact, this is called a bilateral mistake, or mutual mistake. When this mistake occurs, either party may avoid the contract.

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Bilateral Mistake There are two types of bilateral mistakes. 1.Mistake as to the possibility of performance 2.Mistake as to the subject matter

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Mistake as to the Possibility of Performance If both parties enter into a contract believing that the duties described in the agreement can be performed, when in fact, they cannot, either party may avoid the contract. Example 7 page 136

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Mistake as to the Subject Matter Both parties can be mistaken as to the identity of the subject matter when they enter into a contract. The contract may be avoided by either one of the parties. Example 8 page 136

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement 6.2 Remedies for Bilateral Mistakes 1.Mistake as to possibility of performance. 2.Mistake as to the subject matter. 1.Mistake as to possibility of performance. 2.Mistake as to the subject matter. Bilateral Mistake RemedyRemedy 1.Rescission will be granted. 2.Rescission will be granted. 1.Rescission will be granted. 2.Rescission will be granted. Type of Mistake

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Duress Duress is overcoming a persons will by use of force or threat of force or bodily harm.

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Types of Duress Physical duress is when actual physical violence is used to force a person to enter a contract. Emotional duress is when the threat of physical force is used to force a person to enter a contract.

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Types of Duress Economic duress is when threats to a persons business or professional reputation are used to force a party to enter a contract.

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Undue Influence Undue influence occurs when a person uses unfair and improper persuasive pressure to force another person to enter into an agreement.

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Undue Influence Circumstances such as ill health, old age, and mental immaturity may put a person in a weaker position.

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement 6.2 Elements of Undue Influence A dependency relationship relationship DescriptionDescription One party in a relationship is dependent on the other party. One party in a relationship is dependent on the other party. Element

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement 6.2 Elements of Undue Influence Unfair or improper pressure pressure DescriptionDescription The independent person uses excessive pressure to force the dependent person to enter a contract. The independent person uses excessive pressure to force the dependent person to enter a contract. Element

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Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement 6.2 Elements of Undue Influence A beneficial contract DescriptionDescription The contract benefits the independent party at the expense of the dependent party. The contract benefits the independent party at the expense of the dependent party. Element End of Chapter 6