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7-2 Mistakes, Misrepresentation, and Fraud

7-2 Mistakes, Misrepresentation, and Fraud. What are the types of Contractual Mistakes??. 1) unilateral mistakes-an incorrect belief by one of the parties in a contract Ex: not reading the contract before you sign it or signing contract in language you don’t know

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7-2 Mistakes, Misrepresentation, and Fraud

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  1. 7-2 Mistakes, Misrepresentation, and Fraud

  2. What are the types of Contractual Mistakes?? 1) unilateral mistakes-an incorrect belief by one of the parties in a contract • Ex: not reading the contract before you sign it or signing contract in language you don’t know 2) mutual mistake (bilateral mistake)-an incorrect belief by both parties about an important fact • Ex: suppose both a buyer and a seller think that a land is 42 acres but later they find out it is actually 21 acres. This causes the contract to void. 3) material facts-important details that influence the parties’ decision about the contract

  3. What is Misrepresentation?? • Innocent Misrepresentation-a statement made by a party who didn’t know it was untrue • Ex: a seller is unaware that a car has gotten a new odometer and states it has 700mi when in fact it has 90,000mi. • Fraudulent Misrepresentation-a statement made by one party who knew it was untrue • Ex: a seller is aware of the fact that the cars engine is bad but tells consumers that it is fine. • Both result in void contract

  4. A) Untrue Statements What is Misrepresentation?? (cont’d) • Active concealment-substitute for a false statement of fact • Ex: Seller place a price sticker over a scratch on a TV screen . • Silence must end when a statement is made false by previous events. • Ex: A owner of a car says he only drove the car once a week but he didn’t say he drove it at a drag strip.

  5. B) Materiality What is Misrepresentation?? (cont’d) • A statement is material if it causes a reasonable person to want to contract. • A statement can be material if a defendant knew the plaintiff would rely on it. • A statement is material when the defendant knows that the statement is false. C) Reasonable Reliance • Misrepresentation can only take place when the victim is reasonably reliable.

  6. Fraud and Remedies for Fraud • Fraud- is a crime based on misrepresentation A) Misrepresentation- Intentional or Reckless?? • When a person lies and they know they are lying. It is intentional • When a person says something without knowing its true or false. It is reckless.

  7. B) Misrepresentation or Concealment?? Fraud and Remedies for Fraud (cont’d) • Injury-something that is proven to establish fraud. • There can still be misrepresentation but without injury there’s no fraud.

  8. C) Remedies for Fraud Fraud and Remedies for Fraud (cont’d) • Rescission • Contracts resulting of misrepresentation or fraud can be voidable by the injured party and can be rescinded • Damages • Are only available if fraud is proven. Then the party defrauded may choose to ratify the agreement instead of rescind. • Punitive Damages- A form of punishment • Are also available if fraud is proven.

  9. THE ENDBy: Glen Thompson

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