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Chapter 8

Chapter 8. Genuine Agreement. Genuine Agreement and Rescission. Genuine agreement agreement to enter into a contract that is evidenced by words or conduct between parties aka. genuine assent or mutual assent May be lacking due to fraud, misrepresentation, undue influence, duress or mistake

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Chapter 8

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  1. Chapter 8 Genuine Agreement

  2. Genuine Agreement and Rescission • Genuine agreement • agreement to enter into a contract that is evidenced by words or conduct between parties • aka. genuine assent or mutual assent • May be lacking due to fraud, misrepresentation, undue influence, duress or mistake • Voidable • the absence of genuine agreement in a contract

  3. Genuine Agreement and Recession • Rescission • Backing out of the transaction by asking for the return of what you gave in the transaction and offering to give you back what you have received • Must happen promptly and before ratification • Ratification • conduct suggesting you intend to be bound by the contract

  4. Duress • Occurs when one party uses an improper threat or act to obtain an expression of agreement • Causes of Duress • Threats of illegal conduct • Threats to report crimes • Threats to sue • Economic threats

  5. What is Undue Influence? • Occurs when one party to the contract is in a position of trust and wrongfully dominates the other party • Two Key Elements • Relationship • Wrongful or unfair persuasion

  6. The Relationship • Relationship of trust, confidence, or authority must exist between the parties to contract • Presumed between: • attorney and client • husband and wife • parent and child • guardian and ward • physician and patient • minister and congregation member

  7. Unfair Persuasion • Found in unfair terms of contract • The stronger party must act with scrupulous honesty, full disclosure, and insist that the weaker party seek independent counsel • Persuasion or nagging do not necessarily mean undue influence exists • This is a hard question of fact for a jury to find

  8. What is a Unilateral Mistake? • Occurs when one party holds an incorrect belief about the facts related to a contract. • A mistake from failure to read a contract before signing • Misunderstanding from hurried or careless reading

  9. Recognized Unilateral Mistake • The other party knows there is a mistake • A court may grant a rescission to the injured party

  10. Induced Unilateral Mistake • When one party encouraged the other to make a mistake • The contract is voidable

  11. What are Mutual Mistakes? • Mutual Mistakes • Both parties have an incorrect belief about an important fact (material fact) • Mistake About Subject Matter • Treated the same as a mutual mistake • Mistake About Law • When about applicable law, the contract to still valid • You may be able to rescind

  12. What is Misrepresentation? • Innocent Misrepresentation • The seller doesn’t know there is a misrepresentation • Fraudulent Misrepresentation • The seller knows a statement is untrue • Statements are treated as misrepresentation • The untrue statement is one of fact • The statement is material to the transaction or fraudulent • The victim reasonably relied on the statement

  13. Untrue Statement of Fact • The statement must be one of fact not opinion • the statement must be one of past or existing fact • When experts express opinion the law regards that as fact

  14. Untrue Statements of Fact • Active Concealment • a substitute for a false statement of fact • Silence – Three situations • Omits important facts • true statement is made false by subsequent events • a basic mistaken assumption has been made by one of the parties

  15. Materiality • Three ways an untrue statement can be determined to be material • Cause a reasonable person to contract • the defendant knew this plaintiff would rely on the statement • The defendant knew the statement was false

  16. Reasonable Reliance • A material statement isn’t misrepresentation unless the victim relied on it

  17. Elements of Misrepresentation • Untrue statement of fact or active concealment or silence when disclosure is required • Materiality • Reasonable Reliance

  18. Fraud and Remedies • Fraud • Based on misrepresentation • Elements of Fraud • All those for Misrepresentation plus • Intent to deceive or reckless statements intended to induce victim to contract • Injury

  19. Intentional or Reckless • If a person lies or conceals a material fact • Making a false statement of fact • Intend to make the victim contract

  20. Must Injure • Proof of injury • Without injury there is no liability for fraud

  21. Remedies for Fraud • Rescission • Contracts entered into as a result of misrepresentation or fraud are voidable • Anything you received must be returned and vice versa

  22. Damages • Available if fraud is proven • Defrauded party may seek damages for loss created by the fraud • UCC states damages are available for innocent misrepresentation on tangible goods

  23. Punitive Damages • Damages awarded with intent to punish those who have defrauded another

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