2. Genuine Assent – true and complete agreement Contract agreement cannot be based on:

1. Contract Basics • 2. Genuine Assent– true and complete agreement • Contract agreement cannot be based on: • - one party deceiving another • - an important mistake • - use of unfair pressure towards the offeree • Recission/Avoidance: • - the legal right to get back what has already been put into the contract • - must be carried out promptly after discovery of problem • - must occur before injured party ratifies the contract • Ratification:conduct confirming intent to be bound by the contract

2. Contract Basics • Grounds for Recission/Avoidance: • - duress – only occurs when one party uses an improper threat or • act to obtain an expression of agreement, could be threat or act • to the physical life, liberty, or property of the victim, their • immediate family, or near relatives • * committing act of violence • * threatening a crime (stabbing) • * committing a tort (unlawful detention) • * threatening a tort • * threats to report a crime • * threat to sue is made for purpose unrelated to contract • * economic threat, using economic power over another to • modify or change a contract

3. Contract Basics • Grounds for Recission/Avoidance, cont, • - undue influence • * dominating party to a confidential relationship exerts • irresistible pressure on the other party • * confidential relationship: one in which an inordinate amount • of trust and confidence is placed by a dependent party in the • dominant party, ie: attorney/client, doctor/patient

4. Contract Basics • Grounds for Recission/Avoidance, cont, • - mistake • * material facts important facts that influence a party’s decision • * unilateral mistake, only one party holds an incorrect belief • about the facts or law • * generally does not affect the validity of the contract • * failing to read the contract terms is the most common mistake • * mutual mistake/bilateral mistake, both parties have an • incorrect belief about an important fact or law, contract would • be voided, ie: number of acres in a lot of land • * if mutual mistake is regarding the value of the subject matter • then the contract would remain valid, ie: picture at a garage • sale • * if mutual mistake is about the applicable law the contract • would remain valid, ie: zoning laws of raw land

5. Contract Basics • Grounds for Recission/Avoidance, cont, • - misrepresentation • * innocent misrepresentation – seller unknowingly makes • statement that is untrue • * fraudulent misrepresentation – seller knowingly makes a false • statement • * both situations make the contract voidable by the party to • whom the misrepresentation is made

6. Contract Basics • Grounds for Recission/Avoidance, cont, • Misrepresentation • * statements are misrepresentations if: • 1. the untrue statement is one of fact or there is active • concealment • a. untrue Statement of fact – the statement must be one • of fact rather than opinion, unless the statement is made • by an expert in the field • b. active concealment – substitute for a false statement, ie • painting the ceiling to cover leaks • c. silence certain times when sellers cannot remain silent • about defects: • 1. statement of material fact that omits important • information, ie: only drove once a week (at races) • 2. true statement is made false by subsequent events, ie: • roof springs a leak after talking to potential buyer • 3. one party knows the other has made a basic mistaken • assumption, ie: buyer assumes solid foundation, seller • knows truth of a defect

7. Contract Basics • Grounds for Recission/Avoidance, cont, • Misrepresentation, cont. • d. three ways an untrue statement can be determined to be • material: • 1. would cause a reasonable person to contract, ie: total • miles of on a car • 2. defendant knew the plaintiff would rely on the • statement, ie: tanning bed lights • 3. defendant knew the statement was false, ie: how • often the car was serviced • Reasonable Reliance No misrepresentation is present unless the victim reasonably relied on a statement from the other party.

8. Contract Basics • Fraud:deceit, trickery, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage • - misrepresentation with two additional elements • 1. that the misstatement was made recklessly or intentionally • a. intentionally or recklessly made to victim to induce him/her to enter a contract • b. victim relied on info and entered contract • 2. that injury resulted a. proof of injury, not physical b. no injury no liability for fraud • - to prove a case of fraud all elements of misrepresentation, plus the above two elements must be shown

9. Contract Basics • Remedies for Fraud • - rescission of the contract is an option • * normally anything you received must be returned • - if victim can prove fraud the courts will allow recovery of actual damages and punitive damages • * damages, if victim decides to ratify the contract they can seek damages for loss created by fraud • * punitive damages, form of punishment