Understanding Defective Agreements in Business Law

1. Genuine Agreement Chapter 6 REVIEW Mr. Sherpinsky’s Business Law Class

2. Preview Five (5) circumstances that might create a defective agreement: Fraud Misrepresentation Mistake Duress Undue Influence

3. Fraud – Deliberate Deception Fraud: Deliberate deception intended to secure an unfair or unlawful gain

4. Fraud – Deliberate Deception Five elements must exist to prove fraud: Must be false misrepresentation of fact Party making the misrepresentation must knowit is false False misrepresentation must be made with the intent that it be relied upon Innocent party must reasonably rely upon the false representation Innocent party must actually suffer some monetary loss or actual harm

5. Fraud – Deliberate Deception Options if you’ve been induced to enter into a contract by fraud: • Rescind • Cancel • Sue for damages

6. False Representation of Fact • Material fact – • A fact that is important • Matters to one of the parties • Cannot be a promise of something that will happen in the future • Sales talk (sales puffery) • Allowed (Certain amounts) • “This car is really flashy…” • “You’ll get plenty of dates with this car…”

7. False Representation of Fact • Material False Representations • Not confined to oral or written statements. • Actions intended to deceive • Concealment: • Know as passive fraud or nondisclosure • Choosing not to reveal information

8. Resulting Loss • Unless you suffer loss as a result of fraud, you cannot win a lawsuit

9. Types of Misrepresentations • Negligent Misrepresentation • Occurs when the defendant carelessly makes a representation while having no reasonable basis to believe it to be true. • Innocent Misrepresentation • occurs when the representor had reasonable grounds for believing that his or her false statement was true • Most common relief is recission

10. Mistake, Duress, and Undue Influence Chapter 6, Section 2

11. Unilateral Mistakes Defined: • Error on the part of one of the parties to the contract • A person usually cannot avoid a contract because of such a mistake. • People who sign an agreement are bound by it, even if you didn’t read it! • Expectations have been established • Contract should not be blocked by errors on the part of one party

12. Unilateral Mistakes • Mistakes as to the nature of the agreement Example: • The Town of Sharonville received four bids for construction of new city hall • Angelini Construction won the lowest bid • A few days later the General Manager of Angelini discovered a $500,000 error. • The bid should have been higher. Is the company bound to the bid?

13. Unilateral Mistakes • Mistake as to the identity of the party • Cause to void a contract Example: Genevieve Sands sent a letter offering baby-sitting services at a certain rate to Jill Gomez, a mother of toddlers in the neighborhood. The letter carrier mistakenly delivered it to another Jill Gomez, who happened to live across town and also had children. This Jill Gomez liked the offer and accepted the deal. Is the contract voidable?

14. Bilateral Mistake (mutual mistake) Mistake as to the possibility of performance Example • Both parties to an agreement enter into the agreement thinking something can be done • In fact, they find it cannot be done. • In this situation either party can get out of the contract because this is a bilateral mistake **Generally, you can not get out of a contract because of a unilateral mistake, but you can get out of a contract because of a bilateral mistake.**

15. Bilateral Mistake (mutual mistake) 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 • Either party can void the contract Example Ellery Weimer agreed to sell Alvin McCormick 5 vacant lots on Indiana Ave in Parkersburg. McCormick refused to go through with deal after discovering the lots where on a different Indiana Ave in Pakersburg then he original thought. WHAT DO YOU THINK?

16. Duress • Overcoming a person’s will by use of force or by threat of force or bodily harm • Agreements made defective by duress • Physical duress • Emotional duress • Economic duress • Threats to a person’s business or income that cause him or her to enter a contract without real consent

17. Elements of Undue Influence Occurs when a person/relationship uses unfair and improper persuasive pressure to force another person in the relationship to enter into an agreement • A dependency relationship • Poor health, old age, or mental immaturity • Unfair or improper pressure • Independent person uses force against dependent person • A beneficial contract • Independent party benefits at expense of dependent party

18. Review Name 5 circumstances that might create a defective agreement: Fraud Misrepresentation Mistake Duress Undue Influence

19. Classwork • Exam Friday • 54 Questions • Four Essays • 25 True/False • 15 Multiple Choice • 10 Drop Down Selection • Or less