Chapter 13 Contracts: Genuineness of Assent

1. Chapter 13 Contracts: Genuineness of Assent

2. Introduction Contract may be unenforceable if the parties have not genuinely assented to its terms by: • Mistake. • Misrepresentation. • Undue Influence. • Duress.

3. §1: Mistakes of Fact • Only a Mistake of Fact allows a contract to be canceled. • Bilateral (Mutual) Mistakes can be rescinded by either party. • Unilateral Mistakes cannot be canceled unless: • If other party to the contract knows or should have known that a mistake of fact was made. • If mistake was due to mathematical mistake in addition, summation, subtraction, division, or multiplication and was made inadvertently and without gross negligence.

4. Mistakes of Value • Generally, contract is enforceable by either party. • Exception: Mistake of value because of a mistake of material fact.

5. §2: Fraudulent Misrepresentation • Contract Voidable by Innocent Party. • Elements: • Misrepresentation of Material Fact. • Intent to Deceive. • Reliance on Misrepresentation. • Injury to the Innocent Party.

6. Misrepresentation Has Occurred Misrepresentation can be express or implied. • Concealment. • Misrepresentation of future facts and statements of opinion are not fraud, unless person professes to be an expert. • Misrepresentation of Law is not fraud, unless person has greater knowledge of the law. • Silence is not fraud, unless serious problem or defect known or asked and person lied. • Case 13.1:Vokes v. Arthur Murray Inc. (1968).

7. Intent to Deceive • Scienter is an Intent to Deceive. • Party knowledge that fact is not as stated. • Party makes a reckless statement with disregard of the truth. • Party implies that statement is based on personal knowledge or investigation. • Gross negligence is considered intent. • Case 13.2:Sarvis v. Vermont State Colleges (2001).

8. Reliance on Misrepresentation • Deceived party must have Justifiable Reliance. • Depends on the knowledge and experience of the party relying. • Case 13.3: Folet v. Parlier (2002).

9. Injury to the Innocent Party • No proof of injury is required when the action is to rescind contract. • Proof of injury is universally required to recover damages.

10. §3: Nonfraudulent Misrepresentation • Innocent Misrepresentation. • Negligent Misrepresentation. • Equal to Scienter. • Is treated as fraudulent misrepresentation, even though the misrepresentation was not purposeful.

11. §4: Undue Influence • Contract is Voidable. • Confidential or Fiduciary Relationship. • Relationship of dependence. • Influence or Persuasion. • Weak party talked into doing something not beneficial to him or herself. • Presumption of Undue Influence.

12. §5: Duress • Forcing a party to enter into a contract under fear or threat makes the contract voidable. • Threatened act must be wrongful or illegal. • Improper Threat. • Threat to exercise legal rights (criminal or civil suit). • Economic or physical.

13. §6: Adhesion contracts and Unconscionability • Adhesion Contracts. • Preprinted contract in which the adhering party has no opportunity to negotiate the terms of the contract. • Unconscionability. • One sided bargains in which one party has substantially superior bargaining power and can dictate the terms of the contract. • “Standard-form.” • “Take-it-or-leave-it” adhesion contracts.

14. Law on the Web • KATZ Law Firm on Fraud. • ‘Lectric Law Cases on Contract Law. • Legal Research Exercises on the Web.