Genuineness of AssentChapter 7

Genuine Assent

• Genuine Assent – true and complete agreement.

• Voidable – without genuine assent the contract is voidable.

Rescission

• Rescission – backing out of the transaction by asking for return what you gave and offering to give back what you received.

Ratification

• Ratification – conduct suggesting you intend to be bound by the contract.

Duress

• Duress – occurs when one party uses and improper threat or act to obtain an expression of agreement.

Threat to Report Crimes

• If you use the threat to report a crime to get someone to agree to a contract this is still duress.

• FYI – the above act might also be considered extortion.

Threat to Sue

• If you threaten to sue someone for an unrelated event to force them into a contract this is duress as well.

Economic Threats

• If you threaten someone economically in regards to an existing contract agreement, this modification to the contract is duress.

Undue Influence

• Undue Influence – occurs when one party to the contract is in a position of trust and wrongfully dominates the other party.

• When Undue Influence happens the courts look at:– The Relationship

– Unfair Persuasion

The Relationship

• A relationship of trust, confidence, and authority must exist between both parties in the contract.

Unfair Persuasion

• Evidence of unfair persuasion is usually found in the terms of the contract itself.

Unilateral Mistake

• Unilateral Mistake – occurs when only one party holds an incorrect believe about the facts related to the contract.

• Generally a unilateral mistake does not affect the validity of the contract.

• “Experience is the name everyone gives to their mistakes.”Oscar Wilde

Mutual Mistake

• Also known as a Bilateral Mistake

• Mutual Mistake – is when both parties have a incorrect belief about an important fact (called Material Facts) in the contract.

Void Contracts Due to a Mutual Mistake

• A mutual mistake can make a contract void (without legal effect)

• “A man who has committed a mistake and doesn't correct it is committing another mistake.” Confucius

• HOWEVER: Mutual mistakes made about applicable laws do not void a contract.– All persons are presumed to know the law.

Innocent Misrepresentation

• When you make a mistake about a material fact in a contract without knowing it.

Fraudulent Misrepresentation

• When you make a mistake about a material fact in a contract and are aware that you are doing so.

• Statements are treated as misrepresentations by the law only if:– The untrue statement is one of fact, or there is

active concealment.– The statement is material to the transaction.– The victim reasonably relied on the statement.

Untrue Statement of Fact

• The misrepresentation of statement must be one of fact rather than opinion.

• When an expert expresses and opinion the law will treat it as a fact.

Active Concealment

• Active concealment – is the substitute of a false statement of fact.

Silence

• In most cases the seller may remain silent about defects.

• HOWEVER: there are three situations where the seller must disclose defects.–Where a statement of material fact omits important

information. –When a true statement is made false by subsequent

events.–When one party knows the other party has made a

basic mistaken assumption.

Materiality

• The untrue statement must be determined to be material (important and relevant).

• A statement is material if:– It would cause a reasonable person to contract.

– The defendant knew the plaintiff would rely on the statement.

– If the defendant knew the statement was false.

Reasonable Reliance

• Even if a statement is material, there is no representation unless the victim reasonably relied on it.

Fraud

• Fraud – all of the elements of misrepresentation must be proven and the additional elements of: intent and injury.

The Misrepresentation Must be Intentional or Reckless

• The misrepresentation must be intended to induce the victim to contract.

The Misrepresentation or Concealment Must Injure.

• There must be proof of injury.

Remedies for Fraud

• Rescission – the victim may back out of the contract.– Anything you received must be returned.

• Damages – the defrauded party may choose to ratify the agreement then seek damages for loss created by the fraud.