7-1 Duress and Undue Influence7-2 Mistake, Misrepresentation, and

Fraud

GOALSRecognize when genuine assent is

not presentIdentify the two key elements in

undue influence

Slide 2Chapter 7

Scenario The Thompsons were told that if they did

not sign a contract to repay a $2,000 loan at 40 percent interest, their son would be in danger of physical harm. Afraid that their son would be hurt, the Thompsons signed the contract.

Questions Is the contract enforceable? Why or why not?

Slide 3Chapter 7

Genuine assentDuress

Threats of illegal conductThreats to report crimesThreats to sueEconomic threats

Slide 4Chapter 7

Sign this

or

else!!

Undue influence is wrongfully dominating another party when you are in a position of trust.

The relationshipUnfair persuasion

Slide 5Chapter 7

GOALSRecognize the types of mistakes that

can make a contract voidable or voidList the criteria for a statement to be

treated as a misrepresentationDefine fraud and describe the

remedies for it

Slide 6Chapter 7

Scenario Jane contracts with Mike to purchase one

of his two skateboards. Jane thinks she has bought the red one, a premier skateboard. Mike thinks Jane has bought the blue one, his less valuable skateboard.

Question Does a contract exist?

Slide 7Chapter 7

Unilateral mistakes: only one person is mistaken (see What’s Your Verdict)

Mutual mistakes: neither party reallyunderstands thecontract details

Slide 8BOTH OF THESE TYPES OF MISTAKES DO NOT NECESSARILY

INVALIDATE THE CONTRACT!!!

Untrue statement of factActive concealment: concealing

something in order to substitute for a statement of fact (i.e. paint over a huge crack in the wall in order to sell a house)

Silence: three situations when you HAVE to break silence1. Omitting important info2. True statement is made false3. When seller knows buyer has

made a basic mistaken assumption

Slide 9Chapter 7

Materiality: 3 ways untrue statement can be material1. Statement causes person to contract (i.e.

miles on a vehicle vs. miles since rebuilt)2. Defendant knows plaintiff would rely on

the statement (i.e. plaintiff buys car based on maintenance record and seller mis-stated maintenance)

3. Defendant knew the statement was falseReasonable reliance: no misrep.

Unless defendant relied on information Slide

10Chapter 7

The misrepresentation must be intentional or reckless: deliberately lied or concealed fact

The misrepresentation or concealment must injure: proof of injury (i.e. purchased a car for $10,000 that had an unknown defect and was actually worth $5,000)

Slide 11

Chapter 7

Rescission: rescind the contract and get money or item back

Damages: Recover actual damagesPunitive damages:

damages awardedin order to preventfrom happeningagain.

Slide 12

Chapter 7