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Chapter 7

Genuineness of

Assent

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Section 1

Duress and Undue

Influence

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GOALS

• Recognize when GENUINE

ASSENT is NOT present.

• Identify 2 key elements in undue

influence

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Cameron owned a promising race-horse that

Dave had offered to buy for undisclosed

parties. When Cameron refused to sell, Dave

lowered his voice and slowly said. “Listen, the

people I represent don’t take no for an

answer. If you don’t sell, they’ll hurt you.

They’ll hurt your family, Like a good friend,

I’m telling you to sell. You’re getting a fair

price, just sign the contract.” Cameron, who

had secretly recorded the conversation, sold.

Then he called the police.

Can he now rescind and get his horse back?

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Whether oral or written, an agreement will be treated as valid (legally binding and enforceable) as long as it meets all the proper legal requirements!

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Genuine Assent

(True and Complete Agreement)

• Lacking in court due to:

–Duress

–Undue influence

–Mistake

–Misrepresentation

–Fraud

Section 2

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RescissionOffer is terminated due to lack of

Genuine Assent and the injured

party is able to get back whatever

they have already put into it.

Must happen right after you find out

about the lack of genuine assent.

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Ratification

Conduct suggesting you intend to be bound by the contract.

(ex: making a payment.)

If you rescind, it MUST be done before ratification.

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Duress

(Unfair Pressure)

• One party uses threats as a way

to make you agree to the

agreement.

• If proved, duress will cause a

contract to be voidable.

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Types of Duress

• Threats of illegal conduct – “I will kill you if you don’t sign this contract”

• Threats to report crimes – “I will tell the police you robbed the bank if you don’t sign this contract”

• Threats to sue – When a threat to sue is really made for a purpose unrelated to the suit, this may be duress. *Divorce

• Economic Threats – If you don’t pay $25 for this part, then I won’t sell it to you, therefore you won’t be able to make your product.

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Albert had cancer and was being treated by Dr.

Burke. He had carefully followed the doctor’s advice,

and the treatment had been successful. One day,

during a periodic checkup, Dr. Burk said to Albert,

“To prevent the cancer from recurring, you need to

reduce the stress in your life. Long drives in the

country are great for that. Come to think of it, I’m

selling my convertible right now. You should buy it.”

Without investigating, Albert followed the doctors

directions and contracted to buy the car. Later he

found the price he’d agreed to pay was nearly

double the market value.

Could Albert avoid the contract due to undue

influence?

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Undue Influence

One party in the contract is in a

position of trust and wrongfully

dominates the other party.

Two key elements in undue

influence:

1. Relationship

2. Unfair Persuasion

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1. Relationship: Family, church,

and/or doctors can cause undue

influence.

2. Unfair persuasion: Usually found

in the terms of the contract.

Best Advice-ALWAYS READ

EVERYTHING BEFORE SIGNING!

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Section 2

Mistake, Misrepresentation,

and Fraud

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GOALS

• Recognize the types of mistakes that can

make a contract voidable.

• 3 criteria for a statement to

“misrepresentation”

• Define FRAUD and describe the remedies

for it.

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Bill saved more than $25,000 to buy the new

car of his dreams. At the dealership, the sales

staff convinced him to purchase added options

until his $25,000 was totally exhausted. When

he went to register the vehicle, he found that

the state expected him to pay an 8% sales tax

on the purchase price. Bill thought the $2,000

in sales tax had been already included in the

$25,000 paid at the dealership.

Is the contract voidable by Bill because of his

mistake?

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Contractual Mistakes1. Unilateral Mistake – Only one party

made the boo-boo about the facts

related to the contract. *Not reading

before signing. Contract is still valid

2. Bilateral (mutual) Mistake – Both

parties made the boo-boo related to

the contract.

– Material facts are mistaken. *Purchase $

– Contract is voided

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Material Facts

Important facts that influence the

party's decision about a

contract.

Examples:

–Purchase price

–Amount of goods

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Great-Life offered a dietary supplement

for sale. The package contained a

statement that clinical studies at

Harvard University had shown the drug

reduced the risk of cancer by more

than 30% if taken regularly. This

statement was FALSE.

Can customers get their money back if

they learn of the deception?

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MISREPRESENTATION2 types:

Innocent – Accidental mistake

Fraudulent – Intentional mistake

In both cases, statements are treated as misrepresentation by the law only if:

1. Untrue statement is one of fact or there is active concealment, and

2. Statement is material to the transaction or is fraudulent, and

3. Victim reasonably relied on the statement.

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Untrue Statement of Fact

In misrepresentation, the statement

must be one of fact (past or

existing), NOT opinion.

*An expert’s opinion is considered a

fact.

• Active concealment – cover up

• Silence – aware, but didn’t say it

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Breaking the Silence

1. Statement about a material fact omits important information. (Not telling the whole story)

2. A true statement is made false by subsequent events. *The roof don’t leak

3. One party knows the other party is mistaken, but does NOT inform the other party.

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MATERIALITY

There are 3 ways an untrue statement can be determined to be material:

1. Statement would cause a reasonable person to contract. *forged basketball player card

2. If the defendant knew the plaintiff would rely on the statement.*It’s important to the offeree, but not to you.

3. Defendant knew the statement was false.

As long as the offeree relies on the info, it is material.

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Fraud

Based on misrepresentation.

Fraud = misrepresentation + intent + injury

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Jeff sold a used car to Carla for $1,600.

Jeff told her that the car had been driven

only 50,000 miles, had never been in an

accident, and had the original paint. In

fact, Jeff had stolen the car, set back the

odometer from 90,000 miles, and

repainted the exterior in the original

color. Jeff stood between Carla and rear

of the car so she couldn’t see the badly

repaired bumper. Later Carla learned

the truth.

What remedies are available to Carla?

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Remedies (solutions) for Fraud

• Rescission – contract is voided

and anything you received

must be returned.

• Damages

• Punitive Damages