Define genuine agreement and rescission Identify when...
Transcript of Define genuine agreement and rescission Identify when...
Define genuine agreement and rescission
Identify when duress occurs
Describe how someone may exercise
undue influence.
Genuine Agreement/Assent:• “meeting of the minds”
• Must be willful and voluntary
• Must not contain fraud, misrepresentation, undue influence, duress, or a mistake
Voidable Contract:• Injured party can withdraw if there was not
genuine assent
• Ends the contract
Rescission:• Backing out of a contract
• Getting back what you have already put into a
contract.
• Giving back what you’ve already received
To Be Effective Rescission Must:• Be prompt
• Occur before contract is ratified
Ratification:• Conduct suggesting you intend to be bound by
the contract.
Duress:• When one party uses an improper threat
or act to obtain an of agreement.
• Contract is voidable when it occurs
The law focuses on the nature of
the threat – what was the threat?• Threats of illegal conduct
• Threats to report crimes
• Threats to sue
• Economic threats
Threats of Illegal Conduct• Committing an act of violence or
threatening to do so to obtain a signature
on the contract
• Contract will be voidable if person signs
because of this
Threats to Report Crimes• You witness a crime and threaten to
report unless the individual enters into
contract with you
• Also is a type of extortion
Threats to Sue• Threatening to sue to get what you want
• Example
Husband may threaten to sue for custody of the
kids unless he receives control of the house –
this is duress.
He’s only threatening to sue for the kids because
he wants the house
Economic Threats• Using the economic power you have over
someone to negotiate a more favorable
modification of a contract
• Example
A manufacturer has a contract to supply a $15
part for a special computer
The computer doesn’t run without the part
The supplier might threaten to withhold the part
unless the buyer agrees to pay $20
If this causes harm to the buyer – it’s duress
Undue Influence• When one party to a contract is in a position of
trust
• They wrongfully dominate the other party.
Two Elements of Undue Influence• Relationship of Trust
there must be a relationship of trust, confidence or
authority between to the two people
Parent & child, husband & wife, teacher & student
• Wrongful or Unfair Persuasion
Contract must be unfair
Hard to determine
Undue influence can be overcome by proving the
contract was fair to both parties
Get with a partner
“Think Critically About Evidence”• p. 130 #12
• P 135 # 9
Read the case, and prepare an argument
to support your answer.
Describe the kinds of mistakes that can make a contract void or voidable.
Determine when misrepresentation occurred.
Identify when fraud has occurred.
Discuss the remedies for mistake, misrepresentation, and fraud.
Mistake, Misrepresentation, and
Fraud
Unilateral Mistake• Occurs when one party holds an incorrect belief about
the facts related to a contract.
• Generally doesn’t affect validity of a contract
You’re still responsible for fulfilling the contract
• Example
Not fully reading the terms of your lease
Signing a contract written in another language
Recognized Unilateral Mistake• If it’s major, and other party knew – court can grant
rescission
Induced Unilateral Mistake• One party encourages the mistake – it can make
contract voidable
Mutual Mistake (Bilateral Mistake)• Occurs when both parties have an
incorrect belief about an important fact.
• Contract is void if it’s a mutual mistake
Material Facts• Important facts that influence the parties’
decisions about the contract.
Mistake About the Subject Matter• Mistake involves specific aspects of the contract
• Example
A buyer and seller of land think that the property is 41
acres
They agree to terms based on that belief
They later learn it’s only 28 acres
Mutual mistake of fact – contract is void.
Mistake of the Law• If the mistakes involves not knowing the
applicable law, contract is still valid.
• Why?
Ignorance of the law is not a defense.
Innocent Misrepresentation• You don’t intentionally mislead someone in regards to
details of a contract
• Example:
Seller might say a car has 70,000 miles on it.
The car might actually have 150,000 if the previous owner
replaced the odometer
If the seller didn’t know this, it’s innocent misrepresentation.
Fraudulent Misrepresentation• the seller knows the statements are untrue
Contract is voidable under both circumstances
Statements are Misrepresentation if:• Untrue statements is one of fact :
Must be a fact rather than opinion
Expert opinions can be considered facts
• Statement is material to the transaction:
It would cause a reasonable person to contract.
The offeror knew offeree would rely on statement.
Offeror knew statement was false.
• Victim reasonably relied on statement:
Must purchase item based on stated facts that were false
Fraud• Intentional misrepresentation of an existing
important fact
• same elements of misrepresentation must
be proven plus intent and injury
Must be a deliberate lie (it was intentional)
Must cause injury (person was harmed in some
way)
Remedies for Fraud• Rescission:
Contract is voidable
Anything received must be given back.
• Damages:
Can ratify contract and receive damages
based on the difference in value
Suing for money (Punitive)