GENUINENESS OF ASSENT AND UNDUE INFLUENCE pot

© 2010 Pearson Education, Inc., publishing as Prentice-Hall © 2010 Pearson Education, Inc., publishing as Prentice-Hall 1 GENUINENESS OF ASSENT AND UNDUE INFLUENCE © 2010 Pearson Education, Inc., publishing as Prentice-Hall © 2010 Pearson Education, Inc., publishing as Prentice-Hall CHAPTER 13 CHAPTER 13 © 2010 Pearson Education, Inc., publishing as Prentice-Hall © 2010 Pearson Education, Inc., publishing as Prentice-Hall 2 Genuine Assent • Necessary to create an enforceable contract. • Determined by relevant facts surrounding negotiation and formation of the contract. • May be manifested in any manner sufficient to show agreement, including express words or conduct of the parties. © 2010 Pearson Education, Inc., publishing as Prentice-Hall © 2010 Pearson Education, Inc., publishing as Prentice-Hall 3 Genuineness of Assent (continued) • May be lacking due to: – Mistake – Misrepresentation – Duress – Undue Influence © 2010 Pearson Education, Inc., publishing as Prentice-Hall © 2010 Pearson Education, Inc., publishing as Prentice-Hall 4 Mistakes • One or both of the parties have erroneous belief about subject matter, value, or other aspect of the contract. • Mistakes may be: – Unilateral – Mutual • Law may permit rescission of some contracts made in mistake. © 2010 Pearson Education, Inc., publishing as Prentice-Hall © 2010 Pearson Education, Inc., publishing as Prentice-Hall 5 Unilateral Mistake • When one party is mistaken about material fact regarding subject matter of the contract. • Generally, the mistaken party will not be permitted to rescind the contract. • Contract will be enforced. © 2010 Pearson Education, Inc., publishing as Prentice-Hall © 2010 Pearson Education, Inc., publishing as Prentice-Hall 6 Unilateral Mistake (continued) Relief will be granted if: – Other party knew or should have known that a mistake was made. – Mistake was clerical or mathematical error that was not the result of gross negligence. – Mistake is so serious that enforcing the contract would be unconscionable. © 2010 Pearson Education, Inc., publishing as Prentice-Hall © 2010 Pearson Education, Inc., publishing as Prentice-Hall 7 Mutual Mistake of Fact – Mistake made by both parties concerning a material fact that is important to the subject matter of the contract. • E.g., each party referring to a different ship and delivery time (Raffles case) – Contract may be rescinded on the ground that no contract has been formed because there has been no “meeting of the minds” between the parties. © 2010 Pearson Education, Inc., publishing as Prentice-Hall © 2010 Pearson Education, Inc., publishing as Prentice-Hall 8 Mutual Mistake of Value – Both parties know the object of the contract, but are mistaken as to its value. • E.g., seller agrees to sell old painting for $100, and it turns out that collectors highly value such paintings. – Contract is enforceable. • No relief for party that got “worst” of the deal. • Contrary rule would open every contract to such disputes. © 2010 Pearson Education, Inc., publishing as Prentice-Hall © 2010 Pearson Education, Inc., publishing as Prentice-Hall 9 Fraudulent Misrepresentation Misrepresentation • Assertion is made that is not in accord with the facts. Misrepresentation • Assertion is made that is not in accord with the facts. Intentional Misrepresentation • Person consciously induces another person to rely on a misrepresentation. • Also called fraud. Intentional Misrepresentation • Person consciously induces another person to rely on a misrepresentation. • Also called fraud. © 2010 Pearson Education, Inc., publishing as Prentice-Hall © 2010 Pearson Education, Inc., publishing as Prentice-Hall 10 Fraudulent Misrepresentation (continued) • When a party is fraudulently induced to enter into a contract: – The innocent party’s assent to the contract is not genuine; and – Contract is voidable by the innocent party • Can rescind contract and obtain restitution, or • Enforce contract and sue for damages. [...]... Pearson Education, Inc., publishing as Prentice-Hall 15 Undue Influence • Occurs where one person: – Takes advantage of another person’s mental, emotional, or physical weakness, and – Unduly persuades that person to enter into a contract • Contract voidable by the innocent party © 2010 Pearson Education, Inc., publishing as Prentice-Hall 16 Undue Influence (continued) The following elements must be shown:... Silence as misrepresentation Yes Yes Misrepresentation of law Usually no Usually no Innocent misrepresentation No Yes © 2010 Pearson Education, Inc., publishing as Prentice-Hall 14 Duress • One party threatens to do a wrongful act unless the other party enters into a contract – E.g., threat of extortion or physical injury • Due to lack of voluntary assent, contract not enforceable against the innocent...Elements of Fraud • • • • Wrongdoer made a false representation of material fact Wrongdoer intended to deceive the innocent party (scienter) Innocent party justifiably relied on the misrepresentation Innocent party was injured © 2010 Pearson Education, Inc., publishing as Prentice-Hall 11 Types of Fraud Fraud in the Inception Fraud in the Inducement Fraud by Concealment Misrepresentatio n of Law ©... Innocent Misrepresentation • Person makes statement of fact that he or she honestly and reasonably believes to be true, even though it is not • Innocent misrepresentation is not fraud • The aggrieved party may rescind the contract but may not sue for damages © 2010 Pearson Education, Inc., publishing as Prentice-Hall 13 Misrepresentation Summary Type of Misrepresentation Sue for Damages Rescind Contract... elements must be shown: • Fiduciary or confidential relationship existed between the parties • E.g., lawyer-client, psychiatrist-patient, caregiver-elderly patient • Dominant party unduly used his or her influence to persuade the servient party to enter into a contract © 2010 Pearson Education, Inc., publishing as Prentice-Hall 17 . 2010 Pearson Education, Inc., publishing as Prentice-Hall 1 GENUINENESS OF ASSENT AND UNDUE INFLUENCE © 2010 Pearson Education, Inc., publishing as Prentice-Hall ©. Prentice-Hall 16 Undue Influence • Occurs where one person: – Takes advantage of another person’s mental, emotional, or physical weakness, and – Unduly persuades