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)