© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. C HAPTER 11: C ONDUCT I NVALIDATING A SSENT

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. T OPICS C OVERED C HAPTER 11: C ONDUCT I NVALIDATING A SSENT A. Duress. B. Undue Influence. C. Fraud. D. Nonfraudulent Misrepresentation. E. Mistake. 2

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. D URESS  Definition – wrongful or unlawful act or threat that overcomes the free will of a party.  Physical Compulsion – coercion involving physical force renders the agreement void.  3

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. D URESS  Improper Threats – improper threats or acts, including economic and social coercion, render the contract voidable. The test is subjective: did the threat actually induce assent on the part of the victim?  4

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. U NDUE I NFLUENCE  Definition – taking unfair advantage of a person by reason of a dominant position based on a confidential relationship.  Effect – renders a contract voidable.  5

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. U NDUE I NFLUENCE  Rea v. Paulson (1994).  Berardi v. Meadowbrook Mall Company (2002). 6

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. F RAUD  Fraud in the Execution – a misrepresentation that deceives the other party as to the nature of a document evidencing the contract renders the agreement void.  7

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. F RAUD  Fraud in the Inducement – renders the agreement voidable if the following elements are present. False Representation – positive statement or conduct that misleads. M AROUN V. W YRELESS S YSTEMS, I NC. (2005). Fact – the event occurred or the thing exists. M AROUN V. W YRELESS S YSTEMS, I NC. (2005). Materiality – of substantial importance.  8

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. F RAUD  Fraud in the Inducement – renders the agreement voidable if the following elements are present. Knowledge of Falsity & Intention to Deceive – (scienter) includes (a)­actual knowledge, (b)­ lack of belief in statement's truthfulness, or (c)­reckless indifference to its truthfulness.  9

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. F RAUD  Fraud in the Inducement – renders the agreement voidable if the following elements are present. Justifiable Reliance – a defrauded party is reasonably influenced by the fraud. R EED V. K ING (1983). R EED V. K ING (1983). 10

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. N ONFRAUDULENT M ISREPRESENTATION  Negligent Misrepresentation – misrepresentation made without due care in ascertaining its truthfulness; renders agreement voidable.  Innocent Misrepresentation – misrepresentation made without knowledge of its falsity but with due care; renders contract voidable. 11

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. M ISTAKE  The parties’ understanding not in accord with existing fact(s).  Mutual Mistake – both parties have a common but erroneous belief forming the basis of the contract; renders the contract voidable by either party. Lesher v. Strid (2000). Lesher v. Strid (2000).  12

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. M ISTAKE  Unilateral Mistake – courts are unlikely to grant relief unless the error is known or should be known by the nonmistaken party.  Assumption of Risk – a party may assume the risk of a mistake.  13

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. M ISTAKE  Effect of Fault upon Mistake – not a bar to avoidance unless the fault amounts to a failure to act in good faith. Mistake in Meaning of Terms: no contract if material mistake in terms and neither party is to blame. 14

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. C ONDUCT I NVALIDATING A SSENT