Genuine Agreement Contracts Part 2

8-1 Duress and undue influence If one party uses physical threats to obtain the other’s signature on a contract there is no genuine agreement.

Genuine Agreement genuine assent or mutual assent – may be lacking due to: Fraud Misrepresentation Undue influence Duress Mistake The absences of genuine agreement makes what appears to be a contract voidable. Which means the injured part can rescind. This must be prompt in order to be effective and happen before ratification.

Duress Occurs when one part uses an improper threat or act to obtain an expression of agreement Threats of illegal conduct – threat of crime or tort is always duress the actual crime or tort or threats may be to the physical life, liberty or property of the victim the victims immediate or close family/relatives. Threats to report crimes – using something you saw to push someone into a contract with you. You must according to law report any crimes you see being committed. Could be arrested for extortion Threats to sue – is a protected part of our legal system, unless there is no real intent to sue and you are trying to gain something unrelated to the suit. Economic Threats – must be able to cause substantial injury, courts look at both the threat and the alternatives available.

Undue Influence Key Elements: Relationship Wrongful or Unfair Persuasion Occurs when one party to the contract is in a position of trust and wrongfully dominates the other party. The dominated person does not exercise free will in accepting unfavorable terms. Relationship A relationship of trust, confidence, or authority must exist between the parties to the contract. Does not need to be a formal relationship. Wrongful or Unfair Persuasion Best example is in unfair terms of the contract. The stronger party needs to act with scrupulous honesty and full disclosure and insist that the weaker party obtain independent counsel. **Contract becomes voidable by the victim.

8-2 Mistake, Misrepresentation and Fraud

Unilateral Mistake happens when one party holds an incorrect belief about the facts related to a contract. Generally this does NOT affect the validity of the contract. Mistakes from not reading a contract before signing are this. Careless or hurried reading Signing a contract in a language you do not understand is binding If the unilateral mistake is major enough and the other party is aware of it at the time of the signing, a court may grant recession to the injured Induced Unilateral Mistake – if one party has encouraged or induced the mistake the contract is voidable.

Mutual Mistakes (bilateral mistakes) both parties have an incorrect belief about an important fact. Material Facts- important facts that influence a parties decision about a contract. If a mutual mistake happens the contract is void

Misrepresentation When stated material facts turn out to be untrue. Innocent Misrepresentation – when neither party new the true information and there was no intent to deceive. Fraudulent Misrepresentation – When one party knows the material information to be untrue. Both cases make the contract voidable

Statements are treated as Misrepresentation only if: The untrue statement is one of fact or there is active concealment The statement is material to the transaction or is fraudulent The victim reasonably relied on the statement Statements are treated as Misrepresentation only if: The untrue statement is one of fact or there is active concealment Must be fact and not opinion about something past or existing, experts opinions will be treated as facts Purposefully hiding information or traits Silence – the seller may remain silent in most situations except where there is: Half-truths are used A true statement is made falls by subsequent events When one party knows the other has made a basic mistaken assumption. The statement is material to the transaction or is fraudulent Statements are material if: The statement would cause a reasonable person to contract If the plaintiff knew THIS defendant would rely on the statement The Defendant knew the statement was false. The victim reasonably relied on the statement Even if the statement is material there is NO misrepresentation unless the victim reasonably relied on it

Fraud and Remedies for Fraud Fraud is based on misrepresentation if there is no misrepresentation then there is no fraud. All elements of misrepresentation must be present.

Intent and Injury Intent – when a person deliberately lies or conceals a material fact, recklessly makes a false statement of fact, without knowing if it is true or false. Must also be intended to induce the victim to contract Injure – In order to be fraud there must be proof of injury. If there if intentional misrepresentation but no injury there is no liability for fraud

If a fraud exists the courts will grant the victim assistance beyond recession

Remedies for Fraud Rescission Damages Punitive Damages – If the victim can prove fraud the courts will allow recovery of damages and punitive damages Rescission – the voiding of a contract because of misrepresentation or fraud. Anything you received usually must be returned Damages – Are available if fraud is proven. The defrauded party may choose to ratify instead or rescind then the contract is enforceable Punitive Damages – Money to punish the wrong doer, in this case it would be the person who has committed the fraud.