CHAPTER 7 Genuineness of Assent 5/15/2019 CHAPTER 7 Genuineness of Assent 7-1 Duress and Undue Influence 7-2 Mistake, Misrepresentation, and Fraud LAW

7-1 Duress and Undue Influence Chapter 7 5/15/2019 7-1 Duress and Undue Influence GOALS Recognize when genuine assent is not present Identify the two key elements in undue influence Chapter 7 LAW

Chapter 7 5/15/2019 HOT DEBATE Why would it be fair to allow Jack to withdraw from the contract? Excitement left him unfocused Salesperson’s omission Why would it be fair for Jack to be bound by the contract? Caveat emptor Goods were marked as optional Chapter 7 LAW

GENUINE ASSENT AND DURESS Chapter 7 5/15/2019 GENUINE ASSENT AND DURESS Genuine assent Complete agreement May be lacking due to Duress Mistake Fraudulent misrepresentation Undue influence Contract may be voided by person wronged Contract is not voidable, though Validity of contract refers to it being legally binding and enforceable. Must meet certain requirements Genuine assent is a complete agreement between two competent parties. A party who proves that he or she did not genuinely assent to the terms of the contract may void the contract. Genuine assent may be lacking due to a mistake, fraudulent misrepresentation, undue influence or duress. Contracts lacking genuine assent are voidable, not void. Chapter 7 LAW

Genuine Assent and Duress Chapter 7 5/15/2019 Genuine Assent and Duress Voidable: If the injured party desires, he/she can cancel and avoid the contractual obligations Rescission: Requires that all parties to the contract must be brought back to the position they were in before the contract existed. If genuine assent is found to be lacking by one of the parties to the contract (the injured party) they may choose to void the contract. In order for this to happen, a few things need to occur: Rescission must happen: all of the parties to the contract are brought back to the position they had prior to the contract’s existence. The contract must not have been ratified by the injured party. Chapter 7 LAW

Genuine Assent and Duress Chapter 7 5/15/2019 Genuine Assent and Duress Ratification conduct that confirms the intent by the injured party to be held to the contract Chapter 7 LAW

Grounds for Avoidance of Contract Chapter 7 5/15/2019 Grounds for Avoidance of Contract Duress Threats of illegal or tortious conduct Threats to report crimes Threats to sue Economic threats Duress is the improper threat or act to obtain an expression of agreement. Focus in court would be on the nature of the threat. The threat of illegal or tortious conduct is always considered duress. An act of violence Threatening a crime Committing a tort Threatening a tort To the victim, the victim’s immediate family or near relatives, or to the victim’s property Threats to report a crime—considered extortion. Also is considered to be duress. If the threat to sue is unrelated to the current contractual discussion, it will be considered duress. Using the economic power one has over another person may be considered duress. The courts will not only look at the threat but also at the alternative available to a threatened party. Read page 132 scenario and discuss Chapter 7 LAW

   CHECKPOINT List the various forms of legal duress. Chapter 7 5/15/2019 CHECKPOINT    List the various forms of legal duress. Threats of illegal or tortious conduct directed against a person’s immediate family, near relatives, or home Legitimate threats to prosecute a crime or lawsuit Threats of substantial economic harm Chapter 7 LAW

UNDUE INFLUENCE AND ASSENT Chapter 7 5/15/2019 UNDUE INFLUENCE AND ASSENT The relationship Unfair persuasion Undue influence is when the dominating party to a confidential relationship exerts irresistible pressure on the dominated party to enter into a contract that benefits them. This brings into question whether the injured party was able to exercise free will in forming the contract. A confidential relationship is where an inordinate amount of trust and confidence is place by a dependent party in the dominant party. Contract may be voidable by the dominated party. Best evidence of undue influence is often found in the contract itself. How to prevent being accused of undue influence: Act with total honesty Disclose all important facts Insist upon getting independent, outside counsel Chapter 7 LAW

   CHECKPOINT What are the key elements in undue influence? Chapter 7 5/15/2019 CHECKPOINT    What are the key elements in undue influence? A confidential relationship Entry into an unfair contract Chapter 7 LAW