2. Genuine Assent – true and complete agreement Contract agreement cannot be based on: - one party deceiving another - an important mistake - use of unfair pressure towards the offeree Recission/Avoidance: - the legal right to get back what has already been put into the contract - must be carried out promptly after discovery of problem - must occur before injured party ratifies the contract Ratification: conduct confirming intent to be bound by the contract Contract Basics

Grounds for Recission/Avoidance: - duress – only occurs when one party uses an improper threat or act to obtain an expression of agreement, could be threat or act to the physical life, liberty, or property of the victim, their immediate family, or near relatives * committing act of violence * threatening a crime (stabbing) * committing a tort (unlawful detention) * threatening a tort * threats to report a crime * threat to sue is made for purpose unrelated to contract * economic threat, using economic power over another to modify or change a contract Contract Basics

Grounds for Recission/Avoidance, cont, - undue influence * dominating party to a confidential relationship exerts irresistible pressure on the other party * confidential relationship: one in which an inordinate amount of trust and confidence is placed by a dependent party in the dominant party, ie: attorney/client, doctor/patient Contract Basics

Grounds for Recission/Avoidance, cont, - mistake * material facts important facts that influence a party’s decision * unilateral mistake, only one party holds an incorrect belief about the facts or law * generally does not affect the validity of the contract * failing to read the contract terms is the most common mistake * mutual mistake/bilateral mistake, both parties have an incorrect belief about an important fact or law, contract would be voided, ie: number of acres in a lot of land * if mutual mistake is regarding the value of the subject matter then the contract would remain valid, ie: picture at a garage sale * if mutual mistake is about the applicable law the contract would remain valid, ie: zoning laws of raw land Contract Basics

Grounds for Recission/Avoidance, cont, - misrepresentation * innocent misrepresentation – seller unknowingly makes statement that is untrue * fraudulent misrepresentation – seller knowingly makes a false statement * both situations make the contract voidable by the party to whom the misrepresentation is made Contract Basics

Grounds for Recission/Avoidance, cont, Misrepresentation * statements are misrepresentations if: 1. the untrue statement is one of fact or there is active concealment a. untrue Statement of fact – the statement must be one of fact rather than opinion, unless the statement is made by an expert in the field b. active concealment – substitute for a false statement, ie painting the ceiling to cover leaks c. silence certain times when sellers cannot remain silent about defects: 1. statement of material fact that omits important information, ie: only drove once a week (at races) 2. true statement is made false by subsequent events, ie: roof springs a leak after talking to potential buyer 3. one party knows the other has made a basic mistaken assumption, ie: buyer assumes solid foundation, seller knows truth of a defect Contract Basics

Grounds for Recission/Avoidance, cont, Misrepresentation, cont. d. three ways an untrue statement can be determined to be material: 1. would cause a reasonable person to contract, ie: total miles of on a car 2. defendant knew the plaintiff would rely on the statement, ie: tanning bed lights 3. defendant knew the statement was false, ie: how often the car was serviced Reasonable Reliance No misrepresentation is present unless the victim reasonably relied on a statement from the other party. Contract Basics

Fraud: deceit, trickery, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage - misrepresentation with two additional elements 1. that the misstatement was made recklessly or intentionally a. intentionally or recklessly made to victim to induce him/her to enter a contract b. victim relied on info and entered contract 2. that injury resulted a. proof of injury, not physical b. no injury no liability for fraud - to prove a case of fraud all elements of misrepresentation, plus the above two elements must be shown Contract Basics

Remedies for Fraud - rescission of the contract is an option * normally anything you received must be returned - if victim can prove fraud the courts will allow recovery of actual damages and punitive damages * damages, if victim decides to ratify the contract they can seek damages for loss created by fraud * punitive damages, form of punishment Contract Basics