7-1Duress and Undue Influence 7-2Mistake, Misrepresentation, and Fraud

GOALS Recognize when genuine assent is not present Identify the two key elements in undue influence Slide 2 Chapter 7

Scenario The Thompsons were told that if they did not sign a contract to repay a $2,000 loan at 40 percent interest, their son would be in danger of physical harm. Afraid that their son would be hurt, the Thompsons signed the contract. Questions Is the contract enforceable? Why or why not? Slide 3 Chapter 7

Genuine assent Duress Threats of illegal conduct Threats to report crimes Threats to sue Economic threats Slide 4 Chapter 7 Sign this or else!!

Undue influence is wrongfully dominating another party when you are in a position of trust. The relationship Unfair persuasion Slide 5 Chapter 7

GOALS Recognize the types of mistakes that can make a contract voidable or void List the criteria for a statement to be treated as a misrepresentation Define fraud and describe the remedies for it Slide 6 Chapter 7

Scenario Jane contracts with Mike to purchase one of his two skateboards. Jane thinks she has bought the red one, a premier skateboard. Mike thinks Jane has bought the blue one, his less valuable skateboard. Question Does a contract exist? Slide 7 Chapter 7

Unilateral mistakes: only one person is mistaken (see What’s Your Verdict) Mutual mistakes: neither party really understands the contract details Slide 8 BOTH OF THESE TYPES OF MISTAKES DO NOT NECESSARILY INVALIDATE THE CONTRACT!!!

Untrue statement of fact Active concealment: concealing something in order to substitute for a statement of fact (i.e. paint over a huge crack in the wall in order to sell a house) Silence: three situations when you HAVE to break silence 1.Omitting important info 2.True statement is made false 3.When seller knows buyer has made a basic mistaken assumption Slide 9 Chapter 7

Materiality: 3 ways untrue statement can be material 1. Statement causes person to contract (i.e. miles on a vehicle vs. miles since rebuilt) 2. Defendant knows plaintiff would rely on the statement (i.e. plaintiff buys car based on maintenance record and seller mis-stated maintenance) 3. Defendant knew the statement was false Reasonable reliance: no misrep. Unless defendant relied on information Slide 10 Chapter 7

The misrepresentation must be intentional or reckless: deliberately lied or concealed fact The misrepresentation or concealment must injure: proof of injury (i.e. purchased a car for $10,000 that had an unknown defect and was actually worth $5,000) Slide 11 Chapter 7

Rescission: rescind the contract and get money or item back Damages: Recover actual damages Punitive damages: damages awarded in order to prevent from happening again. Slide 12 Chapter 7