LAW for Business and Personal Use © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. CHAPTER 7 Genuineness of Assent Duress and Undue Influence Mistake, Misrepresentation, and Fraud

LAW for Business and Personal Use © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 7 SLIDE 2 7-1Duress and Undue Influence GOALS Recognize when genuine assent is not present Identify the two key elements in undue influence

LAW for Business and Personal Use © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 7 SLIDE 3 GENUINE ASSENT AND DURESS Genuine assent Duress Threats of illegal or tortious conduct Threats to report crimes Threats to sue Economic threats

LAW for Business and Personal Use © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 7 SLIDE 4 CHECKPOINT List the various forms of legal duress. Threats of illegal or tortious conduct Threats to report crimes Threats to sue Economic threats     

LAW for Business and Personal Use © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 7 SLIDE 5 UNDUE INFLUENCE AND ASSENT The relationship Unfair persuasion

LAW for Business and Personal Use © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Is the contract valid? Albert had cancer and was being treated by Dr. Chu. He had carefully followed the dr.s advice and the treatment was successful. One day during a periodic checkup Dr. Chu said to Albert “To prevent the cancer from recurring, you need to reduce stress in your life. Long drive in the country are great for that. Come to think of it, I’m selling my convertible right now. You should buy it.” Chapter 7 SLIDE 6

LAW for Business and Personal Use © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Is the contract valid? Without investigating, Albert followed the doctors directions and contracted to buy the car. Later he found the price he had agreed to pay was nearly double the market value Could Albert avoid the contract due to undue influence? Chapter 7 SLIDE 7

LAW for Business and Personal Use © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 7 SLIDE 8 CHECKPOINT What are the key elements in undue influence?     

LAW for Business and Personal Use © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 7 SLIDE 9 7-2Mistake, Misrepresentation, and Fraud 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

LAW for Business and Personal Use © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 7 SLIDE 10 WHAT ARE THE TYPES OF CONTRACTUAL MISTAKES? Unilateral mistakes – when one party holds an incorrect belief about the facts or law related to a contract. Generally this doesn’t affect the validity of the contract. Mutual mistakes – both parties have an incorrect belief about an important fact or the applicable law.

LAW for Business and Personal Use © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. What do you think? Bueller saved $40,000 to buy the car of his dreams. At the dealership, the sales staff convinced him to purchase option after option until his $40,000 was totally exhausted. When he went to register the car, he found that the state expected him to pay an 7% sales tax on the purchase price. Bueller thought that the sales price was included in the $40,000 paid at the dealership, just as it is with purchases at other retail stores. Chapter 7 SLIDE 11

LAW for Business and Personal Use © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. What do you think? Is the contract voidable by Bueller because of his mistake? Did Bueller make a unilateral or mutual mistake of the law Unilateral Is the contract Valid on Invalid? Valid Chapter 7 SLIDE 12

LAW for Business and Personal Use © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 7 SLIDE 13 CHECKPOINT Name the types of mistakes that can make a contract voidable or void. Unilateral Mutual Material facts     

LAW for Business and Personal Use © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 7 SLIDE 14 WHAT IS MISREPRESENTATION? Untrue statement of fact Active concealment – false statement of fact Silence – seller may remain silent about defects

LAW for Business and Personal Use © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. WHAT IS MISREPRESENTATION? Materiality – 3 ways an untrue statement can be determined material 1.a statement is material if the statement would cause a reasonable person to contract 1.Statement about total miles on a car 2.A statement can be material if the defendant knew this plaintiff would rely on the statement. 3.Person knew the statement was false. Chapter 7 SLIDE 15

LAW for Business and Personal Use © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. WHAT IS MISREPRESENTATION? Reasonable reliance – even though the statement is material, there is no misrepresentation unless the victim reasonably relied on it. A buyer may be told by an art gallery owner that an oil painting was created by “one of the great masters of the Renaissance era.” She learns from an art appraiser that it is a mere imitation. Chapter 7 SLIDE 16

LAW for Business and Personal Use © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 7 SLIDE 17 CHECKPOINT What are the three criteria for a statement to be treated as a misrepresentation?     

LAW for Business and Personal Use © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 7 SLIDE 18 FRAUD AND REMEDIES FOR FRAUD The misrepresentation must be intentional or reckless The misrepresentation must injure Remedies for fraud Rescission Damages Punitive damages

LAW for Business and Personal Use © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. What do you think? Graffer sold a used car to Camacho for $11,000. Graffer told her that the car had be driven only 15,000 miles, had never been in an accident, and had the original paint. In fact, Graffter, after sideswiping a bridge abutment had repaired and repainted the car with far cheaper paint than the original, set back the odometer from 148,000 miles, and stuffed the transmission with sawdust to quiet the rattling sounds emitted by the car. Chapter 7 SLIDE 19

LAW for Business and Personal Use © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Shortly after Camacho purchased the car, the transmission stopped working and a mechanic at the garage near her home pointed out the various ways she has been deceived by Grater. This is Fraud What remedies are available for Camacho? Chapter 7 SLIDE 20

LAW for Business and Personal Use © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 7 SLIDE 21 CHECKPOINT What are the remedies available for fraud? 1.Rescission 2.Damages available if proven 3.Punitive damages are a form of punishment example. Judge might award Camacho a tenth of all Graters wealth in addition to actual damages as a way to punish him for committing the fraud     

LAW for Business and Personal Use © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 7 SLIDE 22 PREVENT LEGAL DIFFICULTIES In making contracts... Research important transactions before entering into them. Verify claims of the seller by outside means or through firsthand personal experience. Do not rush into a decision. Take time to review and understand the advantages and disadvantages of the proposed contract. Legitimate proposals will usually survive a delay. Continued on the next slide

LAW for Business and Personal Use © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 7 SLIDE 23 PREVENT LEGAL DIFFICULTIES Do not hesitate to ask questions about vague or uncovered issues. Forcing the other party to make statements about them may lay the groundwork for proving fraud or misrepresentation later. If the other party does not properly answer your questions, proceed with great caution or abandon the negotiations. If you believe you have been defrauded, act promptly to rescind the contract.