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Mistake, Misrepresentation, and Fraud

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Presentation on theme: "Mistake, Misrepresentation, and Fraud"— Presentation transcript:

1 Mistake, Misrepresentation, and Fraud
Ch. 7-2 Mistake, Misrepresentation, and Fraud

2 Contractual Mistakes Unilateral mistake- One party holds an incorrect belief about the facts or law related to a contract. Contract is still valid Mutual mistake- Both parties have an incorrect belief about an important fact (contract is void) or the applicable law (contract is not void).

3 Misrepresentation Innocent misrepresentation- When a party doesn’t know that a statement he or she made is untrue. Contract is void Fraudulent misrepresentation- When a party knowingly makes a statement that isn’t true.

4 Statements are treated as misrepresentation by the law only if:
Untrue statement is one of fact or there is active concealment Statement is material to the transaction or is fraudulent Victim reasonably relied on the statement

5 Untrue statement of fact
In order for it to be misrepresentation, the untrue statement cannot be an opinion. Active concealment A substitute for a false statement Painting over a house ceiling to cover the leak spots Putting a for sale sticker over a scratch on a TV Silence When one party omits important information A true statement is made false by subsequent events When one party knows that the other party has made a basic mistaken assumption.

6 Fraud Fraud- Must contain all of the elements of misrepresentation in addition to intent and injury. If proven, the victim can recover more than simply anything lost in the contract. The misrepresentation must be intentional or reckless. The misrepresentation or concealment must injure the victim.

7 Remedies for fraud: Rescission- Whatever you gave up in the contract must be given back. Actual damages Punitive damages

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