Presentation on theme: "Mistake, Misrepresentation, and Fraud"— Presentation transcript:
1 Mistake, Misrepresentation, and Fraud Ch. 7-2Mistake, Misrepresentation, and Fraud
2 Contractual MistakesUnilateral mistake- One party holds an incorrect belief about the facts or law related to a contract.Contract is still validMutual mistake- Both parties have an incorrect belief about an important fact (contract is void) or the applicable law (contract is not void).
3 MisrepresentationInnocent misrepresentation- When a party doesn’t know that a statement he or she made is untrue.Contract is voidFraudulent 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 concealmentStatement is material to the transaction or is fraudulentVictim 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 concealmentA substitute for a false statementPainting over a house ceiling to cover the leak spotsPutting a for sale sticker over a scratch on a TVSilenceWhen one party omits important informationA true statement is made false by subsequent eventsWhen one party knows that the other party has made a basic mistaken assumption.
6 FraudFraud- 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 damagesPunitive damages