4 FraudFraud- The deliberate deception to secure an unfair or unlawful gain.Victim has 2 Choices:Rescind- Cancel or take backSue for Fraud- (Tort) Money damages punitive damages-designed to punish the wrong doer
5 Plaintiff must prove all 5 elements: False representation of a factParty making representation must know it to be falseFalse representation must be made with the intent that it be relied uponInnocent party relied upon the false statementSuffered some monetary loss
6 False representation of Material Fact One that is important, it matters to at least one of the partiesExample: Sales person tells potential buyer; “This is a really flashy car. You’ll get plenty of dates with it.”, instead of telling him that this is a 1964 Mustang.Sellers opinions are not material facts.
7 ConcealmentMaking a false representation by not saying something they should have said.Representation known to be false- Actual knowledge or disregard to truthFalse representation intended to be relied upon
8 ConcealmentExample: If a customer asks if a car is a 1964 Mustang and the person who knows the car is a 1965 but doesn’t ever intend to sell it says; “yes it is”, the person cannot be sued because he/she didn’t intend to sell the vehicle. The statement wasn’t intended to be relied upon because the car wasn’t ever for sale.
9 False representation actually relied upon The false information must actually be relied upon in order to bring suit.Example: If the person asking about the Mustang was accompanied by an antique car expert, and the expert informs them that the car isn’t the year the seller claims and that it is worth much less that they are asking, they cannot bring suit because they didn’t actually rely upon the false information.
10 Resulting LossThe innocent party must actually suffer a monetary loss.Example: If the seller of the Mustang claimed that the car was a 1965 because they thought that year would be worth more. The buyer couldn’t bring suit because the car was actually a 1964 and worth more than he was quoted.
12 Innocent Misrepresentation Innocent statement of fact that turns out to be false.The innocent party has the right to rescind the contract.No right of damages/money collected - if the false representation was innocently made.
13 Innocent Misrepresentation Example: Fred bought a mountain bike from Matt, an acquaintance at school. Matt said he believed the bike did not need any repairs. After a weekend ride, Fred discovered the back wheel was severely misaligned. Fred could cancel the deal and ask for his money back. He is not entitled to damages because Matt genuinely believed the bike was in good shape.
14 MistakePeople enter into contracts with the belief that certain facts exist but they don’t.Avoiding the contract may or may not be possible
15 Unilateral MistakeUnilateral mistake- an error on one of the parties to the contract.Usually cannot get out of the contractMisjudge the value of somethingMistake as to the nature of agreement- people are bound by signing a written agreement even if they didn’t read it.Mistake as to the Identity of the Parties- May cause a void contract
16 Unilateral MistakeExample: You send a letter to a friend which serves as an offer. The mail carrier delivers the letter to someone else that has the same name as your friend and they accept the offer. The contract may be voided because the wrong person accepted the offer.
17 Bilateral Mistake Bilateral mistake- Mutual mistake. Both parties to a contract are mistaken about some important fact.May be avoided by either party.Possibility of Performance- Both parties believe it can be performed but it can’t.
18 Bilateral MistakeExample: I agree to sell my car to someone for $ Neither the person or myself knows that my car was totaled last night. Therefore the contract can’t possibly be performed. The contract can be avoided by either party.
19 Mistake as to the Subject Matter Mistake as to the Subject Matter- Both parties mistaken about the subject matter of the contractExample: I agree to buy land on Prospect Avenue; when going to see the land before the purchase was final I realize that the land is on Prospect Road not Prospect Avenue. I can avoid the contract because of mistake of the subject matter
20 DuressDuress- Overcoming a person’s will by use of force or by threat of force or bodily harm.Void- Actual physical forceVoidable- Threat of force*Threaten either the person or a member of their family.
21 Economic DuressEconomic Duress- Threats to a person’s business or income to cause him to enter a contract without real consent.Example: A company threatens not to deliver a shipment if the buyer refuses to pay a higher than agreed upon price.
22 Undue InfluenceUndue Influence- Unfair and improper persuasive pressure exercised by one person in a relationship of trust with another person.Example: An elderly woman sells her son land worth 150,000 for 50,000. Before the land is actually transferred the mother finds out that her son is planning to sell the land to a builder for the construction of an apartment building. If the mother decides not to go through with the sale her son cannot sue her because he took advantage of the trust she has in him.