1. Fundamentals of Business Law Summarized Cases, 8 th Ed., and Excerpted Cases, 2 nd Ed. ROGER LeROY MILLER Institute for University Studies Arlington, Texas GAYLORD A. JENTZ Herbert D. Kelleher Emeritus Professor in Business Law University of Texas at Austin

2. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 2 Learning Objectives In what types of situations might genuineness of assent to a contract’s terms be lacking? What is the difference between a mistake of value or quality and mistake of fact? What elements must exist for fraud to occur? What contracts must be in writing to be enforceable? What is parole evidence? When is it admissible to clarify the terms of a written contract?

3. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 3Mistakes

4. 4Mistakes Mistake of Value (or Quality). –Contract is enforceable. Mistake of Fact. –Unilateral Mistake of Material Fact— mistaken party does not have the right to cancel contract unless: (1) the non-mistaken party knew or should have known about the mistake, or (2) there is a clerical error.

5. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 5Mistakes Bilateral (Mutual) Mistakes—if both are mistaken either one can cancel the contract. –CASE 10.1 Inkel v. Pride Chevrolet- Pontiac, Inc. (Vermont, 2008).

6. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 6 Fraudulent Misrepresentation Innocent party can cancel the contract. Plaintiff must show: –Misrepresentation of a material fact (not opinion) by conduct, silence or words. –Intent to deceive. –Innocent party must have justifiably relied on the misrepresentation. –Plaintiff must have suffered a legal injury.

7. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 7 Undue Influence and Duress Undue Influence. –Arises from a special relationship of trust. –A stronger party overcomes a weaker party’s free will by exerting psychological influence. Duress. –Threat of physical force or extortion. –Can serve as basis for rescission of contract. –Economic need, by itself, is not duress.

8. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 8 Statute of Frauds: The Requirement of a Writing Statute of Frauds requires certain contracts to be in writing and signed to be enforceable. –A contract involving an interest in land. –A contract that by its terms cannot be performed within 1 year of execution. –Collateral contracts to answer for the debt of another. –Prenuptial agreement. –Contracts for sale of goods over $500.

9. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 9 One Year Rule

10. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 10 Exceptions to Statute of Frauds Partial performance. –Purchaser has paid part of purchase price, taken possession and made valuable improvements to property. –CASE 10.2 School-Link Technologies, Inc. v. Applied Resources, Inc. (Kansas, 2007).

11. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 11 Exceptions to Statute of Frauds Admissions. –Party admits in court records contract exists. Promissory Estoppel/Detrimental Reliance. –Promisee justifiably relies.

12. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 12 Sufficiency of the Writing “Writing” includes memorandum, invoice, fax, check, email. Essential terms sufficient. Signed by party against whom enforcement is sought (Defendant). Initials of Defendant adequate.

13. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 13 Contracts Subject to the Statute of Frauds

14. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 14 Parol Evidence Rule

15. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 15 Parol Evidence Rule Prohibits the introduction at trial of evidence of the parties prior communications that contradicts the written contract. CASE 10.3 Yocca v. Pittsburgh Steelers Sports, Inc. (Penn., 2004).

16. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 16 Parol Evidence: Exceptions Exceptions (allow parol evidence): –Evidence of subsequent contract modifications –Oral evidence to show contract was void or voidable. –Show meaning of ambiguous Terms. –To “fill in the gaps.” –Prior Dealings, course of performance, usage in trade. –Obvious or gross clerical errors.

17. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 17 Integrated Contracts Is the written contract intended to be a complete and final statement of the terms of the agreement? –If “yes”, then the contract is “integrated.” –Can be fully or partially integrated. Courts exclude any parol evidence that contradicts the writing.

18. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 18