Section 6.2

1. Section 6.2

2. What You’ll Learn • How to distinguish between unilateral and bilateral mistakes • (pp. 133 and 135) • How to recognize the types of mistakes that will allow rescission of a contract (p. 134)

3. What You’ll Learn • How to recognize the requirements of economic duress (p. 137) • How to recognize the requirements of undue influence (p. 138)

4. Why It’s Important Recognizing how mistake, duress, and undue influence can affect agreements will help you make better decisions in such situations.

5. Legal Terms • unilateral mistake (p. 133) • bilateral mistake (p. 135) • duress (p. 137) • economic duress (p. 137) • undue influence (p. 138)

6. Section Outline Mistake Unilateral Mistake Bilateral Mistake Duress Undue Influence

7. Genuine Agreement In addition to fraud and misrepresentation, mistake, duress, and undue influence can also create a defective agreement.

8. Pre-Learning Question How can a mistake disrupt an agreement?

9. Mistake People sometimes enter into contracts believing that certain information is true when it is actually not, or that information is not true when it really is.

10. Unilateral Mistake • A unilateral mistake is an error on the part of one of the parties to the contract. • Through words or actions, one party has created reasonable expectations on the part of the other party to the contract.

11. Unilateral Mistake • Those expectations should not be blocked because one of the parties has made an error, or mistake. • A person usually cannot avoid a contract because of such a mistake.

12. Unilateral Mistake There are two types of unilateral mistakes. • Mistake as to the nature of the agreement. • Mistake as to the identity of a party.

13. Mistake as to the Nature of the Agreement People who sign an agreement are bound to it, even if they have not read it or are mistaken about what it says.

14. Mistake as to the Identity of a Party If you make an offer by letter to one party, but the wrong person mistakenly receives the offer, the mistake may be cause to void the contract.

15. Mistake as to the Identity of a Party If you make the same offer face-to-face with a person whose identity you have mistaken, your mistake as to the identity will not prevent a binding contract.

16. 6.2 Remedies for Unilateral Mistakes Unilateral Mistake Type of Mistake Remedy • Mistake as to the • nature of the • agreement. • Mistake as to the • identity of a party. • Rescission will not • be granted. • Rescission may be • granted.

17. Bilateral Mistake • When both parties to a contract are mistaken about some important fact, this is called a bilateral mistake, or mutual mistake. • When this mistake occurs, either party may avoid the contract.

18. Bilateral Mistake There are two types of bilateral mistakes. • Mistake as to the possibility of performance. • Mistake as to the subject matter.

19. Mistake as to the Possibility of Performance If both parties enter into a contract believing that the duties described in the agreement can be performed, when in fact, they cannot, either party may avoid the contract.

20. 6.2 Remedies for Bilateral Mistakes Bilateral Mistake Type of Mistake Remedy • Mistake as to • possibility of • performance. • Mistake as to the • subject matter. • Rescission will be • granted. • Rescission will be • granted.

21. True or false—Both parties may avoid contracts involving unilateral and bilateral mistakes.

22. ANSWER False

23. Pre-Learning Question What do you think duress is?

24. Duress Duress is overcoming a person’s will by use of force or threat of force or bodily harm.

25. Types of Duress Physical duress is when actual physical violence is used to force a person to enter a contract. Emotional duress is when the threat of physical force is used to force a person to enter a contract.

26. Types of Duress Economic duress is when threats to a person’s business or professional reputation are used to force a party to enter a contract.

27. Pre-Learning Question What do you think undue influence is?

28. Undue Influence Undue influence occurs when a person uses unfair and improper persuasive pressure to force another person to enter into an agreement.

29. Undue Influence Circumstances such as ill health, old age, and mental immaturity may put a person in a weaker position.

30. 6.2 Elements of Undue Influence Element Description A dependency relationship One party in a relationship is dependent on the other party.

31. 6.2 Elements of Undue Influence Element Description Unfair or improper pressure The independent person uses excessive pressure to force the dependent person to enter a contract.

32. 6.2 Elements of Undue Influence Element Description A beneficial contract The contract benefits the independent party at the expense of the dependent party.

33. Section 6.2Assessment Reviewing What You Learned • What is the difference between unilateral and bilateral mistakes?

34. Section 6.2Assessment Reviewing What You Learned Answer Unilateral mistake: only one party is mistaken. Bilateral mistake: both parties are mistaken.

35. Section 6.2Assessment Reviewing What You Learned • What types of mistake will allow rescission of a contract?

36. Section 6.2Assessment Reviewing What You Learned Answer Mistake as to the identity of a party, mistake as to the possibility of performance, and mistake as to the subject matter.

37. Section 6.2Assessment Reviewing What You Learned • What are the requirements of economic duress?

38. Section 6.2Assessment Reviewing What You Learned Answer Economic duress requires threats to a person’s business or income that cause the person to enter a contract without real consent.

39. Section 6.2Assessment Reviewing What You Learned • What are the requirements of undue influence?

40. Section 6.2Assessment Reviewing What You Learned Answer Undue influence requires unfair and improper persuasive pressure exercised by one person in a relationship of trust with another person.

41. Section 6.2Assessment Critical Thinking Activity Types of Mistakes Why is it important to be able to distinguish between unilateral and bilateral mistakes?

42. Section 6.2Assessment Critical Thinking Activity Answer Types of Mistakes Answers will vary, but should recognize that understanding the differences between unilateral and bilateral mistakes will help you know your rights and remedies in a contract.

43. Section 6.2Assessment Legal Skills in Action Undue Influence Suppose that a close friend has sent you an e-mail message saying that she believes her grandfather was tricked into signing over all of his property to his live-in caretaker.

44. Section 6.2Assessment Legal Skills in Action Undue Influence Your friend asks for your advice. Write an e-mail reply to explain the elements she would have to prove to demonstrate that her grandfather signed over his property because of undue influence.

45. Section 6.2Assessment Legal Skills in Action Answer Undue Influence To prevail in a claim of undue influence, your friend would need to show that the parties had a relationship of trust, and that the caretaker exercised improper persuasion to take advantage of her grandfather .

46. End of Section 6.2