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7-2 Mistakes, Misrepresentation, and Fraud. What are the types of Contractual Mistakes??. 1) unilateral mistakes-an incorrect belief by one of the parties in a contract Ex: not reading the contract before you sign it or signing contract in language you don’t know

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what are the types of contractual mistakes
What are the types of Contractual Mistakes??

1) unilateral mistakes-an incorrect belief by one of the parties in a contract

  • Ex: not reading the contract before you sign it or signing contract in language you don’t know

2) mutual mistake (bilateral mistake)-an incorrect belief by both parties about an important fact

  • Ex: suppose both a buyer and a seller think that a land is 42 acres but later they find out it is actually 21 acres. This causes the contract to void.

3) material facts-important details that influence the parties’ decision about the contract

what is misrepresentation
What is Misrepresentation??
  • Innocent Misrepresentation-a statement made by a party who didn’t know it was untrue
        • Ex: a seller is unaware that a car has gotten a new odometer and states it has 700mi when in fact it has 90,000mi.
  • Fraudulent Misrepresentation-a statement made by one party who knew it was untrue
        • Ex: a seller is aware of the fact that the cars engine is bad but tells consumers that it is fine.
  • Both result in void contract
a untrue statements
A) Untrue Statements

What is Misrepresentation?? (cont’d)

  • Active concealment-substitute for a false statement of fact
      • Ex: Seller place a price sticker over a scratch on a TV screen .
  • Silence must end when a statement is made false by previous events.
      • Ex: A owner of a car says he only drove the car once a week but he didn’t say he drove it at a drag strip.
b materiality
B) Materiality

What is Misrepresentation?? (cont’d)

  • A statement is material if it causes a reasonable person to want to contract.
  • A statement can be material if a defendant knew the plaintiff would rely on it.
  • A statement is material when the defendant knows that the statement is false.

C) Reasonable Reliance

  • Misrepresentation can only take place when the victim is reasonably reliable.
fraud and remedies for fraud
Fraud and Remedies for Fraud
  • Fraud- is a crime based on misrepresentation

A) Misrepresentation- Intentional or Reckless??

    • When a person lies and they know they are lying. It is intentional
    • When a person says something without knowing its true or false. It is reckless.
b misrepresentation or concealment
B) Misrepresentation or Concealment??

Fraud and Remedies for Fraud (cont’d)

  • Injury-something that is proven to establish fraud.
  • There can still be misrepresentation but without injury there’s no fraud.
c remedies for fraud
C) Remedies for Fraud

Fraud and Remedies for Fraud (cont’d)

  • Rescission
    • Contracts resulting of misrepresentation or fraud can be voidable by the injured party and can be rescinded
  • Damages
    • Are only available if fraud is proven. Then the party defrauded may choose to ratify the agreement instead of rescind.
  • Punitive Damages- A form of punishment
    • Are also available if fraud is proven.