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Genuineness of Assent. Chapter 7. Genuine Assent and Duress. Genuine Assent True and complete agreement Required for a contract to be valid If missing contract is VOIDABLE (cancels obligation) Injured party can get back what they put into the contract—RESCISSION Rescission must be prompt

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genuine assent and duress
Genuine Assent and Duress
  • Genuine Assent
    • True and complete agreement
    • Required for a contract to be valid
      • If missing contract is VOIDABLE (cancels obligation)
      • Injured party can get back what they put into the contract—RESCISSION
        • Rescission must be prompt
        • Must occur before RATIFICATION (bound by contract)
  • When one party uses an improper threat or act to obtain an expression of agreement
  • Types:
    • Threats of illegal conduct
    • Threats to report crimes
    • Threats to sue
    • Economic threats
threats of illegal conduct
Threats of Illegal Conduct
  • Threat to engage in illegal conduct—crime or tort to win agreement—always constitutes DURESS
    • Committing an act of violence
    • Threatening a crime
    • Committing a tort
    • Threatening a tort to obtain a signature on a written contract
  • Can be to the victim or the victim’s immediate family
threats to report crimes
Threats to Report Crimes
  • If you observe a crime, you have a DUTY to report it
  • Threatening to report the crime to get the criminal to contract with you is DURESS
  • May also be the crime of extortion
threats to sue
Threats to Sue
  • The law encourages people to settle disputes without suit
    • An important part of this is process involves communicating a threat that you will sue if the other side doesn’t settle
  • When the threat to sue is unrelated to the suit, this may be DURESS
    • Example:
      • Divorce proceedings—husband threatens to sue for custody of the children if the wife doesn’t sign over valuable shares of stock
economic threats
Economic Threats
  • Parties using economic power over one another to negotiate a favorable modification or settlement
  • Example:
    • Manufacturer has a contract to pay a supplier $15 for parts needed to maintain production
    • Supplier threatens to withhold parts unless they are paid $20 per part
    • If the disruption in the economic flow causes substantial injury to the manufacturer, this is DURESS
undue influence
Undue Influence
  • When one party to the contract is in a position of trust and wrongfully dominates the other party
  • Types:
    • Relationship
    • Unfair persuasion
  • A relationship of trust, confidence, or authority must exist between the parties to a contract
  • Presumed to exist between:
    • Attorney and client
    • Husband and wife
    • Parent and child
    • Guardian and ward
    • Physician and patient
    • Minister and congregation member
unfair persuasion
Unfair Persuasion
  • Best evidence is found in the contract
    • Example:
      • Selling a house at half the value to a caregiver
  • To prevent undue influence the stronger party must:
    • Act with total honesty
    • Fully disclose all important facts
    • Insist that the weaker party obtain independent counsel before contracting
contractual mistakes
Contractual Mistakes
  • Types of Contractual Mistakes:
    • Unilateral
      • Occurs when only one party holds an incorrect belief about the facts related to a contract
      • Generally does not affect the validity of a contract
      • Examples:
        • Failure to read the entire contract
        • Hurried or careless reading of the contract
        • Signing a contract written in language you don’t understand
contractual mistakes1
Contractual Mistakes
  • Types of Contractual Mistakes:
      • Mutual (Bilateral)
        • Both parties have an incorrect belief about an important fact
        • Voids the contract if a mistake of FACT occurs
        • Examples:
          • Both parties think a property is 41 acres when, in fact, it is only 28 acres
        • Both parties have an incorrect belief about the applicable law
        • Does not void the contract if a mistake of LAW occur
        • Example:
          • Both parties to a sale believe that local zoning laws permit construction of duplexes on the lot
          • Valid even if duplexes cannot be built
          • All persons are presumed to know the law
  • Statements that are untrue
  • Innocent Misrepresentation
    • Occurs when someone is unaware of the truth
    • Example:
      • Someone is selling a car and states that it has 70,000 miles—unaware that the previous owner replaced the odometer—car actually has 150,000
  • Fraudulent Misrepresentation
    • Occurs when someone is aware of the truth
  • Both types of Misrepresentation void a contract
  • Statements are treated as misrepresentations by the law only if:
    • The untrue statement is one of fact or there is active concealment
    • The statement is material to the transaction or is fraudulent
    • The victim reasonably relied on the statement
  • Untrue Statement of Fact
    • Statement must be one of fact and not opinion
    • Expert opinion is viewed as fact by the law
      • Substitute for a false statement of fact
      • Examples: covering a water stain with paint to conceal a leaky roof
      • Seller remains silent about defects
      • Disclosure is required when:
        • A statement about material fact omits important information
        • When a true statement is made false by subsequent events
        • When one party knows the other party has made a basic mistaken assumption
  • Materiality
    • A statement is material if the statement would cause a reasonable person to contract
    • A statement is material if the defendant knew this plaintiff would rely on the statement
    • A statement is material if the defendant knew the statement was false
  • Reasonable Reliance
    • Even though the statement is material, there is no misrepresentation unless the victim reasonably relied on it
  • Fraud is based on misrepresentation
  • All elements of misrepresentation must be proven to show fraud PLUS two additional elements:
    • Intent
      • Misrepresentation must be intentional or reckless
      • Deliberate lying or concealment of a material fact
      • Recklessly making a false statement not knowing if it is true or false
    • Injury
      • Must be proof of injury
remedies for fraud
Remedies for Fraud
  • Rescission
    • Contracts entered into as a result of misrepresentation or fraud are voidable by the injured party and can be rescinded
      • Anything you received must be returned
      • A party who has done nothing may cancel the contract with no further obligation
  • Damages
    • Available if fraud is proven
    • A party defrauded may choose to ratify the agreement rather than rescind
      • Either party may enforce the contract
      • Defrauded party who ratified may seek damages for the loss created by the fraud
  • Punitive Damages
    • Punishment for the party who committed fraud