CHAPTER 7 Genuineness of Assent

1. CHAPTER 7Genuineness of Assent 7-1 Duress and Undue Influence 7-2 Mistake, Misrepresentation, and Fraud

2. 7-1 Duress and Undue Influence GOALS • Recognize when genuine assent (agreement) is not present • Identify the two key elements in undue influence Chapter 7

3. FOCUS Scenario • The Thompsons were told that if they did not sign a contract to repay a $2,000 loan at 40 percent interest, their son would be in danger of physical harm. Afraid that their son would be hurt, the Thompsons signed the contract. Questions • Is the contract enforceable? • Why or why not? Chapter 7

4. GENUINE ASSENT (Agreement) • Genuine assent • True and complete agreement • A valid offer has been made by the offeror, and a valid acceptance has been exercised (made) by the offeree Chapter 7

5. Duress • Duress—improper threat or act to obtain an expression of agreement. • Threats of illegal conduct (crime or tort) • Threats to report crimes • Threats to sue • Economic threats Chapter 7

6. List the various forms of legal duress. Chapter 7

7. UNDUE INFLUENCE AND ASSENT • Undue Influence • Occurs when one party to the contract is in a position of trust and wrongfully dominates the other party. (Unfair and improper persuasive pressure within a relationship of trust.) • Two Key Elements: • Relationship • Unfair persuasion Chapter 7

8. UNDUE INFLUENCE AND ASSENT • The relationship—a relationship of trust, confidence, or authority must exist between the parties to the contract. • Ex: Teacher = Student Grandparent = Adult Child Chapter 7

9. UNDUE INFLUENCE AND ASSENT • Unfair persuasion—to prevent a claim of undue influence, the stronger party should act with total honesty, fully disclose all important facts, and insist that the weaker party obtain independent counsel before contracting. Chapter 7

10. What are the key elements in undue influence? Chapter 7

11. 7-2 Mistake, Misrepresentation, and Fraud GOALS • Recognize the types of mistakes that can make a contract voidable or void • List the criteria for a statement to be treated as a misrepresentation • Define fraud and describe the remedies for it Chapter 7

12. WHAT ARE THE TYPES OF CONTRACTUAL MISTAKES? • Unilateral mistakes—occurs when only one party holds an incorrect belief about the facts related to a contract. • Mutual mistakes—(bilateral) both parties have an incorrect belief about an important fact. • Material Facts—important facts that influence the parties’ decisions about a contract. Chapter 7

13. FOCUS Scenario • Jane contracts with Mike to purchase one of his two skateboards. Jane thinks she has bought the red one, a premier skateboard. Mike thinks Jane has bought the blue one, his less valuable skateboard. Question • Does a contract exist? Chapter 7

14. Name the types of mistakes that can make a contract voidable or void. Chapter 7

15. What are the types of Misrepresentation? • Innocent Misrepresentation—party makes a statement that turns out to be untrue. • Fraudulent Misrepresentation—seller knowingly makes untrue statements. • Both are voidable by the party to whom the misrepresentation is made. Chapter 7

16. Criteria for a statement to be treated as a misrepresentation: • The untrue statement is one of fact or there is active concealment, and • The statement is material to the transaction or is fraudulent, and • The victim reasonably relied on the statement. Chapter 7

17. WHAT IS MISREPRESENTATION? • Untrue statement of fact • Active concealment—substitute for a false statement of fact (to cover up) • Silence—keeping silent about defects • Omitting important info • True statement is made false by subsequent events • One party knows the other party has made a basic mistaken assumption Chapter 7

18. WHAT IS MISREPRESENTATION? • Materiality—3 ways an untrue statement can be made • Statement would cause a reasonable person to contract • Defendant knew the plaintiff would rely on the statement • Defendant knew the statement was false Chapter 7

19. WHAT IS MISREPRESENTATION? • Reasonable reliance—relying upon the information to complete the contract (or sale). If victim knows info is incorrect but still completes sale, then there is no reliance Chapter 7

20. What are the three criteria for a statement to be treated as a misrepresentation? Chapter 7

21. FRAUD • The misrepresentation must be intentional or reckless • The misrepresentation or concealment must injure Chapter 7

22. REMEDIES FOR FRAUD • Rescission • Damages • Punitive damages Chapter 7

23. What are the remedies available for fraud? Chapter 7