GENUINENESS OF ASSENT AND UNDUE INFLUENCE pot

Unilateral Mistake• When one party is mistaken about material fact regarding subject matter of the contract.. • Generally, the mistaken party will not be permitted to rescind the cont

GENUINENESS OF

ASSENT AND UNDUE INFLUENCE CHAPTER 13

CHAPTER 13

Genuine Assent

• Necessary to create an enforceable contract

• Determined by relevant facts surrounding

negotiation and formation of the contract

• May be manifested in any manner sufficient to

show agreement, including express words or

conduct of the parties

Genuineness of Assent (continued)

• May be lacking due to:

– Mistake – Misrepresentation – Duress

– Undue Influence

• One or both of the parties have erroneous belief

about subject matter, value, or other aspect of

the contract

• Mistakes may be:

– Unilateral – Mutual

• Law may permit rescission of some contracts

made in mistake

Unilateral Mistake

• When one party is mistaken about

material fact regarding subject matter of

the contract.

• Generally, the mistaken party will not be

permitted to rescind the contract.

• Contract will be enforced.

Unilateral Mistake (continued)

Relief will be granted if:

– Other party knew or should have known that

a mistake was made

– Mistake was clerical or mathematical error

that was not the result of gross negligence

– Mistake is so serious that enforcing the

contract would be unconscionable.

Mutual Mistake of Fact

– Mistake made by both parties concerning a

material fact that is important to the subject

matter of the contract

• E.g., each party referring to a different ship and

delivery time (Raffles case)

– Contract may be rescinded on the ground that

no contract has been formed because there

has been no “meeting of the minds” between

the parties

Mutual Mistake of Value

– Both parties know the object of the contract, but are mistaken as to its value

• E.g., seller agrees to sell old painting for $100, and

it turns out that collectors highly value such paintings.

– Contract is enforceable

• No relief for party that got “worst” of the deal.

• Contrary rule would open every contract to such disputes.

Fraudulent Misrepresentation

Misrepresentation

• Assertion is made

that is not in accord

with the facts

Misrepresentation

• Assertion is made

that is not in accord

with the facts

Intentional Misrepresentation

• Person consciously induces another

person to rely on a misrepresentation

• Also called fraud.

Intentional Misrepresentation

• Person consciously induces another

person to rely on a misrepresentation

• Also called fraud.

Fraudulent Misrepresentation (continued)

• When a party is fraudulently induced to enter

into a contract:

– The innocent party’s assent to the contract is

not genuine; and

– Contract is voidable by the innocent party

• Can rescind contract and obtain restitution,

or

• Enforce contract and sue for damages.

Elements of Fraud

• Wrongdoer made a false representation

of material fact.

• Wrongdoer intended to deceive the

innocent party (scienter).

• Innocent party justifiably relied on the

misrepresentation.

• Innocent party was injured.

Types of Fraud

Fraud in the

Inducement

Fraud by Concealment

Silence as Misrepresentatio Misrepresentatio

Innocent Misrepresentation

• Person makes statement of fact that he or

she honestly and reasonably believes to

be true, even though it is not.

• Innocent misrepresentation is not fraud.

• The aggrieved party may rescind the

contract but may not sue for damages.

Misrepresentation Summary

• One party threatens to do a wrongful act unless

the other party enters into a contract

– E.g., threat of extortion or physical injury

• Due to lack of voluntary assent, contract not

enforceable against the innocent party

Undue Influence

• Occurs where one person:

– Takes advantage of another person’s mental, emotional, or physical weakness, and

– Unduly persuades that person to enter into a contract

• Contract voidable by the innocent party.

Undue Influence (continued)

The following elements must be shown:

• Fiduciary or confidential relationship existed

between the parties

• E.g., lawyer-client, psychiatrist-patient,

caregiver-elderly patient

• Dominant party unduly used his or her

influence to persuade the servient party to enter into a contract