Transcript Genuine Agreement and Recession

Genuine Agreement and
Rescission
By John Yazici
Do Now
 When can an injured party rescind? Give an
example of a situation when an individual would
want to rescind.
Vocabulary
 Genuine Agreement: agreement to enter into a
contract that is evidenced by words or conduct
between the parties
 Voidable Contract: contract in which the injured
part can withdraw, thus cancelling the contract
 Rescission: backing out of a transaction by
asking for the return of what you gave and
offering to give back what you received
 Ratification: acting toward the contract as
though one intends to be bound by it
Vocabulary Continued
 Duress: occurs when one party uses an improper
threat or act to obtain an expression of
agreement
 Undue influence: occurs when one party to a
contract is in a position of trust and wrongfully
dominates the other party
To Clarify
 Two parties make a genuine agreement
 Not valid in cases of fraud, misrepresentation,
undue influence, duress, or mistake
 Without a genuine agreement, the contract is
voidable and allows the injured party to rescind.
 A rescission must occur promptly, and before a
contract is ratified
Duress: Threats of Illegal Conduct
 Threat to engage in any illegal activity, such as a
crime or tort, to win an agreement
 Committing an act of violence (ex: stabbing)
 Threatening to commit act of Violence( ex:
threatening to stab)
 Committing Tort (ex: unlawful detention)
 Threatening Tort
Duress: Threats to Report Crimes
 If an individual observes a crime, they have a
duty to report that crime to the proper
authorities.
 If an individual threatens to report the criminal in
attempt to get them to contract; this is duress
(extortion)
Duress: Threats to Sue
 Parties are encouraged by law to settle disputes
without a suit
 Communicating the threat to sue IS okay
UNLESS…
 The threat to sue is made for any purpose
unrelated to the suit
Duress: Economic Threats
 When bound by valid contract, parties seek to
modify it
 They sometimes are tempted to result to use
economic power one holds over the other to
negotiate
 Courts look at both the threat and alternatives in
economic duress cases.
 If the threatened party had no other choice to
enter into or modify a contract, then it is duress
Undue Influence
 When dominated by one party, the dominated
person’s free will is restricted and thus usually
must accept unfavorable terms
 Two Key Elements Exist:
 The relationship
 Unfair persuasion
Relationship & Unfair Persuasion
 A relationship of trust, confidence or authority
must exist between the parties (formal
relationship not necessary)
 Ex: Attorney and Client, Housekeeper and elderly
employer
 Best evidence of unfair persuasion found in
contract
 Ex: Elderly Mother dependent on child sells home
to him/her for half its value. No free will.
Case of Smith p.129
 Smith was in the hospital near death. His nurse
said she would not give him drugs for pain unless
he signed a contract transferring certain stock to
her for half its market value. Smith signed.
 IS SMITH BOUND??