Transcript Chapter 013 - Genuineness of Assent

CHAPTER 7
GENUINENESS OF
ASSENT AND
UNDUE INFLUENCE
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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.
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Genuineness of Assent (continued)
• May be lacking due to:
– Mistake
– Misrepresentation
– Duress
– Undue Influence
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Mistakes
• 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.
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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.
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Unilateral Mistake (continued)
Relief will be granted if:
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–
–
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.
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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– Contract may be rescinded on the ground that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.
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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.
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Fraudulent Misrepresentation
Misrepresentation
• Assertion is made
that is not in accord
with the facts.
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Intentional
Misrepresentation
• Person consciously
induces another
person to rely on a
misrepresentation.
• Also called fraud.
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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.
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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.
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Types of Fraud
Fraud in the
Inception
Fraud in the
Inducement
Fraud by
Concealment
Misrepresentation
of Law
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Silence as
Misrepresentation
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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.
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Misrepresentation Summary
Type of Misrepresentation
Fraud in the inducement
Sue for
Damages
Yes
Yes
Rescind
Contract
Yes
Yes
Fraud by concealment
Yes
Yes
Silence as misrepresentation
Yes
Yes
Misrepresentation of law
Usually no
Usually no
Innocent misrepresentation
No
Yes
Fraud in the inception
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Duress
• 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.
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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.
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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.
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