Genuine Agreement “meeting of the minds” Chapter 6 Genuine Agreement “meeting of the minds”

Genuine Agreement Genuine Agreement exists when a valid offer and a valid acceptance has been made along with consideration, capacity and legality Circumstances that make an agreement defective: mistake, fraud, innocent misrepresentation, duress, economic duress, undue influence

Fraud Deliberate deception to secure an unfair or unlawful gain.

Fraud (Cont.) People who are induced to enter into contracts by fraud can rescind (cancel), sue for money damages & punitive damages- damages designed to punish.

To succeed in a lawsuit for fraud, the party bringing the suit must prove 5 elements: False Representation Of Fact Representation Known To Be False False Representation Intended To Be Relied Upon False Representation Reasonably Relied Upon Resulting Loss

1. False representation of material, existing fact Material fact- is one that is important; it matters to one of the parties.

Opinions & a promise of something to happen in the future are not material facts. Opinions are sometimes called “sales talk”, sales puffing or sales puffery and are allowed.

Other Examples Of Material False Representations: Painting Over Rust Spots On Car Turning Back Mileage Of Odometer

Concealment Or Nondisclosure: Making A False Representation By Not Saying Something That They Should Say. (Hidden Problem)

2. Representation Known To Be False Party Making The Representation Must Know That It Is False.

3. False Representation Intended To Be Relied Upon The Person Making The Representation Must Intend That The Other Party Relies Upon It As Part Of The Contract Negotiations

4. False Representation Actually Relied Upon If One Pays No Attention To A False Representation, One Cannot Bring Suit For Fraud.

5. Resulting in loss Innocent Party Must Actually Suffer Some Monetary Loss

Innocent Misrepresentation- Honestly believed a statement was true Injured party has the right to rescind a contract Injured party CANNOT sue for damages

MISTAKES A: Unilateral mistake – an error on the part of one of the parties to the contract. A person usually cannot get out of a contract because of a unilateral mistake.

1. Mistake as to the nature of the agreement People must read contract thoroughly. Failure to read or notice a mistake is not an excuse.

2. Mistake as to the identity of a party This mistake may or may not be grounds to void contract. Face to face dealings cannot be voided.

b. Bilateral mistake (mutual mistake) Both parties to a contract are mistaken about some important fact. The contract may be avoided by either party.

b. Bilateral mistake (mutual mistake) (Continued) 1. Mistake As To The Possibility Of Performance Ex. #7 pg. 136 2. Mistake As To The Subject Matter Ex. #8 pg. 136

Duress- Overcoming a person’s will by use of force or by threat of force or bodily harm.

$$$$$$ Economic Duress Is the threatening of a person’s business or income to cause him or her to enter a contract. When actual physical force is used, the contract is void. When a threat is used, the contract is voidable.

A threat to exercise one’s legal right is not duress. Ex. A person with grounds to sue may threaten to do so or demand satisfaction.

Undue influence Is unfair and improper persuasive pressure exercised by one person in a relationship of trust with another person Usually exerted by stronger person upon a weaker person (due to ill health, old age)

An attorney’s personal experience with undue influence http://www.youtube.com/watch?v=_I_HX4L_Ick