Contracts- Genuine Agreement Lesson 8-1(Genuine agreement)

What will you learn? What is Genuine Agreement and how is it proven in a contract? How does Duress effect a contract agreement? When does Undue Influence occur and why is this a form of Duress?

What is Genuine Agreement? Genuine agreement is also known as Genuine Assent or Mutual Assent Genuine agreement means both parties to a contract enter into the agreement under their own free will or with the ability to make a choice on their own Both parties have the right not to be lied to (Misrepresentation or fraud), not be misled and not be forced into the contract (Duress or Undue Influence)

What happens to a contract missing Genuine Agreement? The Contract is considered “Voidable” Voidable means the “Injured party can Rescind” (Rescind means to back out) Rescission is defined as backing out of a transaction by asking for a return of what you gave and giving back what you received

When must rescission occur in order to be effective? If a party to a contract decides to rescind their offer/agreement, they must rescind before final ratification Ratification means showing intent to be bound by the agreement (In other words, ratifying means the FINAL AGREEMENT is made) Ex) Signing a document, shaking hands

What is duress? Duress occurs when one party uses an improper threat or act to obtain an expression of agreement Ex) A local homeowner is approached by a business person who says “Sell me your home today, so I can build a new superstore, or we will destroy your property value”. If you agree under duress, you were given no choice, therefore can prove the contract is not valid Contract will be called “Voidable” as the injured party will be given the choice to back out of the agreement

Read this example Cameron owned a promising racehorse that was worth a lot of money. One day, he was approached by Sam who offered to buy the horse for people he called “Associates”. Cameron did not like the offer and said “My horse is a lot more valuable that that”. Sam left and said “You will see me again”. A couple days later, Sam returned and asked to buy the horse again, but this time Cameron decided to tape the conversation. Sam was heard on the tape saying “Listen, the people I represent don’t take NO for an answer”. Cameron, scared, sold the horse to Sam, but took the tape to the police to press charges. Can Cameron also back out of this contract?

Are there types of duress? Threats of Illegal Conduct: Threatening illegal conduct to obtain an agreement (Hurting someone, killing someone) Threats to report crimes: Telling someone “If you don’t agree to this contract, I’ll report a crime against you” Threats to Sue: Its not illegal to threaten a lawsuit if your serious, but its duress/illegal if your NOT serious Economic Threats: Telling someone you will run them out of business if they don’t agree to a contract with you

Why are these things considered duress? If you have knowledge of a criminal act, you are required to report it (Can’t threaten to report) Witnesses to a criminal act can be forced to testify and if someone knows a criminal act occurred, they have a duty to report it Duress occurs when the duty is used to force someone into doing something for you in exchange for not reporting the crime

What about threatening a lawsuit? Threatening a lawsuit puts a person in such fear they will agree to almost anything. If you threaten, you MUST be serious! Ex) If you get a call from a bank manager that says to you “You are now 3 months behind on your mortgage. If you don’t pay the amount owed by the end of the month, we have no choice but to sue”, that is totally legal if they are serious If a debt collector says “I am sending the police to your home to arrest you if you don’t pay me $400 today” that is illegal (Duress), because they CAN’T be serious, as the police do not get involved with civil actions

Why are economic threats so dangerous? Economic duress cases require that the victim prove both the threat and their alternatives, so as to show the victim was given no other choices. Ex) If you own a small local hardware store and a chain store like Home Depot approaches you to sell your business to them, by saying “I know your business is worth $450,000, but I am going to offer you $300,000 today to sell or we will start a campaign telling customers you are a terrorist who hates America” The threat is sell or you will be called a terrorist You were given NO alternatives. Sell or lose your reputation

Why is Undue Influence a type of duress? Undue Influence occurs when a party is forced into making a decision based on having a relationship based on trust with the party forcing them and being unfairly persuaded into the decision. Dangerous because a person in a position of power gets you to so something you would not “normally” do

How does Undue Influence take place? Ex: You have a job with a local bank and they pay you well. You have a wife/husband and 3 young children to provide for. Your boss knows this and comes to you one day and says “I need to you take a few illegal tax exemptions on our taxes, as we have lost money this year and need to make it up. Do it or I will fire you. And I know how bad you need this job!” If you followed your bosses orders, you acted under duress, which specifically is “Undue Influence”

Ticket out the door quiz Complete the practice quiz and turn in before end of class Review and quiz within next 3 classes