Genuine Agreement and Recission Mollie DeJesus

Opening question  Two parties are making a contract. (Party A and party B). If party B physically threatens party A to sign the contract, what can party A do in order to get out of signing the contract?

Important terms  Recission- backing out of any transaction and offering to give back what you received  Ratification- conduct suggesting you intend to be bound by the contract  Duress- occurs when one party uses an improper threat or act to obtain an expression of agreement  Undue influence- occurs when one party to the contract is in a position of trust and wrongfully dominates the other party

What is genuine agreement? The act of two parties agreeing on a contract without the presence/ occurrence of threats or foul play to obtain the contract.

Things that might cause a lack of genuine agreement  Fraud  Misrepresentation  Undue influence  Duress  Mistakes  Physical threats

What can happen if a contract lacks genuine agreement? The contract will be voidable and the injured party can back out of the contract legally. Recission will occur. The injured party can request the return of what they gave, and in turn give back what they received.

Rules of Recission  Must occur shortly after the discovery of the fact that there is no genuine agreement  Must occur before you ratify the contract

Duress is a crime! -Even if a party does not follow through with their threat, it is still a crime. If a threat is made, tort is committed or crime is committed in order to win an agreement, it will always be classified as duress. -The crime/tort/threat may involve, but is not limited to, the physical life, liberty, or property of the victim, the victim’s immediate family or near relatives.

Threat to Report Crimes  Even if one observes someone else commit a crime, the threat to report it in order to convince them to sign a contract counts as duress.

Threats to Sue -Threatening to sue a party is legal, but threatening to sue a party in order to scare them into ratifying a contract is yet another example of duress. -In other words, if a threat is made for a purpose unrelated to the suit, it is duress.

Economic Threats  These threats involve money usually… and are also classified as duress.

Elements of Undue Influence  Relationship  Wrongful persuasion  Unfair persuasion

Example of Duress (Threat of Illegal Conduct)  Cameron owned a promising racehorse that Link had offered to buy for undisclosed parties. When Cameron refused to sell, Link lowered his voice and slowly said, “Listen, the people I represent don’t take ‘no’ for an answer. If you don’t sell, they’ll hurt you. They’ll hurt your family. Like a good friend, I’m telling you to sell. You’re getting a fair price, just sign the contract.” Cameron, who secretly recorded the conversation, sold. Then he called the police.  Can he now rescind and get his horse back?

Example of Duress (Threats to Sue) During divorce negotiations, a husband threatens to sue for custody of the children if the wife doesn’t sign over valuable shares of stock. Because he doesn’t really want custody of the children, this threat to sue, makes the contract for the stock voidable. If the threatened suit is completely groundless, a resulting contract may be voidable for duress.

Duress example (Economic threat)  If a manufacturer has a contract to pay a supplier $15 for a special computer part needed to maintain production, the supplier might threaten to withhold the parts unless the manufacturer agrees to a price of $20 each. If a disruption in the flow of parts would cause a substantial injury to the manufacturer, then the courts would find the agreement on the new price an economic voidable for duress.

Duress example (Undue influence; Unfair influence) An elderly person, who is dependent on one child for daycare, may sell her home to that child for half its value.

Closing Question  Why does duress make a contract become voidable? Is this fair?