Genuine Agreement If the offeror makes a valid offer, and the offeree has made a valid acceptance, then a genuine agreement has been reached. The courts describe this type of agreement as “a meeting of the minds.”

6.1 Genuine Agreement Several circumstances might create a defective agreement: Fraud Misrepresentation Mistake Duress Undue Influence

Pre-Learning Question How would you define fraud?

Fraud Fraud is a deliberate deception intended to secure an unfair or unlawful gain.

Remedies for Fraud You may rescind, or cancel, the contract. You may sue for money damages.

The Elements of Fraud To succeed in a lawsuit for fraud, the following five elements must be demonstrated: A false representation of fact. Knowledge of the falsity by the party making the false representation.

The Elements of Fraud Intent to deceive by the party making the false representation. Reasonable reliance by the innocent party. An actual loss must be suffered by the innocent party.

False Representation of Fact Fraud requires a false representation of a material, existing fact. A material fact is one that is important; it matters to one of the parties.

False Representation of Fact Under some circumstances, individuals can make false representation by choosing not to reveal important information. This is known as concealment, or passive fraud.

Representation Known to Be False To be held accountable for fraud, the party making the false representation must be aware that it is false. This may be shown by: proving actual knowledge showing the statement was made recklessly

Intended to Be Relied Upon False Representation Intended to Be Relied Upon To prove fraud, the person making the misrepresentation must intend that the other party will rely upon the information as part of the contract negotiations.

False Representation Actually Relied Upon To prove fraud, the false representation must be reasonably relied upon by the other party when the agreement is made.

Resulting Loss In proving fraud, the innocent party must show some monetary loss.

Pre-Learning Question How is misrepresentation different from fraud?

Innocent Misrepresentation Misrepresentation is the act of making an innocent statement that turns out to be false, when the person honestly believed the statement was true at the time it was made.

Remedy for Misrepresentation the right to rescind the contract you may not win damages

After Mrs. Grayson died, her neighbor, Joel, asked her son, Tom, if he would sell her TV. Before giving Tom $100, Joel asked, “It works, doesn’t it?” and Tom answered, “As far as I know.” However, when Joel plugged it in, it did not work.

Can Joel claim there was false representation? Why or why not?

ANSWER Probably not. “As far as I know,” would probably be considered innocent misrepresentation.