© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. V OLUNTARY C ONSENT  Mistakes. Only a mistake of fact (not value) allows a contract to be canceled. Mistakes of fact occur in two forms: unilateral and bilateral.  1

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. V OLUNTARY C ONSENT  Mistakes. Unilateral Mistakes cannot be canceled unless: (1) Other party to the contract knows or should have known that a mistake of fact was made, OR 2

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. V OLUNTARY C ONSENT  Mistakes. Unilateral Mistakes cannot be canceled unless: (2) Mistake was mathematical, made inadvertently and without gross negligence. Bilateral (Mutual) Mistakes can be rescinded by either party. 3

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. E XHIBIT 8.1 M ISTAKES OF F ACT 4

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. V OLUNTARY C ONSENT  Fraudulent Misrepresentation. Contract is Voidable by Innocent Party. Consists of the following elements: Misrepresentation of Material Fact. Intent to Deceive. Reliance on Misrepresentation. Injury to the Innocent Party. 5

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. V OLUNTARY C ONSENT  Fraudulent Misrepresentation. Misrepresentation Has Occurred. By Conduct: Occurs when a party takes specific action to conceal a fact that is material to the contract. Statements of Opinion: generally, opinions are not actionable, unless it is an “expert” opinion.  6

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. V OLUNTARY C ONSENT  Fraudulent Misrepresentation Misrepresentation Has Occurred. By Law: ordinarily does not entitle a party to cancel a contract. By Silence: ordinarily neither party has duty to disclose facts. However, seller will be liable if she knows of material defect that cannot be reasonably discovered by buyer.  7

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. V OLUNTARY C ONSENT  Fraudulent Misrepresentation Misrepresentation Has Occurred. By Silence: when parties are in a fiduciary relationship, failure to disclose material facts may be fraud. CASE 8.3 Fazio v. Cypress/GR Houston I, LP (2012). What was the fiduciary relationship in this case? 8

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. V OLUNTARY C ONSENT  Fraudulent Misrepresentation. Intent to Deceive requires scienter (guilty knowledge). Party knows that a ‘fact’ is not true, or makes a reckless statement without regard for the truth, or implies that statement is based on personal knowledge or investigation. 9

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. V OLUNTARY C ONSENT  Fraudulent Misrepresentation. Reliance on Misrepresentation. Deceived party must have justifiably relied on representation. Reliance is not justified if the innocent party knows the true facts or relies on extravagant statements. 10

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. V OLUNTARY C ONSENT  Fraudulent Misrepresentation. Injury to the Innocent Party. No proof of injury is required when the action is to rescind contract. Proof of injury is universally required to recover damages. 11

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. U NDUE I NFLUENCE  Contract lacks voluntary consent and is voidable. Based on confidential or fiduciary relationship, or dependence. Presumed if weaker party is talked into doing something not beneficial to him or herself. 12

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. D URESS  Forcing a party to enter into a contract under fear or threat makes the contract voidable.  Threatened act must be wrongful or illegal and render person incapable of exercising free will. Threat of civil suit is not duress.  13

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. D URESS  Economic Duress: generally not sufficient to constitute duress, unless same party who created the need also requires the money. 14