GENUINE AGREEMENT

Defective Agreements When something goes wrong and what seems to be a valid contract really isn’t Fraud Misrepresentation Mistake Duress Undue influence

Fraud A deliberate deception intended to secure an unfair or unlawful gain If you have entered into a contract by fraud, you may: Rescind (cancel) the contract Sue for money damages Sue for punitive damages – damages designed to punish the wrongdoer for their conduct

Fraud To be successful in a lawsuit for fraud the following elements must be present: False representation of fact Party making the representation must know it is false False representation must be made with the intent to be relied upon Innocent party must reasonably rely upon the false representation Innocent party must actually suffer monetary loss

False Representation of Fact Requires a false representation of a material, existing fact. Material fact – a fact that’s important, it matters to one of the parties; not an opinion Can be oral, written, or actions that are deceptive Concealment – not revealing important information; also called passive fraud or nondisclosure **Examples…….

Representation Known to be False The party making the false representation must know that it is false Can be shown to be false Can be shown that the statement was made recklessly without regard for the truth **Examples…….

False Representation Intended to Be Relied Upon Party making the misrepresentation intends for the other party to rely upon the information as part of the contract **Examples…….

False Representation Actually Relied Upon False representation is reasonably relied upon by the other party when the agreement is made Cannot sue for fraud if the party doesn’t actually rely upon the information **Examples…….

Research Find a news article about a lawsuit involving contract fraud Does it meet the 5 elements necessary for fraud? Explain the elements you find mentioned in the article. A false representation of fact Party making the representation must know it is false False representation must be made with the intent that it be relied upon Innocent party must reasonable rely upon the false representation Innocent party must actually suffer some monetary loss

Resulting Loss You may choose to enter the contract as the result of false misrepresentation but unless there is loss suffered as a result of false misrepresentation, you cannot win a lawsuit for fraud. Examples…..

Innocent Misrepresentation Misrepresentation - an untrue statement of facts Innocent statement that turns out to be false If the party making the representation honestly believes it was true at the time, you may rescind the contract but not sue for fraud. Examples…..

??? Work with a partner and discuss is this situation is a case of potential fraud. A travel agency calls to offer you a vacation package to Europe for less than $200. To take advantage of the offer, you must send $200 in cash within 24 hours to supply a credit card number at the time of the call. What do you think? Remember the elements of fraud.

Mistake Unilateral mistake – an error on the part of one party to a contract Usually cannot avoid the contract since the other party has reasonable expectations because of the contract Examples…..

Mistake as to the Nature of the Agreement A unilateral mistake Not an excuse to avoid a contract If a party signs an agreement, they are bound to it even if they have not read it or are mistaken about what it says. Signature shows agreement with the terms of the contract. If someone doesn’t speak English, they are expected to have the contract (agreement) read and explained to them by someone they trust. Not an excuse to get out of a contract

Mistake as to the Identity of a Party Unilateral mistake Identity of a party is misunderstood, not clear May be cause to void a contract Examples…..

Bilateral Mistake Both parties to a contract are mistaken about an important fact Also called a mutual mistake Either party may avoid the contract

Mistake as to the Possibility of Performance Bilateral Mistake Both parties believe the duties described in the contract can be performed when they cannot Either party may get out of the contract Examples…..

Mistake as to the Subject Matter Bilateral mistake Both parties are mistaken as to the identity of the subject matter in the contract Contract may be avoided by either party Examples…..

Duress Overcoming a person’s will by use of force or by threat of force or bodily harm Must enter into a contract voluntarily, not under duress Agreements made under duress are either void or voidable

Physical Duress Actual physical violence is used to cause another to enter a contract Contract is void Threat of physical force to cause another to enter into a contract Contract is voidable

Economic Duress Threats to a person’s business or income that cause them to enter into a contract without real consent Examples….. A threat to exercise one’s legal rights is not duress

Undue Influence When a person uses unfair and improper persuasive pressure to force another person to enter into an agreement; stronger person substitutes their will for the will of the weaker person. Elements A dependency relationship – one party is dependent on the other party because of ill health, old age, or mental immaturity Unfair or improper pressure – independent person uses excessive pressure to force dependent person to enter a contract Beneficial contract - contract benefits the independent party at the expense of the dependent party Examples…..