1. Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 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.” Genuine Agreement

2. Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement 6.1 Genuine Agreement Several circumstances might create a defective agreement: Fraud Misrepresentation Mistake Duress Undue Influence

3. Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement 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.

4. Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement 5 things must be shown to succeed in a fraud lawsuit The 5 Elements of Fraud 1. A false representation of material fact  a fact that is important and matters to one of the parties. a. Communicated orally, written, or actions intended to deceive b. Concealment: choosing not to reveal important information. Also called passive fraud, nondisclosure c. Ex. The seller of a house cannot conceal problems, liens, death, paranormal activities in home 2. Proof the party making the false representation knew of the falsity. a. Ex. A car seller says the car has not been in an accident but repair receipts were found in glove compartment.

5. Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement 3. Intent to deceive by party making the false representation. a. A lie without the intent to enter a legal contract is not unlawful. b. Both parties must be willing to enter a contract 4. Reasonable reliance by the innocent party. a. Ex. You are selling your diamond to a friend who is an expert jeweler and he says it is 1.2 carats when it is really 1.5 in order to buy it cheaper. b. You relied on your friend’s knowledge to make the deal. 5. Actual loss must be suffered by innocent party. The 5 Elements of Fraud

6. Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement 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 since it is not intentional. 2

7. Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement FRAUDMISREPRESENTATION Must meet all 5 elements Not intended to be deceitful Rescindable Can sue for damages Cannot sue for damages

8. Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Unilateral Mistake 1. A unilateral mistake is an error on the part of one of the parties to the contract. a. Mistake communicated through words or actions b. One party creates reasonable expectations of the other party because of this mistake c. A person usually cannot avoid a contract because of this mistake. d. If a salesperson says a grill is $200 but scans it and it shows it is $300, s/he must sell for $200. Nature of agreement e. Sweepstakes received by an unqualified party may be voidable by contest dealer. Identity of a party 2

9. Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Mistake to the Nature of the Agreement People who sign an agreement are bound to it, even if they have not read it or are mistaken about what it says. Due diligence! Mistake as to the Identity of a Party If a mistake is made as to the identity of one of the party’s to a contract, a rescission may be granted. But if you make the same offer face-to-face the rescission will not be granted. 2

10. Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement 6.2 Remedies for Unilateral Mistakes 1.Mistake as to the nature of the agreement. 2.Mistake as to the identity of a party. *Not if made face to face. Unilateral Mistake Remedy 1.Rescission will not be granted. Cannot sue for damages 2.*Rescission may be granted. Cannot sue for damages Type of Mistake

11. Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Bilateral Mistake When both parties to a contract are mistaken about an important fact it is called a bilateral mistake, or mutual mistake. When this mistake occurs, either party may avoid the contract. There are two types of bilateral mistakes. 1.Mistake to the possibility of performance. 2.Mistake as to the subject matter. 2

12. Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Mistake as to the Possibility of Performance If both parties enter into a contract believing that the duties described in the agreement can be performed, when in fact, they cannot, either party may avoid the contract. Ex. You make an agreement to sell a car but it was stolen before the exchange. 2

13. Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Mistake as to the Subject Matter If both parties are mistaken as to the identity of the subject matter, the contract may be avoided by both parties. Ex. If a seller posts tickets to a concert for sale, s/he can back out if

14. Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement 6.2 Remedies for Bilateral Mistakes 1.Mistake as to possibility of performance. 2.Mistake as to the subject matter. Bilateral Mistake Remedy 1.Rescission will be granted. Cannot sue for damages. 2.Rescission will be granted. Cannot sue for damages. Type of Mistake Since contract is rescinded, it is not carried out, therefore no loss incurred by either party.

15. Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Duress Duress is overcoming a person’s will by use of force or threat of force or bodily harm. Agreements are void/voidable. 2 Physical duress is when actual physical violence is used to force a person to enter a contract. Emotional duress is when the threat of physical force is used to force a person to enter a contract.

16. Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Undue Influence Undue influence occurs when a person uses unfair and improper persuasive pressure to force another person to enter into an agreement. 2

17. Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Elements of Undue Influence 1. A dependency relationship due to ill health, old age, mental immaturity. 2. Unfair or improper pressure as the person pressured is dependent on the other in a particular way. 3. A beneficial contract that benefits the person independent party at the expense of the dependent person.