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© 2013 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. C HAPTER 11: C ONDUCT I NVALIDATING A SSENT
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© 2013 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. T OPICS C OVERED C HAPTER 11: C ONDUCT I NVALIDATING A SSENT A. Duress. B. Undue Influence. C. Fraud. D. Nonfraudulent Misrepresentation. E. Mistake. 2
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© 2013 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 Definition – wrongful or unlawful act or threat that overcomes the free will of a party. Physical Compulsion – coercion involving physical force renders the agreement void. 3
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© 2013 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 Improper Threats – improper threats or acts, including economic and social coercion, render the contract voidable. The test is subjective: did the threat actually induce assent on the part of the victim? 4
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© 2013 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 Definition – taking unfair advantage of a person by reason of a dominant position based on a confidential relationship. Effect – renders a contract voidable. 5
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© 2013 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 Rea v. Paulson (1994). Berardi v. Meadowbrook Mall Company (2002). 6
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© 2013 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. F RAUD Fraud in the Execution – a misrepresentation that deceives the other party as to the nature of a document evidencing the contract renders the agreement void. 7
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© 2013 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. F RAUD Fraud in the Inducement – renders the agreement voidable if the following elements are present. False Representation – positive statement or conduct that misleads. M AROUN V. W YRELESS S YSTEMS, I NC. (2005). Fact – the event occurred or the thing exists. M AROUN V. W YRELESS S YSTEMS, I NC. (2005). Materiality – of substantial importance. 8
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© 2013 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. F RAUD Fraud in the Inducement – renders the agreement voidable if the following elements are present. Knowledge of Falsity & Intention to Deceive – (scienter) includes (a)actual knowledge, (b) lack of belief in statement's truthfulness, or (c)reckless indifference to its truthfulness. 9
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© 2013 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. F RAUD Fraud in the Inducement – renders the agreement voidable if the following elements are present. Justifiable Reliance – a defrauded party is reasonably influenced by the fraud. R EED V. K ING (1983). R EED V. K ING (1983). 10
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© 2013 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. N ONFRAUDULENT M ISREPRESENTATION Negligent Misrepresentation – misrepresentation made without due care in ascertaining its truthfulness; renders agreement voidable. Innocent Misrepresentation – misrepresentation made without knowledge of its falsity but with due care; renders contract voidable. 11
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© 2013 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. M ISTAKE The parties’ understanding not in accord with existing fact(s). Mutual Mistake – both parties have a common but erroneous belief forming the basis of the contract; renders the contract voidable by either party. Lesher v. Strid (2000). Lesher v. Strid (2000). 12
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© 2013 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. M ISTAKE Unilateral Mistake – courts are unlikely to grant relief unless the error is known or should be known by the nonmistaken party. Assumption of Risk – a party may assume the risk of a mistake. 13
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© 2013 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. M ISTAKE Effect of Fault upon Mistake – not a bar to avoidance unless the fault amounts to a failure to act in good faith. Mistake in Meaning of Terms: no contract if material mistake in terms and neither party is to blame. 14
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© 2013 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. C ONDUCT I NVALIDATING A SSENT
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