1. BELL QUIZ ON CHAPTER 5
What is any agreement that is enforceable by law?
There are six elements of a contract. Name TWO.
How many promises does a bilateral contract contain?
Who is the person making the offer?
There are five ways to terminate an offer. Name TWO.

2. ANSWERS TO BELL QUIZ CHAPTER 5
Contract
Offer, acceptance, genuine agreement, consideration, capacity, legality
Two
Offeror
Revocation, rejection, counteroffer, expiration of time, death or insanity

3. Section 6.1

4. Chapter 6 Genuine Agreement Section 6.1 Fraud and Misrepresentation
Mistake, Duress, and Undue Influence

5. Why It’s Important
Learning the elements of fraud may prevent you from being victimized or help you claim your rights if you are defrauded.

6. 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.”

7. 6.1
Genuine Agreement
Several circumstances might create a defective agreement:
Fraud
Misrepresentation
Mistake
Duress
Undue Influence

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

9. Remedies for Fraud You may rescind, or cancel, the contract.
You may sue for money damages.
You may also try to collect punitive damages which is designed to punish the wrongdoer for their conduct.

10. The Five Elements of Fraud
A false representation of fact.
Knowledge of the falsity by the party making the false representation.

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

12. 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.

13. 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.

14. 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
Example 1 page 130

15. 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.
Example 2 page 131

16. 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.
Example 3 page 131

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

18. 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.

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

20. 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.

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

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

23. Mistake, Duress, and Undue Influence
Section 6.2
Mistake, Duress, and Undue Influence

24. Why It’s Important
Recognizing how mistake, duress, and undue influence can affect agreements will help you make better decisions in such situations.

25. Genuine Agreement
In addition to fraud and misrepresentation, mistake, duress, and undue influence can also create a defective agreement.

26. Mistake
People sometimes enter into contracts believing that certain information is true when it is actually not, or that information is not true when it really is.

27. Unilateral Mistake
A unilateral mistake is an error on the part of one of the parties to the contract.
Through words or actions, one party has created reasonable expectations on the part of the other party to the contract.

28. Unilateral Mistake
Those expectations should not be blocked because one of the parties has made an error, or mistake.
A person usually cannot avoid a contract because of such a mistake
Example 5 page 133

29. Unilateral Mistake There are two types of unilateral mistakes.
Mistake as to the nature of the agreement
Mistake as to the identity of a party

30. Nature of the Agreement
Mistake as 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!!!

31. Mistake as to the Identity of a Party
If you make an offer by letter to one party, but the wrong person mistakenly receives the offer, the mistake may be cause to void the contract.

32. Mistake as to the Identity of a Party
If you make the same offer face-to-face with a person whose identity you have mistaken, your mistake as to the identity will not prevent a binding contract.

33. Remedies for Unilateral Mistakes
6.2
Remedies for Unilateral Mistakes
Unilateral Mistake
Type of Mistake
Remedy
Mistake as to the
nature of the
agreement.
identity of a party
Rescission will not
be granted.
Rescission may be
granted.

34. Bilateral Mistake
When both parties to a contract are mistaken about some important fact, this is called a bilateral mistake, or mutual mistake.
When this mistake occurs, either party may avoid the contract.

35. Bilateral Mistake There are two types of bilateral mistakes.
Mistake as to the possibility of performance
Mistake as to the subject matter

36. Possibility of Performance
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.
Example 7 page 136

37. Mistake as to the Subject Matter
Both parties can be mistaken as to the identity of the subject matter when they enter into a contract. The contract may be avoided by either one of the parties.
Example 8 page 136

38. Remedies for Bilateral Mistakes
6.2
Remedies for Bilateral Mistakes
Bilateral Mistake
Type of Mistake
Remedy
Mistake as to
possibility of
performance.
Mistake as to the
subject matter.
Rescission will be
granted.

39. Duress
Duress is overcoming a person’s will by use of force or threat of force or bodily harm.

40. Types of Duress
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.

41. Types of Duress
Economic duress is when threats to a person’s business or professional reputation are used to force a party to enter a contract.

42. Undue Influence
Undue influence occurs when a person uses unfair and improper persuasive pressure to force another person to enter into an agreement.

43. Undue Influence
Circumstances such as ill health, old age, and mental immaturity may put a person in a weaker position.

44. Elements of Undue Influence
6.2
Elements of Undue Influence
Element
Description
A dependency
relationship
One party in a
relationship is
dependent on the
other party.

45. Elements of Undue Influence
6.2
Elements of Undue Influence
Element
Description
Unfair or improper
pressure
The independent person
uses excessive pressure
to force the dependent
person to enter a
contract.

46. Elements of Undue Influence
6.2
Elements of Undue Influence
Element
Description
A beneficial contract
The contract benefits
the independent party
at the expense of the
dependent party.
End of Chapter 6