1. CHAPTER 7
GENUINENESS OF ASSENT

2. 7-1 Duress and Undue Influence
Genuine Assent and Duress
An agreement will be treated as valid (legally binding and enforceable) as long as it meets all the proper legal requirements.
Genuine assent – True and complete agreement
Without genuine assent, a contract is voidable. The injured party can avoid the contractual obligation.

3. 7-1 Duress and Undue Influence
Genuine Assent and Duress When a contract is voidable, if the injured party desires, the party can cancel or avoid the contractual obligation. The party then has the legal right to get back what has already been put into the contract (rescission)

4. 7-1 Duress and Undue Influence
Genuine Assent and Duress
To be effective, an avoidance must be carried out promptly after the injured party discovers that her or his assent was improperly obtained.
Avoidance must occur before the injured party ratifies the contract.
Ratification – conduct that confirms an intent to be bound by the contract.

5. 7-1 Duress and Undue Influence
Genuine Assent and Duress
Grounds for an avoidance due to a lack of genuine assent:
Duress
Undue influence
Mistake
Misrepresentation
Fraud

6. 7-1 Duress and Undue Influence
Genuine Assent and Duress
Duress - (actionable or legal) one party uses an improper threat or act to obtain an expression of agreements = VOIDABLE
Threats of Illegal or Tortious Conduct
Threats to Report Crimes
Threats to Sue
Economic Threats

7. 7-1 Duress and Undue Influence
Genuine Assent and Duress
Threats of Illegal or Tortious Conduct
Committing an act of violence (stabbing)
Threatening a crime (threatening to stab)
Committing a tort (unlawful detention)
Threatening a tort to obtain a signature on a written contract

8. 7-1 Duress and Undue Influence
Genuine Assent and Duress
Threats to Report Crimes
If you observe a crime, you have the duty to report it to the proper authorities

9. 7-1 Duress and Undue Influence
Genuine Assent and Duress
Threats to Sue
The law encourages parties o settle conflicts without a suit.
The threat to sue made for a purpose unrelated to the current contractual negotiations may be considered duress.

10. 7-1 Duress and Undue Influence
Genuine Assent and Duress
Economic Threats
When a party attempts to use the economic power they have over one another to negotiate a favorable modification or settlement.
The court will not only look at the threat, they will also look at the alternatives available to the threatened party.

11. 7-1 Duress and Undue Influence
Genuine Assent and Duress
Undue Influence - Occurs when the dominating party to a confidential relationship exerts irresistible pressure on the dominated party to enter into a contract that benefits the former.

12. 7-1 Duress and Undue Influence
Genuine Assent and Duress
Undue Influence
Confidential relationship – one in which an inordinate amount of trust and confidence is placed by a dependent party in the dominant party.
attorney/client
parent/ young child
child/ elderly parent
physician/ patient
When a contract arises because of undue influence, the contract is voidable by the dominated party.

13. 7-2 Mistake, Misrepresentation, & Fraud
What Are the Types of Contractual Mistakes?
Unilateral Mistake
This occurs when only one party holds an incorrect belief about the facts or law related to a contract.
Mutual Mistake (Bilateral Mistake)
This occurs when both parties have an incorrect belief about an important fact or the applicable law.
If a mutual mistake of material fact as to the identity of the subject matter of a contract occurs, the contract is void.
When the mutual mistake is about the applicable law, the contract is still valid.

14. 7-2 Mistake, Misrepresentation, & Fraud
What Is Misrepresentation?
Misrepresentation
Innocent Misrepresentation - party to a contract does not know that a statement he or she made is untrue
Fraudulent Misrepresentation – party to a contract knows that a statement he or she made is untrue

15. 7-2 Mistake, Misrepresentation, & Fraud
What Is Misrepresentation?
Untrue Statements of Fact
In misrepresentation, the statement must be one of fact rather than opinion.
The statement must be about a past or existing fact.
A statement about the future is generally considered opinion.
If an expert is expressing an opinion, the law will treat the statement as a statement of fact which can be the basis for misrepresentation.

16. 7-2 Mistake, Misrepresentation, & Fraud
What Is Misrepresentation?
Untrue Statements of Fact
Active Concealment
a substitute for a false statement of fact
example: painting a wall to cover water damage before selling a house
Silence – There are three important situations where disclosure is required
Where a statement about a material fact omits important information. Half-truths cannot be used to conceal or mislead.
There is a duty to break silence when a true statement is made false by subsequent events.
There is s duty to break silence when one party knows the other party has made a basic mistaken assumption.

17. 7-2 Mistake, Misrepresentation, & Fraud
What Is Misrepresentation?
Materiality
There are three ways an untrue statement can be determined to be material.
A statement is material if the statement would cause a reasonable person contract.
A statement is material if the defendant knew the plaintiff would rely on the statement.
If the defendant knew the statement was false, this makes the statement material.

18. 7-2 Mistake, Misrepresentation, & Fraud
What Is Misrepresentation?
Reasonable Reliance
Even thought a statement is material, there is no misrepresentation unless the victim reasonably relied on it.

19. 7-2 Mistake, Misrepresentation, & Fraud
Fraud and Remedies for Fraud
Fraud – Misrepresentation with two additional elements:
The misstatement was made recklessly or intentionally
Injury resulted
If there is an intentional misrepresentation, but no injury, there is no liability for fraud.

20. 7-2 Mistake, Misrepresentation, & Fraud
Fraud and Remedies for Fraud
Fraud – Misrepresentation with two additional elements:
The misstatement was made recklessly or intentionally
Injury resulted
If there is an intentional misrepresentation, but no injury, there is no liability for fraud.

21. 7-2 Mistake, Misrepresentation, & Fraud
Fraud and Remedies for Fraud
The Misrepresentation Must Be Intentional or Reckless
The first additional element that must be shown to establish fraud is that the misrepresentation was intentionally or recklessly made to the victim to induce him to enter into the contract.
Some jurisdictions also require the victim show that he had no diligent way to check the accuracy of the fraudulent statement.

22. 7-2 Mistake, Misrepresentation, & Fraud
Fraud and Remedies for Fraud
The Misrepresentation Must Injure
There must be proof of injury
If there is intentional misrepresentation, but no injury, there is no liability for fraud.

23. 7-2 Mistake, Misrepresentation, & Fraud
Fraud and Remedies for Fraud
Remedies for Fraud
If a seller innocently misrepresents a material fact, the buyer may avoid the contract.
If the victim can establish fraud, courts also will allow recovery of actual damages and punitive damages.

24. 7-2 Mistake, Misrepresentation, & Fraud
Fraud and Remedies for Fraud
Remedies for Fraud
Rescission
Anything you received must be returned
Damages
Only available is fraud is proven.
Punitive Damages
A form of punishment

25. CH 7 ASSIGNEMNT
7-1 ASSESSMENT page 133 Think About Legal Concepts 1-7 (Write the question and answer) 7-2 ASSESSMENT page (Write the question and answer) DUE: MONDAY, NOVEMBER 2, 2015