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Chapter 12 law
| Question | Answer |
|---|---|
| Importance of genuine assent - | If assent is not genuine, or legal, a contract may be voidable. For purposes of planning, it is important for people to understand the circumstances under which failure of assent may render their contracts voidable. |
| Mistake - | are erroneous beliefs about the material facts of a contract at the time the agreement is made. They may be either unilateral or mutual. Only under certain rare conditions is a unilateral mistake a basis for rescinding a contract. However, if both parties |
| Misrepresentation - | is an intentionally untruthful assertion by one of the parties about a material fact. An innocent misrepresentation occurs when the party making the false assertion believes it to be true. The misled party may rescind the contract. When a misrepresentatio |
| Undue Influence - | refers to the persuasive efforts of a dominant party who uses a special relationship with another party to interfere with that other's free choice of the terms of a contract. Any relationship in which one party has an unusual degree of trust in the other |
| Duress - | occurs when one party threatens the other with a wrongful act unless assent is given. Such assent is not legal assent because coercion interferes with the threatened party's free will. For a court to rescind the agreement, the injured party must demonstra |
| you need an acceptance to - | form a contract |
| Certain problems with the acceptance, or the yes, may - | give rise to the claim that the acceptance was not really genuine and, therefore, that the resulting contract is not valid. |
| Voidable - | a term applied to a contract that one or both parties have the ability to either withdraw from or enforce |
| when a contract is voidable - | it may be rescinded or canceled |
| rescinded - | to cancel a contract |
| The cancellation of a contract permits the person who canceled it to require - | the return of everything she gave the other party. At the same time, the person who rescinds the contract must herself return whatever she has received from the other party |
| Duress | is found when one party was forced into the agreement by the wrongful act of another. |
| The wrongful act may come in various forms. Any of the following would trigger a successful request for rescission on grounds of duress: One party threatens physical harm or extortion to gain consent to a contract. | One party threatens to file a criminal lawsuit unless consent is given to the terms of the contract. (Threats to file a civil case against a party do not constitute duress unless the suit is frivolous.) One party threatens the other’s economic interest |
| In Indian law, duress is referred to as coercion, or the committing of or threatening to commit any act forbidden by the Indian Penal Code to force a person into entering an agreement. To prove coercion, the plaintiff must establish that | (1) there was a clear utterance of threat; (2) the threat referred to an act forbidden by the Indian Penal Code; (3) the act was committed with the intention to cause the plaintiff to enter into an agreement |
| (4) there was unlawful detaining of or threat to detain any property; (5) coercion was employed by a party or by his agent; and (6) the plaintiff is a party or any other person with some interest in the agreement. | |
| Physical coercion may include threats to | commit suicide. In contrast, moral coercion is synonymous with undue influence. The Indian Contract Act states that a contract is induced by undue influence when the relations subsisting between the parties are such that one of the parties is in a positio |
| Quite unlike the concept of duress in the United States, | the Indian concept of moral coercion, or undue influence, includes the unique consideration of pardanashin ladies in contract law. |
| In India, a major difference between acts of coercion and acts of undue influence is | the legal consequence of each action. In cases of coercion, the agreement obtained by coercion is automatically voidable. In cases of undue influence, the contract is either voidable or is set aside. |
| Factors that enter into the finding of undue influence include the following: | Inadequacy of consideration. Inequality between the parties in regard to age, intelligence, or social status. Fiduciary relationship between the parties. Unconscionable bargains. Pardanashin women. |
| The court held that Knafel’s representation to Jordan that he was the father met the requirements of being (1) a material fact; (2) made for the purpose of inducing Jordan to act; | (3) that either was known by Knafel to be false or was not actually believed by her on reasonable grounds to be true, but Jordan reasonably believed it to be true; and (4) that was relied on by Jordan to his own detriment. |
| European courts take a different approach to mistakes about the ___ of a contract In general, they agree with the reluctance of American courts to interfere with a contract just because the value of the item in question has changed since the agreement. | value of performance |
| Mistakes may be unilateral | the result of an error by one party about a material fact, that is, a fact that is important in the context of the particular contract. |
| Alternatively, they may be mutual, | shared by both parties to the agreement. This distinction is important in determining which contracts are voidable. |
| Sometimes, however, rescission is permitted for even unilateral mistakes. Because our economic well-being depends so heavily on reliable contracts, we want to be fully aware of the circumstances under which unilateral mistakes permit rescission. Any of th | One party made a mistake about a material fact and the other party either knew or had reason to know about the mistake. |
| The mistake was caused by a clerical error that did not result from gross negligence. | |
| The mistake was so serious that the contract is unconscionable, that is, so unreasonable that it is outrageous. | |
| Mutual Mistake | Rescinding such a contract is fair because any agreement between the parties was an illusion: An ambiguity in some key fact prevented the parties from being in actual agreement |
| The famous story of the ship Peerless2 has taught generations of students the importance of | being very clear in defining material facts in any contract. The parties to the contract that led to the contract disagreement had agreed that the vessel Peerless would deliver the cotton they were exchanging. Unfortunately for them, there were two ships |
| Warning: Anticipate ambiguity in the material facts and clarify them in advance to save yourself headaches later. For a mutual mistake to interfere with legal consent, it must involve all the following: | A basic assumption about the subject matter of the contract. A material effect on the agreement. An adverse effect on a party that did not agree to bear the risk of mistake at the time of the agreement. |
| For instance, to rise to the level of a basic assumption, the mistake would need to be about the existence, quality, or quantity of the items to be exchanged | To meet the second condition, the mistake must involve the essence of the agreement. A fact is material when it provides a basis for a person’s agreement to enter into the contract. In the case opener, Knafel was basing her appeal on the argument that the |
| The second element is not satisfied when | the person attempting to avoid the contract simply claims that the item to be exchanged is not the one he had intended to exchange. |
| The third condition is necessary to | protect those who bargain with someone who agreed, at the time of the agreement, to bear the risk of mistake but then later wants to avoid that risk when the contract does not work out as well as he or she had planned. This situation might arise, for inst |
| Misrepresentations are similar to mistakes | In both cases, at least one of the parties is in error about a fact material to the agreement. |
| An innocent misrepresentation | A false statement about a fact material to an agreement that the person who made the statement believed to be true. |
| The person who made the false statement had no knowledge of the falsity of the claim. We say the person lacked | scienter- Intent or knowledge. |
| negligent misrepresentation | A false statement of material fact made by a party who thinks it is true but who would have known the truth about the fact had he or she used reasonable care to discover or reveal it. |
| Any fraud on the part of a party to a contract provides a basis for rescission. The parties cannot be said to have assented when one of the parties was tricked into the agreement by | a fraudulent misrepresentation |
| fraudulent misrepresentation | is a false representation of a material fact that is consciously false and is intended to mislead the other party. |
| intentional misrepresentation | A false representation of a material fact made by a party who either knows or believes that the factual claim is false or knows that there is no basis for the assertion. Scienter is clear. Here, scienter is clear. The party making the misrepresentation |
| To understand the requirements for a finding of fraudulent misrepresentation, start with the two elements from the definition: | A false statement about a past or existing fact that is material to the contract. Intent to deceive. Intent can be inferred from the particular circumstances. |
| Then add a third necessary element: | Justifiable reliance on the false statement by the innocent party to the agreement. |
| Justifiable reliance is generally present unless the injured party knew or should have known by the extravagance of the claim, that the false statement was indeed false. For example, a person could not justifiably rely on a claim by another that a hair on | |
| Finally, if damages are sought, the defrauded party must have been injured by the misrepresentation. | |
| Either concealment or nondisclosure can be treated as the equivalent of | an actual assertion. |
| Concealment | nvolves the active hiding of the truth about a material fact, for example, removing 20,000 miles from the odometer on your car before selling it to me. |
| Nondisclosure | is different because it involves a failure to provide pertinent information about the projected contract. The courts have until recently been hesitant to use nondisclosure as a basis for rescinding a contract because it is a passive form of misleading con |
| Under the Consumer Contracts Law, | if a business fails to provide a consumer with information or makes misrepresentations concerning basic or other important contractual matters that are necessary for the consumer to make a judgment about the contract, and if the consumer would not have en |
| This provision is applicable whenever a business, in trying to induce a consumer to enter into a contract, | (1) fails to provide information about the contents of the contract, (2) fails to provide important information necessary for the consumer to make the decision to enter into the contract, or (3) makes misrepresentations. In many such cases, the consumer w |
| However, courts will now find nondisclosure as having the same legal effect as an actual false assertion under certain conditions | a relationship of trust exists between the parties to the contract there is failure to correct assertions of fact that are no longer true in light of events that have occurred since the initial consent to the terms of the agreement. |
| A relationship of trust exists between the parties to the contract | In this situation, the relationship provides a reasonable basis for one person’s expectation that the other would never act to defraud him or her. |
| There is failure to correct assertions of fact that are no longer true in light of events that have occurred since the initial consent to the terms of the agreement. | An illustration is my failure to inform you of the recent outbreak of rust on my rust-free car that you have agreed to purchase next month. |
| intent to deceive | Scienter is present when the party accused of making the fraudulent assertion believed that the assertion was false or made the claim without any regard for whether it was true or false. Alternatively, intent to deceive is present when the party making th |
| Justifiable reliance on the false assertion | What responsibilities does the injured party have when a false assertion was made by the other party? As we said earlier, the injured party has no justifiable claim of fraud when he or she relied on assertions that should have been obviously false. Anyone |
| you need an offer and an acceptance to | form a contract |
| Certain problems with the acceptance, or the yes, may give rise to the claim that | the acceptance was not really genuine and, therefore, that the resulting contract is not valid. |
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