LAW 2300: Chapter 12 notes

Chapter 12: Genuine Assent


A contract which satisfies the other requirements may still be unenforceable if one or
both of the parties did not genuinely assent to its terms.


Mistakes

Unilateral Mistakes:

A unilateral mistake occurs when one contracting party makes a mistake
as to some material fact that is, a fact important to the subject matter of
the contract. The general rule is that a unilateral mistake does not afford
the mistaken party any right to relief from the contract.

Exceptions:

1. If the other party to the contract knows or should have
known that a mistake of fact was made, the contract may not
be enforceable.

2. When the unilateral mistake of fact was due to a
mathematical mistake and was made inadvertently without
gross (extreme) negligence.

Mutual Mistakes

When both parties are mistaken about the same material fact, the
contract can be rescinded by either party.

       Mutual Mistakes of Value

      If a mutual mistake concerns the future market value or quality of
      the object of the contract, the mistake is one of value, and the
      contract normally can be enforced by both parties.


Duress

Assent to the terms of a contract is not genuine if one of the parties is forced into
the agreement. Duress is both a defense to the enforcement of a contract and a
ground for the recission of a contract.

Objective standard: A threat constitutes duress only if a reasonable person
under the same circumstances would have deemed the threat believable and
would have been motivated to action in order to avoid the threat.


Fraud

When an innocent party is fraudulently induced to enter into a contract, the
contract normally can be avoided because that party has not voluntarily
consented to its terms. Normally, the innocent party can either rescrind the
contract and be restored to his original position, or enforce the contract and seek
damages for any injuries resulting from the fraud.

Elements of Fraud:

Misrepresentation of a material fact

Words

Acts

Silence

Intent to deceive ("scienter")

Innocent party justifiably relied on the misrepresentation

Damages: Not usually required in an action to rescind. Required to
recover damages.

"Puffery" is not fraud.


Fraud in the inducement v. Fraud in the execution: Primarily the difference is
between the contract being voidable at the option of the innocent party vs. void.


Undue Influence

Arises from special relationships, such as fiduciary relationships, in which one
party's free will has been overcome by the undue influence of another. To
determine whether undue influence has been exerted, a court must ask: "To
what extent was the transaction induced by domination of the mind or emotions
of the person in question?"


Misrepresentation

Essentially, misrepresentation is fraud without the intent to deceive. It can be
either innocent or negligent.

Innocent misrepresentation: The aggrieved party can rescind the contract
if the misrepresentation was material but usually cannot seek damages.

Negligent misrepresentation: Misrepresentation is negligent if the person
making it fails to exercise reasonable care in uncovering or disclosing the
facts or does not use the skill and competence that his business or
profession requires. Most states treat negligent misrepresentation as
fraud.