Ch 13 Flashcards
Fraud in the inducement
245
fraud that occurs when the party knows what he or she is signing but has been fraudulently induced to enter into the contract
telling someone you are starting an oil company, they invest but you use the money for personal use.
Undue influence/duress
249
Undue influence:
a situation in which one person takes advantage of another persons mental, emotional, or physical weakness and unduly persuades that person to enter into a contract; the persuasion by the wrongdoer must overcome the free will of the innocent party
Duress:
a situation in which one party threatens to do a wrongful act unless the other party enters into a contract
difference between fraud and innocent misrepresentation
244-247
Fraud:
an event that occurs when one person consciously decides to induce another person to rely and act on a misrepresentation
Innocent misrepresentation:
fraud that occurs when a person makes a statement of fact that he or she honestly and reasonably believes to be true even though is it not.
fraud in the inception /inducement
245
Fraud in the inception:
fraud that occurs if a person is deceived as to the nature of his or her act and does not know what he or she is signing
Fraud in the inducement:
fraud that occurs when the party knows what he or she is signing but has been fraudulently induced to enter the contract.
duress or valid request
248
Duress:
a situation in which one party threatens to do a wrongful act unless the other party enters into a contract
Valid request:
duress or valid request
248
duress:
situation in which one party threatens to do a wrongful act unless the other party enters into a contract
ex. threat to harm someone if they do not sign a contract
valid request:
- a.
William tells Carol that he paid $150,000 for his farm in 2000 and that he believes it is now worth twice that. Relying on these statements, Carol buys the farm from William for $225,000. William did pay $150,000 for the farm in 2000, but its value has increased only slightly, and it is presently not worth $300,000. On discovering this, Carol offers to reconvey the farm to William and sues for the return of her $225,000. Result?
Carol loses
1 b.
Modify the facts in (a) by assuming that William had paid $100,000 for the property in 2000. What is the result?
Carol wins
On February 2, Phillips induced Mallor to purchase from her fifty shares of stock in the XYZ Corporation for $10,000, representing that the actual book value of each share was $200. A certificate for fifty shares was delivered to Mallor. On February 16, Mallor discovered that the February 2 book value was only $50 per share. Thereafter, Mallor sues Phillips. Will Mallor be successful in a lawsuit against Phillips? Why?
Yes–fraud in the inducement
- Decedent, Joan Jones, a bedridden, lonely woman, eighty-six years old, owned outright Greenacre, her ancestral estate. Biggers, her physician and friend, visited her weekly and was held in the highest regard by Joan. Joan was extremely fearful of pain and suffering and depended on Biggers to ease her anxiety and pain. Several months before her death, Joan deeded Greenacre to Biggers for $5,000. The fair market value of Greenacre at this time was $125,000. Joan was survived by two children and six grandchildren. Joan ‘s children challenged the validity of the deed. Should the deed be declared invalid due to Biggers’ undue influence? Explain.
Yes–undue influence
- Treasure Salvors and the state of Florida entered into a series of four annual contracts governing the salvage of the Nuestra Senora de Atocha. The Atocha is a Spanish galleon that sank in 1622, carrying a treasure now worth well over $250 million. Both parties had contracted under the impression that the seabed on which the Atocha lay was land owned by Florida. Treasure Salvors agreed to relinquish 25 percent of the items recovered in return for the right to salvage on state lands. In accordance with these contracts, Treasure Salvors delivered to Florida its share of the salvaged artifacts. Subsequently the U.S. Supreme Court held that the part of the continental shelf on which the Atocha was resting had never been owned by Florida.
Treasure Salvors then brought suit to rescind the contracts and to recover the artifacts it had delivered to the state of Florida. Should Treasure Salvors prevail?
Yes–mutual mistake of fact
