ch. 8: contracts Flashcards
What is misrepresentation in contract law?
A false statement of fact that induces someone to enter into a contract.
What are the three types of misrepresentation?
Innocent misrepresentation
Negligent misrepresentation
Fraudulent misrepresentation
What is innocent misrepresentation?
A false statement made honestly and without intent to deceive.
What is the remedy for innocent misrepresentation?
Rescission (canceling the contract and restoring both parties to their original positions).
When is rescission unavailable for innocent misrepresentation?
- The contract was affirmed.
- It is impossible to restore both parties.
- A third party has acquired rights.
- The plaintiff does not have clean hands.
What is fraudulent misrepresentation?
A false statement made knowingly, recklessly, or without belief in its truth.
What are the remedies for fraudulent misrepresentation?
Rescission (canceling the contract).
AND
Damages (monetary compensation).
POSSIBLE punitove damages
How can an innocent misrepresentation become fraudulent?
If the person making the statement discovers the mistake but fails to correct it.
What is negligent misrepresentation?
A false statement made carelessly, usually by a professional, leading to financial loss.
What must be proven in a claim for negligent misrepresentation?
- A duty of care existed.
- The duty was breached.
- The breach caused damage.
- The plaintiff suffered actual damages.
What is duress in contract law?
A situation where a party is forced to enter a contract due to threats or coercion.
What are examples of duress?
- Threats of violence
- Threats of imprisonment
- Threats to disclose scandalous information
- Threats to property or employment
What is the effect of duress on a contract?
The contract becomes voidable (can be canceled by the victim).
What is undue influence?
Unfair pressure exerted by someone in a position of trust or authority to force another party into a contract.
What is the key difference between duress and undue influence?
- Duress involves direct threats.
- Undue influence involves subtle pressure from a trusted person.
When is undue influence presumed in law?
In special relationships, such as lawyer-client, doctor-patient, or parent-child
What is an unconscionable transaction?
A contract where:
- The bargaining power is drastically unequal.
- One party takes advantage of the other.
- The contract has grossly unfair terms.
What is the legal remedy for an unconscionable transaction?
The contract is voidable (it can be canceled by the weaker party).
What is a mistake in contract law?
An error that destroys mutual agreement between parties.
What is a mistake in contract law?
An error that destroys mutual agreement between parties.
What are the three types of mistakes?
- Shared mistake (both parties make the same error).
- Misunderstanding (each party has a different understanding).
- One-sided (unilateral) mistake (only one party is mistaken).
What is the remedy for a shared mistake?
Rectification (correcting the mistake in the contract).
In some cases, the contract may be void.
What is a unilateral mistake?
A mistake made by one party that is usually not relieved by courts.
What is non est factum?
A defense meaning “It is not my act”, used when a person did not understand the nature of a document they signed.
What is the privity of contract rule?
Only the parties to a contract can enforce its terms.
What are the exceptions to privity of contract?
- Trusts (beneficiaries can enforce a contract).
- Novation (a new party replaces an original party).
- Agency (a principal can be bound by an agent’s contract).
- Contracts affecting land (rights may run with the land).
What is assignment in contract law?
The transfer of contractual benefits (but not obligations) to another party.
What is statutory assignment?
A legal assignment that meets three conditions:
1)It is absolute and unconditional.
2)It is in writing.
3)Proper notice is given to the debtor.
What rights cannot be assigned?
Support payments
Right to sue
Workers’ compensation benefits
What happens to contractual rights upon death or bankruptcy?
Upon death, rights transfer to an executor or administrator.
Upon bankruptcy, rights transfer to a trustee in bankruptcy.
