Chapter 11- Conduct invalidating contracts Flashcards
What are 2 types of duress?
Physical and mental
What are the 2 types of mental duress?
mental coercion
social
What is undue influence?
- unfair persuasion
- by a person in a dominant position
- based on a confidential relationship
(voidable contract)
What is duress?
Any wrongful/unlawful act or threat that overcomes the free will of a party
What is physical duress?
an immediate threat of physical violence (compulsion)
ex. gun to head (contract is void)
what is mental duress?
leaves victim with no reasonable alternative, explicit or inferred (contract is voidable)
ex. construction work company vs. phone company
What are 3 factors in determining undue influence?
- whether dominant party made full disclosure of all relevant info known to them.
- whether consideration was adequate
- whether dependent party received competent and independent advice before completing transaction
What is mistake?
a belief that is not in accordance with the facts
What are the 3 Ms?
Mistake, Mutual, Material
What are 2 types of Mistake?
Mutual (bilateral)- voidable
unilateral- ex: make a contract for a ship they both knew about vs. make contract based on facts known to both parties
What is fraud?
it prevents assent from being knowingly given
What are 2 types of fraud?
execution: misrepresentation that deceives as to very nature of contract (void)
inducement: any act that compels a person to enter into a contract (voidable)
What are 5 elements of fraud in the inducement?
- misrepresentation
- fact
- material
- knowingly made with the intention to deceive (scienter)
- justifiably relied upon to detriment of defrauded party
What is a fiduciary?
a person in a confidential relationship who owes a duty of trust, loyalty, and confidence to another
What is non-fraudulent misrepresentation?
Material, false statement, induce another to rely justifiably, without scienter
What are the 2 types of non-fraudulent misrepresentation?
negligent and innocent
To obtain relief for non-fraudulent misrepresentation, what must you have?
All other elements of fraud must be present AND misrepresentation must be material
What is scienter?
Knowledge of falsity with intention to deceive. “guilty knowledge”
If only 1 party is mistaken, can relief still be granted?
Typically, NO. contract is for set of facts known to both parties.
What is a negligent misrepresentation?
a false representation that is made without due care in ascertaining its truthfulness
What is an innocent misrepresentation?
a false representation made without the knowledge of its falsity but with due care.
