Chapter 13 Flashcards
Genuineness of Assent
the requirement that a party’s assent to a contract be genuine.
Unilateral Mistake
a mistake in which only one party is mistaken about a material fact regarding the subject matter of a contract.
3 situations in which a contract may not be enforced due to a unilateral mistake:
1) one party makes a unilateral mistake of fact, and the other party knew (or should have known) that a mistake was made.
2) a unilateral mistake occurs because of a clerical or mathematical error that is not the result of gross negligence.
3) the mistake is so serious that enforcing the contract would be unconscionable.
Mutual Mistake of a Material Fact
a mistake made by both parties concerning a material fact that is important to the subject matter of a contract.
*an ambiguity in a contract may constitute a mutual mistake of a material fact (ambiguity occurs where a word or term in the contract is susceptible to more than one logical interpretation).
Mutual Mistake of Value
A mistake that occurs if both parties know the object of the contract but are mistake as to its value.
*the contract remains enforceable by either party because the identity of the subject matter of the contract is not at issue.
Fraudulent Misrepresentation
An event that occurs when one person consciously decides to induce another person to rely and act on a misrepresentation.
*contract is voidable by the innocent party who can either rescind the contract and obtain restitution or enforce the contract and sue for contract damages.
Elements of Fraud
To prove fraud, the following elements must be shown:
1) the wrongdoer made a false representation of material fact.
2) the wrongdoer intended to deceive the innocent party.
3) the innocent party justifiably relied on the misrepresentation.
4) the innocent party was injured.
Misrepresentation of a Material Fact
- may occur by words (orally or written) or by the conduct of a party.
- to be actionable as fraud, the misrepresentation must be of a past or existing material fact (the misrepresentation must have been a significant factor in inducing the innocent party to enter into the contract).
Intent to Deceive
To prove that a person intended to deceive an innocent party:
1) the person making the misrepresentation must have either had knowledge that the representation was false or made it without sufficient knowledge of the truth (scienter “guilty mind”).
2) the misrepresentation must have been made with the intent to deceive the innocent party.
3) intent can be inferred from the circumstances.
Reliance on the Misrepresentation
- not actionable unless the innocent party to whom the misrepresentation was made relied on the misrepresentation and acted on it.
- an innocent party who acts in reliance on a misrepresentation must justify his or her reliance.
Injury to the Innocent Party
- to recover damages, the innocent party must prove that the fraud caused him or her economic injury.
- measure of damages is the difference between the value of the property as represented and the actual value of the property.
Types of Fraud
1) Fraud in the inception: occurs if a person i deceived as to the nature of his or her act and does not know what he or she is signing *contracts are void
2) fraud in the inducement: innocent party knows what he or she is signing or doing but has been fraudulently induced to enter into the contract *voidable by the innocent party.
3) Fraud by concealment: occurs when one party takes specific action to conceal a material fact from another party.
4) Silence as misrepresentation: 1) nondisclosure would cause bodily injury or death, 2) there is a fiduciary relationship (i.e., a relationship of trust and confidence), 3) federal and state statutes require disclosure
5) misrepresentation of law: usually not actionable unless one party to the contract is a professional who should know what the law is and intentionally misrepresents law to a less sophisticated contracting party.
6) innocent misrepresentation: occurs when a person makes a statement of fact that he or she honestly and reasonably believes to be true even though it is not. *not fraud, aggrieved party may rescind the contract but cannot sue for damages.
Equitable Doctrine: Undue Influence
a situation in which one person takes advantage of another person’s 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.
1) a fiduciary or confidential relationship must have existed between the parties.
2) the dominant party must have unduly used his or her influence to persuade the servient party to enter into a contract.
