Chapter 13: Genuineness of Asset and Undue Influence

Question 1

genuineness of assent (situations where missing)

Answer 1

the requirement that a party’s assent to a contract be genuine (mistake, fraudulent misrepresentation, duress)

Question 2

rescission

Answer 2

an action to undo a contract

Question 3

unilateral mistake (rescind-able?)

Answer 3

a mistake in which only one party is mistaken about a material fact regarding the subject matter of a contract (not in most cases)

Question 4

three types of situations in which a contract may not be enforced due to a unilateral mistake

Answer 4

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/mathematical error that is not the result of gross negligence
3. The mistake is so serious that enforcing the contract would be unconscionable

Question 5

mutual mistake of a material fact (rescind-able?)

Answer 5

a mistake made by both parties concerning a material fact that is important to the subject matter of a contract (yes on the grounds that there was never a contract such as ambiguity)

Question 6

mutual mistake of value (rescind-able?)

Answer 6

a mistake that occurs if both parties know the object of the contract but are mistaken as to its value (no- almost all contract would then rescind by the party who got the bad end of the deal)

Question 7

fraudulent misrepresentation (fraud)

Answer 7

an event that occurs when one person consciously decides to induce another person to rely and act on a misrepresentation

Question 8

the four elements needed in order to prove fraud

Answer 8

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

Question 9

actionable/non-actionable factors of misrepresentation of a material fact

Answer 9

actionable: the misrepresentation must be of a past or existing material fact that was a significant factor in inducing the innocent party to enter into the contract; may occur by written or spoken words, or by the conduct of the parties
non-actionable: statements of opinion or predictions about the future

Question 10

scienter (“guilty mind”)

Answer 10

knowledge that a representation is false or that it was made without sufficient knowledge of the truth

Question 11

actionable factors for intent to deceive

Answer 11

accused must have acted with scienter and with intent to deceive the innocent party (intent can be inferred from the circumstances)

Question 12

reliance on a misrepresentation (exclusions)

Answer 12

an innocent party who acts must justify his or her reliance (justifiable reliance is generally found unless the innocent party knew that the misrepresentation was false or was so extravagant as to be obviously false)

Question 13

economic injury measures (alternative)

Answer 13

the measure of damages is the difference between the value of the property as represented and the actual value of the property in order to give the innocent party the benefit of the bargain (or the buyer can rescind the contract and recover the purchase price)

Question 14

fraud in the inception (void/voidable?)

Answer 14

fraud that occurs if a person is deceived as to the nature of his act and does not know what he is signing (such contracts are void)

Question 15

fraud in the inducement (void/voidable?)

Answer 15

fraud that occurs when the party knows what he is signing but has been fraudulently induced to enter into the contract (such contracts are voidable by the innocent party)

Question 16

fraud by concealment

Answer 16

fraud that occurs when one party takes specific action to conceal a material fact from another party

Question 17

three situations where silence is misrepresentation

Answer 17

1. non-disclosure would cause bodily injury or death
2. there is a fiduciary relationship between the contracting parties
3. federal and state statutes require disclosure

Question 18

Restatement (Second) of Contracts’ duty of disclosure

Answer 18

Nondisclosure is a misrepresentation if it would constitute a failure to act in “good faith”

Question 19

non-actionable/actionable factors of misrepresentation of law

Answer 19

non-actionable: the innocent party cannot generally rescind the contract because each party to a contract is assumed to know the law that applies to the transaction, either through his own investigation or by hiring an attorney
actionable: if one party to the contract is a professional who should know what the law is and intentionally misrepresents the law to a less sophisticated contracted party

Question 20

innocent misrepresentation (consequences)

Answer 20

fraud that occurs when a person makes a statement of fact that he honestly and reasonably believes to be true even though it is not (not truly fraud- aggrieved party may rescind the contract but may not sue for damages; often treated as a mutual mistake)

Question 21

duress (enforceable?)

Answer 21

a situation in which one party threatens to do a wrongful act unless the other party enters into a contract (such contract is not enforceable against the innocent party because the assent is not voluntary)

Question 22

equitable doctrine: undue influence

Answer 22

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

Question 23

two elements in order to prove undue influence (and one situation where presumed)

Answer 23

1. a fiduciary or confidential relationship must have existed between the parties
2. the dominant party must have unduly used his influence to persuade the servient party to enter into a contract
   OR
   any contract between dr/patient or lawyer/client is presumed to be entered into under undue influence (can be overcome through proper evidence)