Conduct or Circumstances Invalidating Consent

Question 1

Two Reasons to challenge a contract:

Answer 1

1. misconduct
2. mutual mistake

Question 2

Subjective test

Answer 2

Was there real consent or was formation of contract tainted in some way?

Was objective assent of a party not knowingly or voluntarily given because of the misconduct of a party, the parties mistake as to a material fact or some other factor?

If so, the contract is said to be “voidable” by the aggrieved party

Question 3

Remedies available to aggrieved party

Answer 3

Recission

in some cases, money damages

Question 4

Recission

Answer 4

“Undo” the contract (you give up what you received and get back what you gave)

you must assert this right promptly (or an unreasonable delay may be construed as a ratification - “acceptance” - of the voidable contract

Question 5

In some cases, money damages

Answer 5

may be recoverable

for example, in a fraud cause (intentional deceit)

Question 6

Chapter 100 - Wisconsin Statute - Unfair Marketing and Trade Practices

Answer 6

Misconduct in the context of certain types of legal relationships may be sanctioned by Attorney General’s office or other state agencies

1. regulation of trading stamps
2. selling with pretense of prize
3. guessing contests
4. ticket refunds
5. mail-order sales
6. Dating service contracts
7. Fitness center and weight reduction center contracts
8. Fraudulent drug advertising
9. Unfair trade practices in the dairy industry
10. Motor vehicle rustproofing warranties
11. Cable television subscriber rights

Question 7

Section 100.18 of the Wisconsin Statutes

Answer 7

Advertisements, announcements, statements or representations made with respect to the sale of goods, services or real estate to the public may not contain any assertions, representations or statements of fact which are untrue, deceptive or misleading —– elements of a claim under this statute

Question 8

Elements under the Section 100.18

Answer 8

1. The defendant made a representation to the public with the intent to cause a contract to be formed (you advertise the sale of a used car in the classified ads and state the mileage)
2. The representation was false or misleading (your statement as to mileage was inaccurate)
3. The representation caused a loss to the plaintiff (the car was not worth what the plaintiff paid for it because of the understood mileage)

Question 9

Fraud in the Inducement

Answer 9

Classic Fraud

Generally occurs in the contract formation process - a tort action - an allegation that one has been led by another’s guile, surrepitiousness or other form of deceit to enter into an agreement to his or her detriment

Question 10

A false representation was made (probably during negotiations leading up to contract formation) - the representation may be in form of

Answer 10

a. spoken or written words
b. conduct (concealment)
c. silence (non-disclosure, standing silent, as forms of false representation)

Question 11

The general rule is that silence, a failure to disclose a fact =>

Answer 11

is not misrepresentation unless the non-disclosing party has a duty to diclose the fact

Question 12

Duties

Answer 12

1. you have a duty to disclose latent (hidden) deficiency that the other party did not discover
2. You have a duty to correct incorrect statements which were made during negotiations
3. You have a duty to make greageer disclosures if there exists a fiduciary relationship (involving trust) or any other special relationshpi between the parties that is not arms length
4. Restatement - a person may disclose facts necessary to correct the other party’s mistake about a basic assumption of the contract when non-disclosure is a failure to act in good faith and in accordance with reasonable standards of fair dailing

Question 13

Of a fact - can you define in terms of trule or false? The following generally not regarded as facts

Answer 13

a. statements of opinion as to value, quality, authenticity or other matters of judgment - exception to his general rule statements made by “experts
b. puffing - sales talk
c. predictions (increases in value, of durability)

Question 14

Sales Talk

Answer 14

Exaggerations reasonably to be expected of a seller as to the degree of quality of his product, the truth or falsity of which cannot be precisely determined

ex. the best, the finest, a masterpiece, or “of premium quality”

Question 15

What makes a false representation material?

Answer 15

a. Must induce reliance and influence, to a substntail degree, the making of the decision to contract
b. would knowing the truth of the matter have made a difference with regard to the decision to enter into the contract?

Question 16

A fact is material if:

Answer 16

A reasonable person would attach importance to its existence or nonexistence in determining the choice of action in the transaction in question

Question 17

3 Situations that satisfy this requirement of “With knowledge of falsity and intention to deceive”

Answer 17

1. Actual knowledge of falsity
2. Constructive knowledge of falsity - a lack of belief in the statement’s truthfulness
3. Reckless disregard for the truth of the statement -a representation made without a sufficient basis of information to support the representation

Question 18

Justifiable reliance on the misrepresentation

Answer 18

a. you are not deceived if you do not rely
b. does aggrieved party have knowledge
c. What obligation does innocent person have to determine fraud? - was the aggrieved party’s fault so negligent as to amount to a failure to act in good faith and in accordance with reasonable standards of fair dealing?

Question 19

Remedies

Answer 19

1. Recisisions (avoidance of the contract), or
2. No recission, but right to recover “benefit-of-the-bargain” damages
3. Under the UCC - no such election of remedies is required - you can rescind and recover damages

Question 20

Nonfraudulent Misrepresentation

Answer 20

A. All the elements of fraud except the requirement that you show knoowledge and intent

1. Negligent misrepresentation - without knowledge of the falsity of the representation but made without due care
2. innocent misrepresentation - without knowledge of the falsity of the representation but made with due care

B. Remedy - recission (generally, you cannot recover money damages except “out of pocket” damages if you elect not to rescind)

Question 21

Mutual Mistake - both parties mistaken - belief about a material fact not in accord with the truth

Answer 21

1. Existence of subject matter- destruction of the sbuject matter at the time of contracting
2. Character of subject matter
3. Identity of subject matter
4. The parties reach an agreement but fail to accurately express it in writing - a “paperwork” error - remedy is usually reforming to the written contract to make it conform to what the parties intended

Question 22

Unilateral mistake

Answer 22

1. If as to value of bargain - no relief to the mistaken party
2. Unilateral mistake as to a collateral (secondary) matter than other party was aware of
3. Collateral matters - mathematical error, typographical error, clerical error, description error
4. other party must have known, or should have known, the mistake

Question 23

Duress

Answer 23

Wrongful coercion that induces a person to enter into or modify a contract (threat of physical or emotional harm, or more recently, “economic” duress

Question 24

Under influence

Answer 24

Unfair persuasion exerted by one person upon another duing the bargaining process where the relationship between the parties is either one of trust and confidence or in which the person exercising the persuasion dominates the person being persuaded