Invalid Assent (ch 4) Flashcards
Question
Ansewer
sales talk; not generally considered statements of fact
puffing
false statement made without intent to deceive, upon which a party justifiably relies to his detriment (e.g., carelessness, mistake)
misrepresentation
Two questions that come into play when determining misrepresentation
- Whether statement was one of fact2. Whether injured party was justified in relying on speaker
one party is obligated to act in the best interest of the other party
fiduciary interest
3 types of misrepresentation
- innocent (actually believe it, with good reason)2. negligent (fail to exercise reasonable care in ascertaining facts)3. fraudulent (intent to deceive)
3 remedies for innocent or negligent misrepresentation
- uphold contract2. rescind on contract and void3. keep contract and collect damages
You may not sue for (1) under contract law. Fraudulent misrepresentation must be sued for through the avenue of (2).
- punitive damages2. Tort law
Fraudulent misrepresentation is difficult to sue for because you must prove a (1).
- state of mind
3 avenues through which you can prove state of mind for fraud
- seller knew/believed assertion was untrue2. seller lacked confidence in the truth of his statement but presented it as fact3. seller implied there was a basis for the truth of his statement (e.g., he looked it up)
For collecting damages, it must be proven that the buyer (1) on the untruthful statement
- relied
Where there is not (1), there is a generaly rule that there is no duty to disclose info to another party.
statutory authority
5 exceptions to presumed lack of duty to disclose info
- half-truths (“I’ve never see a rattlesnake”–has seen many other snakes)2. positive concealment (filling in cracks)3. failure to correct a past statement (e.g., if something new happens to the property)4. fiduciary relationship (obligated to look out for best interests of the person)5. failure to correct a known mistake (e.g., a buyer’s mistake–“red diamond”)
A mere expression of opinion that does not relate to an (1) cannot be the basis of a claim of (2) or (3) unless the person stating the opinion has (4) or (5) knowledge.
- existing fact2. fraud3. misrepresentation4. exclusive5. superior
Where an opinion is a (1) in a purchase, this can be misrepresentation.
- decisive factor (e.g., “fashionable” couch)
Fraud in the (1) and fraud in the (2) have similar fact patterns.
- execution2. inducement
relates to parties’ motivation for entering into the contract (e.g., buy a car thinking 50k miles–actually has 150k)
fraud in the inducement
relates to deception in what document is actually being presented for approval
fraud in the execution
(1), or nondisclosure, is difficult to prove as there is not always a (2).
- silence as fraud2. duty to disclose
knowledge of falsity; a “guilty mind”
scienter
Mistake, if (1), can be rescinded by the offeror. The mistake must be (2), which is hard to prove. Relief can be granted if the mistake relates to the (3)–not to (4) or (5). A mistake in (6) is also not voidable.
- mutual2. material3. substance4. quality 5. value6. judgment (believing something is going to gain value)
silence as fraud
Having a duty to disclose but knowingly concealing the truth.
scienter
Having a guilty mind, knowledge of the falsity.
Innocent misrepresentation (remidies)
You may have a remedy when the misrepresentation was material “imporant to you and infuenced your decision to enter into contract.” You have the option to void the contract or sue for damages. EX - No intention of misrepresentation
Negligent misrepresentation (remidies)
You may have a remedy when the misrepresentation was material “imporant to you and infuenced your decision to enter into contract.” You have the option to void the contract or sue for damages. Ex- selling house that is “probably” five acres, too lazy to have property suveyed
Fraudulent misrepresentation (remidies)
Because fraud is a tort, you will be able to sue for punitive damages in addition to voiding the contract. There must be intent present
mutual mistake
All parties are mistaken as to a basic assumption of the contract.
Three Ms of mutual mistake
- Mutual – both parties must believe mistaken assumption. 2. Material – must be large or material “substance” 3. Legal mistake – ask whether the parties contracted on the basis of the set of facts that parties took as true
unilateral mistake
Only one of the parties is mistaken as to a basic assumption of the contract. Usually you are able to get out of these contracts.
A (1) mistake usually relates to an accounting error, and it is voidable.
unilateral
consists of any wrongful act or threat which overcomes the free will of the other party. Not necessarily illegal – e.g., threatening a lawsuit
duress
Duress uses a (1) standard–relates to what the person threatened feels
subjective
4 ways to commit duress
- threat of violence2. threat of imprisonment3. wrongful taking/keeping of another’s property or threat to do so4. threat to breach a contract
(1) is hard to prove–it is basically an abuse of trust
undue influence
2 things that must be established for undue influence
- person unduly influenced had a relationship of dependence and trust and other party dominated them and made them believe they were acting on trust2. dominant party abused their position of trust and had a psychological advantage over the other person
2 ways to end up with an unconscionable/adhesion contract
- large disparity in bargaining position of parties (one has little or no ability to negotiate)2. terms of contract are so unfair as to “shock the conscience”
adhesion contract
A contract where all the bargaining power is concentrated in one person. It is a take it or leave it contract, an example of an unconscionable contract.
2 ways a contract can “shock the conscience”
- procedural - bargaining process is impaired e.g. language barrier, absolution of responsibility on back of parking pass2. substantive - terms are lopsided e.g., enormous interest rate