Misrepresentation and Duress - Jan. 18 Flashcards
What is a misrepresentation? (R)
A misrepresentation is an assertion that is not in accord with the facts. (159)
When is a misrepresentation fraudulent? (R)
A misrepresentation is fraudulent if the maker intends his assertion to induce a party to manifest his assent and the maker:
(A) knows or believes that the assertion is not in accord with the facts, or
(B) does not have the confidence that he states or implies in the truth of the assertion, or
(C) knows that he does not have the basis that he states or implies for the assertion. (162)
When is a misrepresentation material? (R)
A misrepresentation is material if it would be likely to induce a reasonable person to manifest his assent, or if the maker knows that it would be likely to induce the recipient to do so. (162)
When is non-disclosure equivalent to an assertion? (R)
A person’s non-disclosure of a fact known to him is equivalent to an assertion that the fact does not exist in the following cases only:
(A) where he knows that disclosure of the fact is necessary to prevent some previous assertion from being a misrepresentation or from being fraudulent or material.
(B) where he knows that disclosure of the fact would correct a mistake of the other party as to a basic assumption on which that party is making the contract and if non-disclosure of the fact amounts to a failure to act in good faith and in accordance with reasonable standards of fair dealing.
(C) where he knows that disclosure of the fact would correct a mistake of the other party as to the contents or effect of a writing, evidencing or embodying an agreement in whole or in part.
(D) where the other person is entitled to know the fact because of a relation of trust and confidence between them. (161)
When does a misrepresentation make a contract voidable? (R)
(A) If a party’s manifestation of assent is induced by either a fraudulent or a material misrepresentation by the other party upon which the recipient is justified in relying, the contract is voidable by the recipient.
(B) If a party’s manifestation of assent is induced by either a fraudulent or a material misrepresentation by one who is not a party to the transaction upon which the recipient is justified in relying, the contract is voidable by the recipient, unless the other party to the transaction in good faith and without reason to know of the misrepresentation either gives value or relies materially on the transaction. (164)
When does duress by threat make a contract voidable? (R)
(A) If a party’s manifestation of assent is induced by an improper threat by the other party that leaves the victim no reasonable alternative, the contract is voidable by the victim.
(B) If a party’s manifestation of assent is induced by one who is not a party to the transaction, the contract is voidable by the victim unless the other party to the transaction in good faith and without reason to know of the duress either gives value or relies materially on the transaction. (175)
What is duress? (DeLong)
Duress is a wrongful threat that induces a party to agree to a contract or a contract modification. (74)
Who can void a contract induced by duress? (DeLong)
A contract induced by duress, like one made by a minor, is voidable at the election of the party against whom the duress was practiced. (74)
How can one show proof of duress? (DeLong)
Duress can be shown by a proof of threat to do something that would cause the victim to suffer financial loss, serious physical injury, or death. (74)
How does the duress doctrine act as a shield? (DeLong)
As a shield, duress may be interposed as a defense to one who is sued for breach of a contract that he executed under duress. (74)
How does the duress doctrine act as a sword? (DeLong)
As a sword, duress may be the basis of a claim for restitution of payments plaintiff made to the defendant. It is the duress that makes the enrichment “unjust.” (74)
Why do the courts not enforce promises by people who are threatened with death? (DeLong)
Because “such promises are made unenforceable in order to discourage threats by making them less profitable.” (88)
Why do courts prevent people from making opportunistic threats to breach? (DeLong)
Because “if contractual protections are illusory, people will be reluctant to make contracts” and “encouraging people to make contracts promotes the efficient allocation of resources.” (88)
Why do courts enforce settlement agreements made by people who are desperately poor? (DeLong)
Because otherwise they “would be unable to settle because they could not enter into a binding settlement; being desperate they could always get it set aside later on grounds of duress.” (88)
