Page 29 Flashcards
What is fraud?
Agreement of one party was induced by material misrepresentation of the other party, so contract not enforced
What are the major types of fraud?
- fraud in the inducement
- fraud in the execution
- promissory fraud
- misrepresentation
What is fraud in the inducement?
False statements that induce a party to contract. They know they are contacting, but they don’t know the subject matter.
What is the result of fraud in the inducement?
Voidable by party subjected to the fraud
What is an example of fraud in the inducement?
Someone sells lakefront property that is really the meridian on the highway
What is fraud in the execution?
Party deceives another into thinking the document is different than it is. Voids the contract
What is an example of fraud in the execution?
Having someone sign a birthday card but it’s really a contract
What is promissory fraud?
Party makes a promise with no intent to perform. Result is avoidance or reformation
What is misrepresentation?
An express statement or deliberate concealment that makes the transaction voidable
What are the different types of misrepresentation?
- misrepresentation of FACT
- erroneous statements of OPINION
- misrepresentation of LAW
- INTENTIONAL misrepresentation
- misrepresentation of PURPOSE
Does a misrepresentation of fact constitute a breach?
Not unless the misrepresentation was material
Can a party get relief for relying on another party’s opinion?
No, you can’t rely on trade talk, puffery, or opinion statements
What are exceptions to the rule that you can’t rely on a statement of opinion?
- if there is a relationship of trust/fiduciary
- representer is an expert
- representer has superior access to knowledge of the facts that make the opinion false
- opinion is stated by a third person posing as a disinterested person
- opinion is so far from reality that no reasonable person could have it
Why do misrepresentations of the law not make a contract voidable?
Because everyone is presumed to know the law. Exceptions: can rely on experts, relationships of trust/confidence, and superior position
How is intentional misrepresentation treated?
As a tort and punitive damages can be given
How is unintentional misrepresentation treated?
Avoidance is only possible if it was material
How is misrepresentation of purpose treated?
That is immaterial because intentions can change over time
When do you have to disclose information in a bargaining transaction?
- if required by statute
- if concealment present
- if partial disclosure is made, must disclose everything
- if supervening events make the disclosure no longer true, and you know it, must disclose new info
- fiduciary relationships: must disclose material facts
What are the elements of misrepresentation?
- by other party or someone on their behalf
- statement made with knowledge of its falsity/intent to deceive
- person deceived had a right to rely
- person did rely
What is UCC misrepresentation?
Any writing corrupted by fraud is void if it induced another to sign without knowledge of its character or essential terms (just need reliance)
What are remedies for fraud?
- stand on the transaction and sue for DAMAGES
- avoid transaction and claim RESTITUTION
What is restitution?
Disgorging of something that was taken, or compensation for an injury
After discovering fraud, can the party ratify the contract?
Yes, the injured party can proceed with the transaction despite the fraud
