Round 2 Lecture 3 Flashcards
subjective test
was there real consent or was the formation of contract process tainted in some way? if it was the contract is voidable by the aggrieved party
voidable
the aggrieved party can be relieved of the obligations under the contract
remedies available
rescission or money damages
rescission
undo the contract (you give up what you received and get back what you gave)- you must asset this right promptly- an unreasonable delay may be interpreted as acceptance of the voidable contract
fraud in the inducement
- classic fraud
- generally occurs in the contract formation process-a tort action
- an allegation that one has been led by another’s guile, superstitiousness, or other form of deceit to enter into an agreement to his or her detriment
elements of fraud in the execution
- a false representation was made in the form of spoken words, conduct (concealment), or silence probably during negotiations
- of a fact -can you define in terms of true or false?
- that is material
- with knowledge of falsity and intention to deceive
- justifiable reliance on the misrepresentation
general rule about silence
failure to disclose a fact is not misrepresentation unless the nondisclosing party has a duty to disclose the fact
examples of when a party has a duty to disclose
- latent (hidden) deficiency that the other party didn’t discover
- to correct prior incorrect statements
- make greater disclosures if there exists a fiduciary relationship
- to correct other party’s mistake about a basic assumption of the contract
the following are generally not regarded as facts
- statements of opinion as to value, quality, authenticity, or other matters of judgement (except for statements made by experts)
- puffing (sales talk)
what makes a false representation material?
- must induce reliance and influence to a substantial degree, the making of the decision to contract
- would knowing the truth of the matter have made a difference with regard to the decision to enter into the contract?
3 situations that satisfy the knowledge requirement
- actual knowledge of falsity
- constructive knowledge of falsity-a lack of belief in the statements truthfulness
- reckless disregard for the truth of the statement - a representation made w/o a sufficient basis of info to support the rep.
justifiable reliance on the misrep
if you know its false, you can’t go back later and claim fraud
what obligation does the innocent person have to discover fraud?
was the aggrieved party’s fault so negligent as to the amt. to a failure to act in good faith and in accordance with reasonable standards of fair dealing
remedies for fraud in the execution
- rescission
- no rescission, but right to recover benefit of the bargain damages
remedies for fraud in execution under the UCC
not necessary to choose, you can rescind and recover damages
nonfraudulent misrepresentation
all the elements of fraud except yo u do not have to show knowledge and intent on the part of the wrongdoer
negligent misrepresentation
a misrep. made w/o knowledge of the falsity of the rep. but made without due care
innocent misrep.
a misrep. made w/o knowledge of the falsity of the rep. but made with due care
remedies for nonfraudulent misrep.
rescission (generally you cannot recover money damages, except out of pocket damages if you elect not to rescind)
the economic loss doctrine
a limitation on your right to allege fraudulent or non-fraudulent misrepresentation. in the formation of a contract involving the sale of goods or real estate if you could sue for breach of contract- this doctrine or some variation of it has been adopted by many states - does not apply to contracts for services
what is the intent of the economic loss doctrine
to prevent product or real estate liability lawsuits based on negligence or strict liability when a breach of warranty claim could be made
what are economic losses?
damages arising because the product or real estate does not perform as expected or in not as represented
mutual mistake
both parties mistaken (no effective meeting of the minds)- a mutual belief about a material fact that is not in accord with the truth
examples of mutual mistake
1) existence of subject matter
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 correcting the written contract to conform to what was originally intended
