Ch 10

Fundamentals of Business Fundamentals of Business LawLaw

Summarized Cases, 8th Ed., and Excerpted Cases, 2nd Ed.

ROGER LeROY MILLERInstitute for University Studies

Arlington, Texas

GAYLORD A. JENTZHerbert D. Kelleher Emeritus Professor in Business Law

University of Texas at Austin

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.

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Learning ObjectivesLearning Objectives• In what types of situations might genuineness

of assent to a contract’s terms be lacking? • What is the difference between a mistake of

value or quality and mistake of fact?• What elements must exist for fraud to occur?• What contracts must be in writing to be

enforceable?• What is parole evidence? When is it

admissible to clarify the terms of a written contract?


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MistakesMistakes


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MistakesMistakes• Mistake of Value (or Quality).

– Contract is enforceable.• Mistake of Fact.

– Unilateral Mistake of Material Fact—mistaken party does not have the right to cancel contract unless:• (1) the non-mistaken party knew or should

have known about the mistake, or • (2) there is a clerical error.


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MistakesMistakes• Bilateral (Mutual) Mistakes—if both

are mistaken either one can cancel the contract.– CASE 10.1 Inkel v. Pride Chevrolet-

Pontiac, Inc. (Vermont, 2008).


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Fraudulent Fraudulent MisrepresentationMisrepresentation

• Innocent party can cancel the contract.• Plaintiff must show:

– Misrepresentation of a material fact (not opinion) by conduct, silence or words.

– Intent to deceive.– Innocent party must have justifiably relied on

the misrepresentation.– Plaintiff must have suffered a legal injury.


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Undue Influence Undue Influence andand DuressDuress

• Undue Influence.– Arises from a special relationship of trust.– A stronger party overcomes a weaker party’s

free will by exerting psychological influence.• Duress.

– Threat of physical force or extortion.– Can serve as basis for rescission of contract.– Economic need, by itself, is not duress.


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Statute of Frauds: The Statute of Frauds: The Requirement of a WritingRequirement of a Writing

• Statute of Frauds requires certain contracts to be in writing and signed to be enforceable.– A contract involving an interest in land.– A contract that by its terms cannot be

performed within 1 year of execution.– Collateral contracts to answer for the debt of

another.– Prenuptial agreement. – Contracts for sale of goods over $500.


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One Year RuleOne Year Rule


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Exceptions to Statute of Exceptions to Statute of FraudsFrauds

• Partial performance. – Purchaser has paid part of purchase price,

taken possession and made valuable improvements to property.

– CASE 10.2 School-Link Technologies, Inc. v. Applied Resources, Inc. (Kansas, 2007).


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Exceptions to Statute of Exceptions to Statute of FraudsFrauds

• Admissions.– Party admits in court records contract exists.

• Promissory Estoppel/Detrimental Reliance.– Promisee justifiably relies.


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Sufficiency of the WritingSufficiency of the Writing• “Writing” includes memorandum,

invoice, fax, check, email.• Essential terms sufficient.• Signed by party against whom

enforcement is sought (Defendant).• Initials of Defendant adequate.


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Contracts Subject to Contracts Subject to the Statute of Fraudsthe Statute of Frauds


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Parol Evidence RuleParol Evidence Rule


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Parol Evidence RuleParol Evidence Rule• Prohibits the introduction at trial of

evidence of the parties prior communications that contradicts the written contract.

• CASE 10.3 Yocca v. Pittsburgh Steelers Sports, Inc. (Penn., 2004).


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Parol Evidence: Parol Evidence: ExceptionsExceptions

• Exceptions (allow parol evidence):– Evidence of subsequent contract modifications– Oral evidence to show contract was void or

voidable. – Show meaning of ambiguous Terms.– To “fill in the gaps.” – Prior Dealings, course of performance, usage

in trade.– Obvious or gross clerical errors.


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Integrated ContractsIntegrated Contracts• Is the written contract intended to be a

complete and final statement of the terms of the agreement?– If “yes”, then the contract is “integrated.”– Can be fully or partially integrated.

• Courts exclude any parol evidence that contradicts the writing.

Ch 10

Documents

Transcript of Ch 10