Genuine Agreement

Chapter 6

Genuine Agreement

Genuine Agreement – offer + acceptance; assuming the other three elements are present

Sometimes agreements turn out to be defective.

Defective Agreements:

Mistake Fraud Misrepresentation Duress Economic duress Undue influence

Fraud

Fraud- The deliberate deception to secure an unfair or unlawful gain.

Victim has 2 Choices: Rescind- Cancel or take back Sue for Fraud- (Tort) Money damages punitive

damages-designed to punish the wrong doer

Plaintiff must prove all 5 elements: False representation of a fact Party making representation must know it to

be false False representation must be made with the

intent that it be relied upon Innocent party relied upon the false

statement Suffered some monetary loss

False representation of Material Fact One that is important, it matters to at least

one of the parties

Example: Sales person tells potential buyer; “This is a really flashy car. You’ll get plenty of dates with it.”, instead of telling him that this is a 1964 Mustang.

Sellers opinions are not material facts.

Concealment

Making a false representation by not saying something they should have said. Representation known to be false- Actual

knowledge or disregard to truth False representation intended to be relied upon

Concealment

Example: If a customer asks if a car is a 1964 Mustang and the person who knows the car is a 1965 but doesn’t ever intend to sell it says; “yes it is”, the person cannot be sued because he/she didn’t intend to sell the vehicle. The statement wasn’t intended to be relied upon because the car wasn’t ever for sale.

False representation actually relied upon The false information must actually be relied

upon in order to bring suit. Example: If the person asking about the

Mustang was accompanied by an antique car expert, and the expert informs them that the car isn’t the year the seller claims and that it is worth much less that they are asking, they cannot bring suit because they didn’t actually rely upon the false information.

Resulting Loss

The innocent party must actually suffer a monetary loss.

Example: If the seller of the Mustang claimed that the car was a 1965 because they thought that year would be worth more. The buyer couldn’t bring suit because the car was actually a 1964 and worth more than he was quoted.

Assignment

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Innocent Misrepresentation

Innocent statement of fact that turns out to be false. The innocent party has the right to rescind the

contract. No right of damages/money collected - if the false

representation was innocently made.

Innocent Misrepresentation

Example: Fred bought a mountain bike from Matt, an acquaintance at school. Matt said he believed the bike did not need any repairs. After a weekend ride, Fred discovered the back wheel was severely misaligned. Fred could cancel the deal and ask for his money back. He is not entitled to damages because Matt genuinely believed the bike was in good shape.

Mistake

People enter into contracts with the beliefbelief that certain facts exist but they don’t.

Avoiding the contract may or may not be possible

Unilateral Mistake

Unilateral mistake- an error on one of the parties to the contract.

Usually cannot get out of the contract Misjudge the value of something Mistake as to the nature of agreement- people

are bound by signing a written agreement even if they didn’t read it.

Mistake as to the Identity of the Parties- May cause a void contract

Unilateral Mistake

Example: You send a letter to a friend which serves as an offer. The mail carrier delivers the letter to someone else that has the same name as your friend and they accept the offer. The contract may be voided because the wrong person accepted the offer.

Bilateral Mistake

Bilateral mistake- Mutual mistake. Both parties to a contract are mistaken about

some important fact. May be avoided by either party. Possibility of Performance- Both parties

believe it can be performed but it can’t.

Bilateral Mistake

Example: I agree to sell my car to someone for $1000. Neither the person or myself knows that my car was totaled last night. Therefore the contract can’t possibly be performed. The contract can be avoided by either party.

Mistake as to the Subject Matter Mistake as to the Subject Matter- Both parties

mistaken about the subject matter of the contract

Example: I agree to buy land on Prospect Avenue; when going to see the land before the purchase was final I realize that the land is on Prospect Road not Prospect Avenue. I can avoid the contract because of mistake of the subject matter

Duress

Duress- Overcoming a person’s will by use of force or by threat of force or bodily harm.

Void- Actual physical force Voidable- Threat of force

*Threaten either the person or a member of their family.

Economic Duress

Economic Duress- Threats to a person’s business or income to cause him to enter a contract without real consent.

Example: A company threatens not to deliver a shipment if the buyer refuses to pay a higher than agreed upon price.

Undue Influence

Undue Influence- Unfair and improper persuasive pressure exercised by one person in a relationship of trust with another person.

Example: An elderly woman sells her son land worth 150,000 for 50,000. Before the land is actually transferred the mother finds out that her son is planning to sell the land to a builder for the construction of an apartment building. If the mother decides not to go through with the sale her son cannot sue her because he took advantage of the trust she has in him.

Assignment

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