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26 Cards in this Set
- Front
- Back
Mistake of fact (categories)
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bilateral
unilateral *may allow a contract to be avoided |
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Mistake of value or quality
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if a mistake concerns the future market value or quality of the object of the contract
*normally contract is enforceable EX: violin sold for cheap but later is found to be rare and worth much more. seller can't later demand more *reason: value is variable and depends on time, place, etc |
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Bilateral (mistake of fact)
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mutual mistake made by both of the contracting parties
EX: surveyer made a mistake in amount/placement of land or word/term subject to more than one interpretation |
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unilateral (mistake of fact)
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a mistake made by only one of the parties about a material fact
*normally does not give mistaken party any relief and the contract is enforceable EX: V selling motorhome. Types offer and mistypes price but B accepts - bound contract |
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exceptions to a contract with a unilateral mistakes of fact contracts being enforceable
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1) if the other party to the contract knows or should have known that a mistake of fact was made
2) a mathematical mistake made inadvertently and without gross (extreme) negligence. Clerical error must be readily provable |
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Elements of Fraudulent Misrepresentation
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1) A misrepresentation of a material fact must occur
-can occur by words or actions 2) There must be ab intent to deceive 3) The innocent party must justifiably rely on the misrepresentation |
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Cases when opinions can be fraud
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When a naive purchaser relies on a so-called expert's opinion, the innocent party may be entitled to rescission or reformation (equitable remedy granted by a court in which the terms of a contract are altered to reflect the true intentions of these parties - see Ch 18)
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Misrepresentation
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-can occur by words or actions
-statements of opinion and representations of future facts (predictions) are generally not subject to claims of fraud - a seller of goods is allowed to use puffery to sell his or her wares without liability for fraud |
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Misrepresentation by Concealment
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when a party takes specific action to conceal a fact that is material to the contract
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Misrepresentation of Law
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-ordinarily does not entitle a party to relief from a contract
-at common law people are assumed to know state and local ordinances EXCEPTIONS -when the misrepresenting party is in a profession that is known to require greater knowledge of the law than the average citizen possesses. |
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Misrepresentation by Silence
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a contract cannot be set aside because certain pertinent information is not volunteered
-however, if the purchaser asks you and you lie, you have committed a fraudulent misrepresentation |
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Exceptions to the Misrep by Silence
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-If the seller knows of a serious potential problem that could not reasonably be suspected by the buyer, the seller may have a duty to speak
-seller must disclose only "latent" defects (defects that could not readily discovered) -when parties are in a fiduciary relationship (one of trust ex: attorney and their client), there is a duty to disclose materail facts; failure to do so may constitute fraud |
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Duty to Prospective Employees
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A duty to disclose information may also arise in an employment context when the employer either misrepresents or conceals info from a prospective employee during the hiring process (ex: fraudulent misrepresentation about a company's financial health)
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scienter
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"guilty knowledge"
-second element of fraud: knowledge on the part of the misrepresenting party that facts have been falsely represented *signifies an intent to deceive* |
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innocent misrepresentation
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If a person makes a statement that she or he believes to be true but that actually misrepresents material facts
(not guilty of fraud) -the aggrieved party can rescind the contract but usually cannot seek damages |
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negligent misrepresentation
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a party will make a misrepresentation through carelessness believing the statement is true.
If a person fails to exercise reasonable care in uncovering or disclosing the facts or does not use the skill and competence that her or his business or profession requires -equal to scienter -treated as fraudulent misrepresentation (even though it wasn't purposeful) |
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justifiable reliance
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the deceived party must haev a justifiable reason for relying on the misrepresentation, and the misrepresentation must be an important factor (but not necessarily the sole factor) in inducing that party to enter into the contract
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Injury to the innocent party
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-Showing of injury is not required when the action is to rescind the contract (this just returns parties to the positions they held before the contract was made)
-To recover damages caused by fraud, proof of an injury is universally required *courts can also award punitive damages (intended to punish the defendant) or exemplary damages |
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undue influence
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-arises from special kinds of relationships in which one party can greatly influence another party, thus overcoming that party's FREE WILL
-lacks voluntary consent and is therefore voidable -there must be clear and convincing evidence that the person did not act out of her or his free will |
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the presumption of undue influence
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-when the principal in a confidential relationship benefits from that relationship, a presumption of undue influence arises
-the dominant party must exercise the utmost good faith in dealing with the other party -when a contract enriches the dominant party, the court will often presume that the contract was made under undue influence |
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duress
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forcing a party to do something, including entering into a contract, through fear created by threats (blackmail/extortion count too)
-a defense to the enforcement of a contract and a ground for the rescission of a contract |
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The Threatened Act Must Be Wrongful or Illegal
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threatening someone to exercise a legal right, ordinarily is not illegal and usually does not constitute duress
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Economic Duress
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economic need is generally not sufficient to constitute duress, even when one party exacts a very high price for an item that the other party needs
- if the party exacting the price creates the need, economic duress may be found |
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adhesion contracts
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contracts written exclusively by one party and presented to the other party on a take-it-or-leavei-it basis.
*often use standard forms |
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standard form contracts
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often contain fine-print provisions that shift a risk naturally borne by one party to the other
-often used by life insurance policies, residential leases, loan agreements, and employment agency contracts *to avoid enforcement of the contract or of a particular clause, the aggrieved party must show that the parties had substantially unequal bargaining positions and that enforcement would be manifestly unfair or oppresive |
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unconscionability (broad)
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Section of the Uniform Commercial Code applies only for the sale of goods but courts have broadened the concept and applied it in other situations
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