CHAPTER 14 Contracts: Genuineness of Assent <a href="/keyword/wests-business-law/" >west's business law</a> 10th Edition Kenneth W. Clarkson, University of Miami Roger LeRoy Miller, Institute for University Studies, Arlington, Texas Gaylord A. Jentz, University of Texas, Austin, Emeritus Frank B. Cross, University of Texas, Austin COPYRIGHT 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 1 Introduction Contract may be unenforceable if the parties have not genuinely assented to its terms by: Mistake. Misrepresentation. Undue Influence. Duress. COPYRIGHT 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 2 1: Mistakes of Fact Only a Mistake of Fact allows a contract to be canceled. Bilateral (Mutual) Mistakes can be rescinded by either party. COPYRIGHT 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 3 Mistakes of Fact Unilateral Mistakes cannot be canceled unless: If other party to the contract knows or should have known that a mistake of fact was made. If mistake was due to mathematical mistake in addition, summation, subtraction, division, or multiplication and was made inadvertently and without gross negligence. Case 14.1: Roberts v. Century Contractors, Inc. (2004). COPYRIGHT 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 4 Mistakes of Value Generally, contract is enforceable by either party. Exception: Mistake of value because of a mistake of material fact. COPYRIGHT 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 5 2: Fraudulent Misrepresentation Contract Voidable by Innocent Party. Elements: Misrepresentation of Material Fact. Intent to Deceive. Reliance on Misrepresentation. Injury to the Innocent Party. COPYRIGHT 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 6 Misrepresentation can be express or implied. Concealment. Misrepresentation of future facts and statements of opinion are not fraud, unless person professes to be an expert. Misrepresentation of Law is not fraud, unless person has greater knowledge of the law. Silence is not fraud, unless serious problem or defect known or asked and person lied. Case 14.2: Vokes v. Arthur Murray Inc. (1968). COPYRIGHT 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. Misrepresentation Has Occurred 7 Intent to Deceive Scienter is an Intent to Deceive. Party knowledge that fact is not as stated. Party makes a reckless statement with disregard of the truth. Party implies that statement is based on personal knowledge or investigation. Gross negligence is considered intent. COPYRIGHT 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 8 Reliance on Misrepresentation Deceived party must have Justifiable Reliance. Depends on the knowledge and experience of the party relying. Case 14.3: Fogel v. Enterprise Leasing Co. of Chicago (2004). COPYRIGHT 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 9 Injury to the Innocent Party No proof of injury is required when the action is to rescind contract. Proof of injury is universally required to recover damages. COPYRIGHT 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 10 3: Nonfraudulent Misrepresentation Innocent Misrepresentation. Negligent Misrepresentation. Equal to Scienter. Is treated as fraudulent misrepresentation, even though the misrepresentation was not purposeful. COPYRIGHT 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 11 4: Undue Influence Contract is Voidable. Confidential or Fiduciary Relationship. Relationship of dependence. Influence or Persuasion. Weak party talked into doing something not beneficial to him or herself. Presumption of Undue Influence. COPYRIGHT 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 12 5: Duress Forcing a party to enter into a contract under fear or threat makes the contract voidable. Threatened act must be wrongful or illegal. Improper Threat. Threat to exercise legal rights (criminal or civil suit). Economic or physical. COPYRIGHT 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 13 6: Adhesion Contracts and Unconscionability Standard-Form (Adhesion) Contracts. Preprinted contract in which the adhering party has no opportunity to negotiate the terms of the contract. Take-it-or-leave-it&quot; adhesion contracts. Unconscionability. One sided bargains in which one party has substantially superior bargaining power and can dictate the terms of the contract. COPYRIGHT 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 14