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Unformatted text preview: CHAPTER 13: REALITY OF CONSENT CONTRACTS Necessity never made a good bargain.- Benjamin Franklin, 1735 Get the Facts Before They Get You! Learning Objectives:- Five doctrines that permit people to avoid their contracts beause of the absence of real consent: o Misrepresentation o Fraud o Mistake o Duress, and o Undue influence Effect of The Five Doctrines:- Contracts induced by mistake, fraud, misrepresentation, duress, or undue influence are generally considered to be voidable o Person claiming non-consent has power to rescind (cancel) the contract o Person claiming non-consent must not act in a manner to ratify (affirm) the contract- When real consent is lacking, the contract is Voidable- Person claiming non-consent o Has the power to rescind (cancel) the contract o Must not act in a manner that ratifies (affirms) the contract Genuineness of Assent:- Contracts must be entered into knowingly and voluntarily- The party claiming that knowledge or voluntariness was lacking has the burden of proof Misrepresentation or Fraud?- A misrepresentation is a false statement and may be negligent (innocent) or fraudulent (made with knowledge of falsity and intent to deceive) o Either way, injured parties may void (rescind) the contract- A person who commits fraud may be liable in tort for damages, including punitive damages Fraudulent Misrepresentation:- Defendant mislead Plaintiff about ANY fact related to Contract by: o Lying, or o Active concealment, or o Nondisclosure- Plaintiff justifiably relies on (believes) Defendants information- Plaintiff suffers economic injury- Remedy: o Damages Compensatory and Punitive o Rescission and Restitution JORDAN V. KNAFEL Pg. 363 Illinois Court of Appeals- FACTS:- QUESTION:- JUDICIAL REASONING:- RULE: Economic Injury :- The difference between the actual worth and the worth had the representations been true Nonfraudulent Misrepresentation:- Innocent or negligent misrepresentation- Misleading Plaintiff about a MATERIAL fact- Plaintiff relies justifiably- Remedies: o Rescission and Restitution Elements- Innocent or fraudulent misrepresentation: o Defendant made an untrue assertion of fact Includes active concealment or non-disclosure o Fact asserted was material or was fraudulent Fact is material if likely to play significant role in inducing reasonable person to enter the contract o Complaining party entered the contract because of reliance on the assertion- Reliance of complaintant was reasonable...
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