The risk allocation precludes Buyer from rescinding on the contract based on mutual mistake. Although Buyer is unduly prejudiced, and no assumption of risk in case the property becomes uninhabitable but it is expressed in the “as is” clause. (real estate purchase). 1.What is the mutual understanding? 2.What is the assumption? 3.Is there a false assumption?
1. FRAUDULENT – false statement that is known to be false or is made recklessly – without knowing or caring whether it is true or false – and that is intended to reduce a party to detrimentally rely on it a. false representation of fact b. intended to deceive the other party c. does so deceive the other party d. causes loss/detriment occasioned 2. INNOCENT – false statement not known to be false; a misrepresentation that, though false, was not made fraudulently 3. MATERIAL – false statement that is likely to induce a reasonable person to assent or that the maker knows is likely to induce the recipient to assent a. non fraudulent b. induces entry into the contract 4. NEGLIGENT – careless or inadvertent false statement in circumstances where care should have been taken Restatement §160. Concealment. Action intended or known to be likely to prevent another from learning a fact is equivalent to an assertion that the fact does not exist.
Contracts I – Professor Goodrich Summer 2006 38 of 41 Restatement §161. When Non-disclosure is Equivalent to an Assertion. A person’s non-disclosure of a fact known to him is equivalent to an assertion that the fact does not exist in the following cases only: (a) where he knows that disclosure of the fact is necessary to prevent some previous assertion from being a misrepresentation or from being fraudulent or material (b) where he knows that disclosure of the fact would correct a mistake of the other party as to a basic assumption on which that party is making the contract and if non-disclosure of the fact amounts to a failure to act in good faith and in accordance with reasonable standards of fair dealing (c) where he knows that disclosure of the fact would correct a mistake of the other as to the contents or effect of a writing, evidencing or embodying an agreement in whole or in part.
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- The Land, Professor Goodrich Summer, www.swapnotes.com Contracts