CH 13 VOLUNTARY CONSENT

What does voluntary consent mean in contract law?

The parties genuinely and freely agree to the contract.

What four problems can prevent voluntary consent?

Mistake, fraudulent misrepresentation, undue influence, and duress.

What can a party generally do when a contract lacks voluntary consent?

The affected party can choose to carry out the contract or rescind it.

What does it mean to rescind a contract?

To cancel the contract and undo the transaction, generally returning the parties to their original positions.

What does it mean for a contract to be voidable?

The protected party can choose to cancel it; the contract is not automatically invalid.

What is a material fact?

A fact a reasonable person would consider important when deciding whether to enter a contract.

What is a mutual, or bilateral, mistake?

Both parties are mistaken about a material fact or basic assumption underlying their agreement.

What is the general effect of a mutual mistake of material fact?

Either party may generally rescind the contract.

Both parties to a workers' compensation agreement overlook an arithmetic error, and the court corrects the figures. What concepts apply?

A mutual mistake and reformation: both parties overlooked the error, and the court revised the agreement to correct it.

How does reformation differ from rescission?

Reformation corrects the agreement; rescission cancels it.

What can happen when a contract term has two reasonable meanings and each party understands it differently?

The material misunderstanding may allow the contract to be rescinded.

A seller owns a Prius and a Challenger. The buyer thinks the agreement concerns the Challenger, while the seller thinks it concerns the Prius. What concept applies?

Mutual misunderstanding about the subject of the contract, which may allow rescission.

What is a unilateral mistake?

A mistake made by only one party to the contract.

What is the general effect of a unilateral mistake?

The contract normally remains enforceable against the mistaken party.

A seller accidentally offers a jet ski for $1,500 instead of $2,500, and the buyer accepts without knowing of the error. What concept applies?

A unilateral mistake. Under the example in the notes, the seller is normally bound by the accepted price.

What are the two exceptions to the general rule that a unilateral mistake does not allow relief?

The other party knew or should have known of the mistake, or the mistake was a substantial inadvertent mathematical error made without gross negligence.

Why can another party's awareness of a unilateral mistake matter?

A party who knew or should have known of the error cannot necessarily insist on enforcing the mistaken agreement.

What is a mistake of value?

An incorrect judgment about an item's worth or future value.

What is the general effect of a mistake of value?

The contract normally remains enforceable because the parties assume the risk that the item is worth more or less than expected.

How does a mistake of material fact differ from a mistake of value?

A material-fact mistake concerns an important fact underlying the agreement; a value mistake concerns what the item is worth.

Two people sell and buy an old violin believing it has little value. They later learn it is worth thousands. What concept applies under the notes?

A mistake of value, which normally does not allow the seller to rescind.

A seller transfers land and its mineral rights. The buyer later discovers oil. What concept generally prevents the seller from demanding more money simply because of the discovery?

Mistake of value: the transferred rights proved more valuable than the seller expected.

A buyer and seller both believe a stone is quartz, but before delivery they discover it is a diamond. What concept does this illustrate?

A mutual mistake of material fact about the stone's identity, which can support rescission.

Why is mistaking quartz for a diamond different from simply underestimating an item's price?

The quartz example concerns what the object is; underestimating price concerns its value.

What is fraudulent misrepresentation?

An intentional misrepresentation of a material fact that the other party justifiably relies on when entering a contract.

What three elements must generally be shown to rescind a contract for fraud?

A misrepresentation of a material fact, intent to deceive, and justifiable reliance.

What additional element is required to recover damages for fraud?

Harm resulting from the fraud.

How can a material fact be misrepresented?

Through words or actions, including conduct that implies something false.

A seller falsely identifies a sculpture as the work of a famous artist. What type of statement is this?

A misrepresentation of fact, because the artist's identity is a factual claim.

How do statements of fact differ from opinions or predictions in fraud claims?

False material facts can support fraud claims; opinions and predictions generally do not.

A seller says, “This land will double in value next year.” How is that statement generally classified?

A prediction about future value, rather than a statement of an existing fact.

A seller says, “This car will last for years and years.” Why is that generally not enough to establish fraud?

It is generally an opinion or prediction rather than a specific misrepresentation of material fact.

What does scienter mean?

Intent to deceive, often shown by knowledge that a statement is false.

What can show intent to deceive besides knowing a statement is false?

Making an assertion while knowing there is no basis for it.

A job applicant invents experience as a corporate president and business law instructor to get hired. What concept applies?

Fraudulent misrepresentation: the applicant knowingly lies about material qualifications to induce the employer to hire her.

Why can an employer rescind an employment contract obtained through fabricated qualifications?

The employer's agreement was induced by intentional misrepresentations about facts important to its hiring decision.

What is justifiable reliance?

The deceived party actually relies on the misrepresentation and has a reasonable basis for doing so.

Why does knowing the truth defeat a claim of justifiable reliance on a false statement?

A person who knows a statement is false cannot reasonably claim to have been deceived by it.

A buyer relies on an obviously extravagant claim about a pickup truck's fuel economy. Which fraud element is questionable?

Justifiable reliance, because reliance on an obviously unrealistic statement may not be reasonable.

A reputable art dealer knowingly sells a convincing fake as an original, and the collector relies on that claim. What concept applies?

Fraudulent misrepresentation: the dealer intentionally lies about authenticity, and the collector justifiably relies on that material fact.

A person enters a marriage solely to obtain citizenship while implying genuine marital intentions, then disappears after obtaining citizenship. What concept applies in the notes?

Fraud through implied misrepresentation; the deceptive conduct supported annulment.

An insurer promises by email to report a settlement in a particular way, but the signed settlement omits the promise and includes a merger clause. What is the key fraud principle?

The merger clause does not automatically prevent the other party from using the email to try to prove fraudulent inducement.

What is the difference between using evidence to support a fraud claim and proving that fraud actually occurred?

Being allowed to present the evidence gives the party a chance to prove fraud; it does not automatically establish every element.

Why is proof of injury generally unnecessary when seeking only rescission for fraud?

Rescission undoes the transaction rather than awarding compensation for a loss.

How does a mistake differ from fraudulent misrepresentation?

A mistake involves an incorrect belief; fraudulent misrepresentation involves intentional deception that induces agreement.

What is undue influence?

Excessive influence through a relationship of trust or dependence that overcomes another person's free will.

What is the effect of undue influence on a contract?

The contract is voidable by the party whose free will was overcome.

Why does old age or physical or mental impairment alone not prove undue influence?

The key issue is whether the person actually lost the ability to exercise free will when agreeing.

When can a rebuttable presumption of undue influence arise?

When a relationship of trust and confidence exists and the contract is extremely unfair to the dominated party.

What does a rebuttable presumption of undue influence mean?

The circumstances support an initial inference of undue influence, but evidence can overcome it.

What evidence can help rebut a presumption of undue influence?

Full disclosure, adequate consideration, and competent independent advice for the weaker party.

A guardian uses influence over a dependent person to obtain a contract benefiting the guardian. What concept may apply?

Undue influence, if the guardian's pressure overcame the dependent person's free will.

An elderly man depends entirely on his nephew, who threatens to stop caring for him unless he sells land well below market value. What concept applies?

Undue influence, because the nephew exploits a relationship of dependence to obtain an unfair bargain.

What is duress?

A wrongful or illegal threat that forces someone into a contract by overcoming their free will.

What effect does duress have on a contract?

It generally makes the contract voidable and can be used as a defense to enforcement or a ground for rescission.

After a barn burns down, its owner threatens to have another person's son prosecuted unless the parent promises to pay. What concept applies?

Duress, because the threat of criminal prosecution is being used to force the payment agreement.

A person promises to pay because someone threatens physical harm to them or their child. What concept applies?

Duress, because the wrongful threat coerces agreement.

A property owner threatens a good-faith civil lawsuit for damage unless the responsible person pays. How does this differ from duress?

Threatening to pursue a legitimate civil claim is generally not a wrongful threat, so it does not by itself establish duress.

How does undue influence differ from duress?

Undue influence exploits trust or dependence; duress uses wrongful threats to force agreement.

How does fraudulent misrepresentation differ from undue influence?

Fraud obtains agreement through deception; undue influence obtains it by overpowering someone's free will through a relationship.

What is the course policy on laptop use during lectures?

Laptops are prohibited unless Professor Hailey grants an exception. With an exception, they may be used only for taking notes.

What is the course policy on cell phone use during lectures?

Cell phone use is prohibited except for approved audio recording for personal study and taking pictures of slides.

What permission is required to audio-record a lecture?

Professor Hailey must approve the recording, and it must be for personal study only.

What is the course policy on photographing slides?

Cell phone pictures of slides displayed on the screen are allowed.

What is the course policy on AI use for assignments?

AI use is prohibited except for basic Grammarly or spell-check functions.

What must a student do to receive assignment questions?

Be present to hear the questions or email the professor a university-approved reason for being absent.