Business Law Chapter 14

what kind of behavior can undermine a person’s ability to knowingly and voluntarily agree?

behavior that leads a party to agree to wrong info, and behavior that coerces a party to agree

contracts entered into as a result of misrepresentation, fraud, certain kinds of mistake, duress, and undue influence are

voidable

what is the basic idea of misrepresentation?

one of the parties to a contract created in the mind of another party a mistaken impression about an important fact about the contract

what 4 elements must be proved for a successful misrepresentation claim?

a false assertion, that is material, another party justifiably relies upon, to their detriment

what are 3 types of behavior that may qualify as assertion?

making a statement; concealing info; failing to disclose when law imposes a duty of disclosure

what are the 3 situations where a person has a duty to disclose even if the other party does not ask?

a person offers partial info; between people who have a relationship of trust and confidence; info not readily available to other party

misrepresentation only applies to facts, not opinions meaning that

assertion must be knowable and verifiable

what does a claim for misrepresentation not require?

proof that the person knew or should have known their assertion was false

what makes a fact material?

a reasonable person would view it as relevant to their decision to enter in a contract

the requirement of proving justifiable reliance was traditionally based on what two rationales

ensures a casual connection between the misrepresentation + the person’s agreement AND creates a duty for people to take reasonable steps to discover the facts

Recently, courts and the Restatement of contracts have placed less emphasis on what?

the need to prove justifiable reliance

to prove fraud, what are all the things a person must prove?

all elements of misrepresentation, knowledge that an assertion was false, and an intent to deceive

scienter

refers to a person’s mental state, including their intent

the original common law rule caveat emptor/”buyer beware” imposed

no duty to disclose information to others when negotiating a contract

fraud by silence

a person knew and intended that their failure to disclose info would create a false impression upon which the person would (and did) rely on

fraud in the execution

misstatements about the content or legal effect of something usually contained in a form or preprinted contract

fraud in execution can also apply in these two instances

signer was discouraged or prevented from reading contract OR special relationship between parties existed

what are the two remedies for fraud?

rescind the contract OR can affirm the contract and sue for damages under tort law of deceit

Mistake

when one or both parties enter a contract with a false belief about a material fact underlying a contract

what does a claim for mutual mistake require proof of?

a mutual mistake about a fact underlying the contract, fact was material, person seeking to rescind did not assume the risk of the mistake

how can a person expressly assume the risk of mistake in the terms of the contract?

by entering into a contract for something “sold as is”

how can a person impliedly assume the risk of mistake?

entering into a contract with conscious ignorance of certain facts underlying the contract

what does a claim for a unilateral mistake require on top of the three requirements for mutual mistake?

either the other party knew/should have known about the person’s mistake OR enforcement of the contract would be unconscionable

what is the rationale for the first additional requirement for a claim of a unilateral mistake?

to prevent a party from taking advantage of another person’s mistake

duress and undue influence are both terms used to describe

situations in which one party interfered with the other party’s ability to resist entering into the agreement

what two kinds of harms are recognized as wrongful threats?

physical and economic

is the threat of criminal prosecution wrongful if the person has good reason to believe someone committed a crime?

Yes

what makes a threat of civil lawsuit not duress?

if the claim is well-founded

undue influence

exists only when the parties entered into the contract at a time when they had a relationship where one party was dependent on and subject to the control of another person

what two things does a claim for undue influence require?

a relationship of trust/confidence/dominance and unfair persuasion

what are the two types of unfair persuasion?

procedural and substantive

procedural unfairness

suspicious/unusual behavior in how the vulnerable person agreed to the contract

substantive unfairness

suspicious/unusual inequalities in the terms of the resulting contract