Guardianship:
A contract made by the ward (individual under guardianship) is void.
Contracts made by the guardian on behalf of the ward are enforceable against the ward as if the ward had signed them.
Guardianship disempowers the ward, removing their ability to enter contracts independently.
Guardians act as fiduciaries, placing the interests of the ward above their own.
Any misconduct by the guardian constitutes a breach of trust.
Mental Illness or Defect:
Refers to conditions that impair decision-making abilities and are recognized by mental health professionals.
These conditions may not always warrant a complete loss of decision-making capability, leading to a contract being voidable if the mental defect was severe enough.
Key considerations for evaluating incapacity:
Whether the individual suffered from a mental illness.
Whether they could understand the nature or consequences of the contract.
Whether the illness caused this inability.
Whether the other party knew of the condition.
A person may retain the ability to engage in simpler contracts despite being impaired in others.
Definition: Misrepresentation occurs when one party is misled regarding a contract, which can negate assent and render a contract void or voidable.
Types of Misrepresentation:
Fraud in the Execution: Where deception prevents the awareness that a contract is being signed.
Fraud in the Inducement: Misrepresentations about the subject matter leading to mistaken valuations.
Misrepresentation extends beyond fraud to include innocent misstatements.
Elements of Misrepresentation:
A misrepresentation must have occurred.
It must be either fraudulent or material.
The misrepresentation must have induced the assent of the deceived party.
There must have been circumstances that justified reliance on the misrepresentation.
To support a misrepresentation defense, an assertion must be:
Fraudulent: Made with intent to deceive.
Material: Significant enough to affect the contract.
Material Assertions can induce assent if they:
Are likely to influence a reasonable person's decision.
Are known by the speaker to significantly influence the recipient's decision.
Case Examples:
Halpert v. Rosenthal: Court allowed rescission because the seller believed his misrepresentation about the property being free of termites was material.
Definition: Mistakes concerning facts at the time the contract is made can be grounds for defense.
Types of Mistakes:
Unilateral Mistake: Only one party is mistaken, often not a ground for rescission unless the mistake is known to the other party.
Mutual Mistake: Both parties are mistaken about a basic assumption of the contract, which can warrant rescission.
Basic Assumption Mistakes: Must relate to essential elements of the contract; peripheral mistakes do not allow for rescission.
Material Effect on the Exchange: A mistake must materially affect the exchange to warrant rescission, causing an imbalance that is unfair to enforce.
Key Cases:
Wood v. Boynton: Mistaken belief about the value of an item resulted in significant disparity between what was exchanged and what was received.
Lenawee County Board of Heath v. Messerly: Misunderstanding the condition of property led to a significant misvaluation affecting contract enforceability.