GENUINENESS OF ASSENT 4310-4315

 

 

•     A party who demonstrates that he or she did not genuinely assent to the terms of a contract may avoid the contract. Genuine assent may be lacking due to mistake, fraudulent misrepresentation, undue influence, or duress.

 

•     As was true with contracts entered into by persons lacking contractual capacity, contracts lacking genuine assent are voidable, not void.

 

MISTAKE 4314

 

•     Mistake: The parties entered into a contract with different understandings of one or more material fact(s) relating to the subject matter of the contract.

 

•     Unilateral Mistake: A mistake made by one of the contracting parties. Generally, a unilateral mistake will not excuse performance of the contract unless:

 

(1)   the other party to the contract knew or should have known of the mistake; or

(2)   the mistake is one of mathematics only.

 

•     Mutual Mistake of Fact: A mistake on the part of both contracting parties as to some material fact. In this case, either party may rescind.

 

•     Mutual Mistake of Value: If, however, the mutual mistake concerns the future market value or some quality of the object of the contract, the contract can normally be enforced by either party.

 

FRAUDULENT MISREPRESENTATION 4310

 

 

•     When an innocent party consents to a contract with fraudulent terms, he or she may usually avoid the contract, because he or she did not genuinely assent to the fraudulent terms.

 

•     Elements of Fraudulent Misrepresentation:

 

(1)   A misrepresentation of material fact was made,

(2)   with the intent to deceive,

(3)   on which the innocent party justifiably relied

(4)   resulting in injury to the innocent party.

 

•     Most courts do not require proof of an injury to the innocent party if the only remedy sought by the innocent party is rescission of the contract -- that is, returning the parties to their pre-contractual positions.

 

•     However, in order to recover damages, it is universally held that the innocent party must prove injury as a result of the misrepresentation.

 

TYPES OF MISREPRESENTATIONS

 

 

•     Predictions and Expressions of Opinion: Generally, these will not give rise to an actionable misrepresentation, unless the person making the statement has a particular expertise and knows or has reason to know that the listener intends to rely on the statement.

 

 

•     Misrepresentation by Conduct: The conduct of a party -­particularly a party’s concealment of some material fact from the other party -- will support a claim of misrepresentation.

 

 

•     Misrepresentation of Law: Generally, this will not support a misrepresentation claim, unless the speaker is a member of a profession that is commonly known to require greater knowledge of the law than possessed by the average citizen.

 

 

•     Misrepresentation by Silence: Generally, neither party to a contract has a duty to come forward and volunteer facts unless the other party asks. However, the common law recognizes exceptions where a duty to speak exists, for example, where there exists a serious defect or serious risk of injury. In addition, some statutes create duties to speak not otherwise present under common law.

 

 

INTENT AND RELIANCE

 

 

•     Scienter: A defendant acts with the intent to deceive if he:

 

(1)   knows a statement to be false,

 

(2)   makes a statement he reasonably believes to false,

 

(3)   makes a statement recklessly, without regard to its truthfulness or falsity, or

 

(4)   implies that a statement is made on the basis of information that he does not possess or on some other basis on which it is not, in fact, based.

 

 

•     Reliance: The plaintiff must have acted based on (although not necessarily solely based on) the defendant’s misrep­resentation. Moreover, in some jurisdictions, the plaintiff’s reliance on the misrepresentation must be reasonable.

 

OTHER MISREPRESENTATIONS

 

 

•     Innocent Misrepresentation: A statement made by a person, believing it to be true, that actually misrepresents some material fact.

 

>     An innocent misrepresentation results, in essence, in a mutual mistake of fact. Therefore, the only remedy to an injured party is generally rescission of the contract.

 

 

•     Negligent Misrepresentation: An untrue statement made by a person believing it to be true who failed to exercise reasonable care in determining its truthfulness and/or failed to use the skill and competence required by her business or profession.

 

UNDUE INFLUENCE AND DURESS 4313

 

 

>     Undue Influence arises from relationships in which one party can influence another party to the point of overcoming the influenced party’s free will.

 

•     The essential feature of undue influence is that the party being influenced does not, in reality, enter into the contract of his or her own free will.

 

 

>     Duress: Forcing a party to enter into a contract because of the fear created by threats. While a party forced to enter into a contract under duress may choose to perform the contract, duress is grounds for cancellation, or rescission.

 

 

ADHESION CONTRACTS

 

 

•     Adhesion Contract: A contract written exclusively by one party (the “dominant” party, usually the seller or creditor) and presented to the other party (the “adhering” party, usually the buyer or borrower) on a “take-it-or-leave-it” basis, such that the adhering party has no opportunity to negotiate the terms of the contract.

 

•     To avoid enforcement of a contract based on adhesion, the adhering party must show that:

 

(1)  the parties had substantially unequal bargaining positions and

 

(2)   enforcement against the adhering party would be

manifestly unfair or oppressive.