; Duress and Undue Influence
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Duress and Undue Influence


  • pg 1
									 Chapters 7 and 8
    Genuine Assent and
Consideration in Contract Law
Genuine Assent
   Chapter 7
    Donald Drapkin Awarded $16M

► Discussing  his lawsuit against former friend
  and colleague Ronald Perleman for breach
  of contract, with Donald Drapkin, former
  MacAndrew & Forbes vice chair.
► http://video.cnbc.com/gallery/?video=3000
► http://video.cnbc.com/gallery/?video=3000
             Six Requirements of a
            Legally Binding Contract
1.   Offer and Acceptance
      1. Offer: intent, communicated, terms
      2. Acceptance: Come from the offeree, mirror image rule, Be communicated to the
2.   Genuine Assent
      1. No deception
3.   Legality
      1. follow the Law/ cannot be based on any illegal actions
4.   Consideration
      1. Agreement must involve both sides receiving something of value
5.   Capacity
      1. Both Parties must be able to perform contract for themselves - Cannot “outsource”
6.   Writing
      1. As a general rule, it is wisest to have the terms written in understandable language
      2. Statute of Frauds – lists Contracts that must be in writing to be enforced (By State)
       Genuine Assent
►True  and complete intent to
 enter into a contract
       means agreement, approval or
► Assent

Without it, contracts are
 typically voidable
    Federal Lawsuit Alleges Infringement of
    Minors' New York Right of Publicity by
     Facebook "Like" and "Friend Finder"
►   Read article:

►   Be able to describe the issue of Assent in this article
Voidable – if the injured
 party desires, they can
 cancel their obligation
 and get back what they
 have already put in
►Rescission  – when the
 injured/forced party
 cancels their obligation of
 a contract
► In contract law, rescission has been
  defined as the unmaking of a contract
  between parties.
► Rescission is the unwinding of a
► This is done to bring the parties, as far as
  possible, back to the position in which they
  were before they entered into a contract
 Ratification:      suggesting you intend to be bound by

► Collective   bargaining agreements
► Example:
   The Union authorizes one or more people to
    negotiate and sign an agreement with
   A collective bargaining agreement can not
    become legally binding until the union members
    ratify the agreement. I
   f they do not approve it, the agreement is of no
    effect, and negotiations resume.
            Unfair persuasion
► refers to a form of undue influence by which a
  stronger party succeeds over the weaker through
  seriously impairing weaker party’s free and
  competent exercise of judgment.
► When compared to duress and misrepresentation,
  the effects brought by undue persuasion are less
► If a contract is obtained by undue influence, the
  document is invalid;
►Occurs when one party
uses improper threat or
act to obtain a contract

►Creates a VOIDABLE
                  Deion Sanders Divorce

        Should the Prenup
          be thrown out
        because of Duress?
    Types of Duress
1. Threats of illegal conduct
2. Threats to report crimes
3. Threats to sue
4. Economic threats
   Undue Influence
►Occurs  when one party is
in a position of trust and
wrongfully dominates and
deceives the other party
►VOIDABLE   by the victim
  Validity and Contesting a Trust /
           Undue Influence
► http://www.youtube.com/watch?v=cL65pCX

► http://www.youtube.com/watch?v=Nm0IsU
     & Fraud
         The People’s Court:
► http://www.youtube.com/watch?v=bpcgAGr
  Unilateral Mistake
►Occurs  when only one
party holds an incorrect
belief about the facts of
a contract
Mutual (bilateral) Mistake
►Both  parties have an
 incorrect belief about an
 important fact of a contract
►Also known as “Mutual
►Contract is VOID
Material Facts are the
 important facts that
 influence a persons
 decision to enter into a
Two types of Misrepresentation
►Innocent  Misrepresentation

►Fraudulent    Misrepresentation
Requirements of Misrepresentation

1.   Untrue statement is one of
     fact or active concealment
2.   Statement is material to the
3.   Victim reasonably relied on
►Based   on misrepresentation
►Must   be proven to show…
 All elements of misrepresentation
   Remedies for Fraud
►Rescission   (cancel the contract)
  Recovery from loss

►Punitive   Damages
  Forms of punishment (above and
   beyond recovery from loss)
  5 Types of Contracts in Business

► Many types of
 contracts are used in
 business, many of
 them specific to a
 particular industry.
    Independent Contractor

 An independent
  contractor agreement is
  an agreement between
  two independent parties
  to perform certain
 The independent
  contractor has much
  greater freedom and is
  subject to far less
  supervision than an
► Unlike an employee, an independent contractor
  does not work regularly for an employer but works
  as and when required, during which time he or
  she may be subject to the Law of Agency.
► An independent contractor is An independent
  person, business, or corporation that provides
  goods or services to another entity under terms
  specified in a contract
► Independent contractors are usually paid on a
  freelance basis.
 Examples of occupations where independent
    contractor arrangements are typical:

► Accountant               ►   Nurse
► Author                   ►   Personal trainer
                           ►   Pool Maintenance Person
► DJ
                           ►   Private investigator
► Engineering Consultant   ►   Private security
► Entertainer              ►   Professional athlete
► Gardner                  ►   Real estate agent
► General contractor       ►   Short term university instructor
                           ►   Stock broker
► Hair Stylist
                           ►   Talent agent
► Lawn care worker         ►   Tattoo artist
► Lawyer                   ►   Taxi Driver or limousine driver
► Massage therapist
► Doctor                   ►   Truck Driver
                           ►   Tutor
           Licenses and Permits

► Before  you start a business as an independent
  contractor, you will want to obtain the professional
  licenses and permits that are required for your
► Each professional organization has licenses and
  permits that are required, as does each city/state
► This license is sometimes called a business license
► Protects you Personally from being sued, only
  the Business can be sued!
     Employment Agreements

► Employment    agreements set out the terms
  of the relationship between employer and
► It should include provisions that define job
  duties, work rules, duration of employment
  and grounds for termination.
► Employed at Will
► Findan article about an employee fired for
 violating their employment contract
  Confidentiality Agreements

► important in certain industries, such as the
  software and finance industry, where employees
  have access to company trade secrets.
► Confidentiality agreements may be executed
  between a company and its employee, between a
  company an an independent contractor and
  between two companies doing business together.
     Non-compete Agreements

►A  non-compete agreement prevents an
  employee or independent contractor from
  working for the employer's competitor,
  sometimes for years after the employment
  or contract relationship has ended.
► State laws provide limits on the duration
  and geographic scope of non-compete
              Sales Contracts

► Sales contracts are generally executed between
  two companies when one purchases goods from
  the other.
► A written agreement is required if the value of the
  transaction is at least $500.
► In many cases, sales transactions are evidenced
  only by the exchange of letters, emails and
► Under the Uniform Commercial Code, a valid
  contract can be created in this way even if there is
  no single written agreement.
 Download and Complete the
 worksheet regarding types of
Business Contracts and specific
   lawsuits (filed/pending)
   Chapter 8
Consideration – what a
 person demands and
 generally must receive
 in order to make a
 contract legally
3 Requirements of Consideration

1.   Each party must give an
     act, forbearance, or
     promise to the other party

Forbearance – refraining
  from doing something you
  have the right to do
3 Requirements of Consideration

2. Each party must trade what
  they contribute to the

3. What each party trades
   must have legal value
 ** Consideration
  distinguishes a
contractual promise
from a promise to
   give a gift **
Gift – transfer of ownership
 without receiving anything in
  generally not legally enforceable

Donor – gives
Donee – receives
  After gift exchange occurs,
   transaction becomes binding
Nominal Consideration – token
 amount identified in a
 written contract when parties
 either cannot or do not wish
 to state the amount
 Ex. $1 and other valuable
 consideration in exchange for a car
     Illusory Promises
►A contract clause that allows
 you to escape legal obligation

Ex. I promise to paint your
 house…if I have time.
    Termination Clauses
►Gives  power to withdraw from a
 contract if certain circumstances
 change, or after the passage of
 a certain length of time
  Exceptions must be defined
Output and Requirement Contracts

 Output Contract – A buyer’s
  agreement to purchase all of a
  particular producer’s
 Requirements Contract – A
  seller’s agreement to supply all
  of the needs of a buyer
      Existing Duty
A promise to do something that
 you are already obligated to
 do by law or prior contract
 does not serve as

This is called…
  Existing Public/Private Duty
       Liquidated Debt
Where an agreement is made
 that a debt and the true amount
 of that debt exists and must be

►   All debt must be recovered
  Unliquidated Debts
Where an agreement cannot
 be reached as to the
 amount of debt owed
►Accord   and Satisfaction
 - a compromise must be
Once an agreement is
 reached concerning
 unliquidated debt, this
 is called a release
 Composition of Creditors
When a group of creditors
 cooperatively agree to accept
 less than what they are
 entitled to in exchange for
 the debtor not filing
   Past Performance
►An act that has already been
performed cannot serve as
consideration for an
immediate or future contract
 This is known as past
   When is
not Required?
1. Promisesto Charitable
2. Promises   covered by the
   ► Firm Offers
   ► Modifications
3. Promises barred from Collection
 by Statute
Statute of Limitations
  A specific time limit for bringing a
Debts Discharged in Bankruptcy
  Some debt lost in bankruptcy can
   still be reinstated by a promise of
   the debtor
4. Promissory Estoppel
  Prevents a promisor from
  stating in court that they
  did not receive
  consideration for their
Requirements for P.E.
1.Must forsee reliability
 on the promise
2.Promisee does act in
 reliance of the promise
3. Promisee would suffer
  economic loss
4. Injustice can be
  avoided only by
  enforcement of the

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