Assent

Genuineness of Assent A closer look at the first required element of a K... AGREEMENT Quick Review of Agreement An offer made by one party, assented to (accepted) by another party  Manifestation of mutual assent to the same bargain  Mirror Image Rule   acceptance must match offer exactly  detailing the Honda? Legal Reality of Consent   K may be subject to avoidance (rescission) because of lack of real consent There is a problem with the agreement if it was obtained through:      misrepresentation (non-fraudulent) fraud mutual mistake duress undue influence If you‟re assent wasn‟t genuine...  ...you can   enforce the K  why would you want to? disaffirm an action for rescission  sometimes you can get damages   and if you‟re challenged, use defense of lack of genuineness of assent MISTAKE.... ooops!  “occurs in the formation of a K where the party or parties to the K believe that a past fact which is material to their transaction exists when in reality it does not, or believe it does not exist when in reality it does” Distinguish between...  unilateral and bilateral   mistakes as to material facts mistakes of judgment as to value or quality which warrant K rescission?  Unilateral v. Bilateral Mistakes  Unilateral Mistake  Only one party to the K is mistaken as to a material fact  Generally, does not afford mistaken party relief  Exceptions  other party knows or should have known of mistake  inadvertent math error, without gross negligence  Bilateral Mistake  Determine what mistake is about...  If about a material fact:  terms  identity of parties  existence, nature, quantity of the subject matter  Peerless  ...then mistake allows rescission by either party at any time Bilateral (Mutual) Mistakes in Value  Value is established at the moment of agreement...  what is value subject to?  Mistake as to value almost never justifies avoidance of the K… why?  but... if mistake in value includes a mistake as to a fact, K may be avoided  barren cow; Mestrovic deal; Stradivarius  Mistake in value d/n/e mistake in fact!!! Misrepresentation (non-fraud) innocent misrepresentation of a material fact upon which a party justifiably relied as an inducement to enter a K to their detriment...  huh?  “The Honda only has 25,000 miles on it”  Voidable... no tort remedy available...  Should have known better....  Negligent Misrepresentation “Sure, the „89 Honda‟s only got 20,000 miles on it...”  ... sold by a used car dealer?...  Culpable ignorance of the truth   you might have a duty to know...  Essentially treated as fraudulent misrepresentation, even though it wasn‟t intentional... FRAUD!!! It‟s a tort  What do you need to show it occurred?  Misrepresentation of a material fact  Intent to deceive (scienter)  Justifiable reliance on the misrepresentation  ... and to recover damages, must show some injury  Misrepresentation of a Material Fact In words or action (conduct)  Concealment (either by action or inaction)  There might be an expectation that you will use due care and judgment  Predictions, sales puffery, opinions are not normally subject to fraud claims   subjective v. objective Misrepresentation....  But wait...  expert opinions  unfair advantage  novice relying on expert  e.g., Arthur Murray Dance School case  Misrepresentation of Law  ordinarily, no relief  Why?  unless relying on an expert... brokers, etc. Can you misrepresent by saying nothing?  No duty to inform contracting party of facts.... except • • • • • latent defects (not normally discoverable) causing danger (defined as injury or detriment) seller w/ superior knowledge may not conceal facts knowing other party lacks knowledge previous misstatement require correction fiduciary or confidential relationship sometimes, statutes require disclosures... e.g., prospectus Scienter • “Intent to deceive”     means guilty knowledge knowledge of falsity reckless - assertion of a fact, when party asserting it had no reason to do so you might have duty to know truth... making statement with no basis for belief might provide requisite scienter for finding of fraud... Justifiable Reliance  Reliance on the misrepresentation must be based on a justifiable reason  misrepresentation must also be an important factor in inducing the party to enter into the K  why?  subjective test (Do not use reasonable person test. Question is not “should it have happened?”, but “did it happen?”) Injury to Innocent Party Some courts don‟t require injury be shown if only rescission of K is sought  But... for damages to be recovered, all courts require a showing of injury  What‟s the remedy?  benefit of the bargain  sometimes, punitive or exemplary damages  Differentiating Fraud and Misrepresentation  Common elements Misrepresentation of a fact  Materiality of fact  Justifiable reliance  Injury or detriment   Distinguishing elements knowledge of falsity  intent to deceive  justifiable silence (no = fraud)  Two Types of Fraud  Fraud in Inception (Fraud in Execution)  occurs if the person is deceived as to the nature of his act, and does not know what he is signing  K is void    Fraud in Inducement  innocent party knows what she is signing, or knows the stated purpose of the K, but has been fraudulently induced to enter into K  K is voidable at the option of the innocent party  oil well... Production capacity; no liens on property for sale autograph example immigrant lacking knowledge of English Undue Influence  occurs when the dominant party in a confidential or fiduciary relationship secures an unfair advantage in a K with a dominated party  arises where there is some kind of special relationship minor and guardian  incompetents  elderly  Undue Influence  “To what extent was the transaction induced by domination of the mind?”  examination of mental state to indicate if transaction should be deemed unfair  Rebuttable Presumption in fiduciary and confidential relationships... rebut by showing:    full disclosure adequate consideration competent independent advice was received Duress   Any wrongful threat made toward a person whereby that person is forced by fear to enter a K against his will Assent induced by fear of:    bodily harm (to self or family) criminal prosecution (what about civil?) destruction of property  Subjective Test: did threat actually induce assent on the part of person claiming to be victim? Duress v. Undue Influence Don‟t confuse them!!! Coercion v. Persuasion (need relationship) Unconscionable Clauses     Superior Bargaining Position Unfair advantage K for sale of goods (b/c its in the UCC) Examples:    Adhesion Ks... broad exculpatory Ks; strong arm terms.... unreasonably small or large liquidated damages terms that attempt to eliminate product liability... Adhesion Contracts  Not per se unenforceable  What must be shown? Substantially unequal bargaining power  Enforcement is manifestly unfair   How do we show it, and what are the potential problems? Problem 14-1  Undue Influence  arises from special kinds of relationships... one party greatly influences other... overcoming free will to what extent was the transaction induced by a domination of the mind or emotions of the person in question?  Questions to ask:  Problem 14-1  Voidable K  Is there Duress? likely not...  need coercion for duress.... forcing a party to enter into a K under fear of threat  Problem 14-2  Elements of Fraudulent Misrepresentation misrepresentation of a material fact  intent to deceive  justifiable reliance  for damages... must show injury   Is a statement of opinion as to future event a misrepresentation? Problem 14-2  Justifiable Reliance  Who has the books? Which elements are missing?  Failure to disclose  Was information reasonably expected to be discovered?  Problem 14-2  Questions: Duty to disclose? Non-fiduciary relationship?  Prediction of future profits = opinion or a statement of fact?  Was there justifiable reliance by Tanner  books were available to Tanner  can Tanner reasonably find out about overpass?  Problem 14-3  A) Bilateral mistake.... value question or identity question?  Both mistaken as to the Subject Matter... K can be rescinded by either  B) K as a result of threat of criminal prosecution = duress....  voidable regardless of guilt Problem 14-4  Elements of Fraudulent Misrepresentation? misrepresentation of a material fact  intent to deceive  justifiable reliance  for damages... must show injury   What‟s missing? Problem 14-5 Was mistake by Lanci known to Metropolitan or should it have been?  Basic assumption under which the contract was made? 