Reality of Consent 13: Reality of Consent

Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin3Introduction to ContractsThe Agreement: OfferThe Agreement: AcceptanceConsiderationReality of ConsentContractsPART3Capacity to ContractIllegalityWritingRights of Third PartiesPerformance and RemediesContractsPARTReality of ConsentPAETRHC13Necessity never made a good bargain.Benjamin Franklin, 1735Learning ObjectivesExplain five doctrines that permit people to avoid their contracts because of the absence of real consent and identify elements:MisrepresentationFraudMistakeDuress, and Undue influenceContracts induced by mistake, fraud, misrepresentation, duress, or undue influence are generally considered to be voidablePerson claiming non-consent has power to rescind (cancel) the contractPerson claiming non-consent must not act in a manner to ratify (affirm) the contractEffect of The Five DoctrinesA misrepresentation is a false statement and may be negligent (innocent) or fraudulent (made with knowledge of falsity and intent to deceive) Either way, injured party may void (rescind) the contractA person who commits fraud may be liable in tort for damages, including punitive damagesMisrepresentation or Fraud?Innocent or fraudulent misrepresentation:Defendant made an untrue assertion of factIncludes active concealment or non-disclosureFact asserted was material or was fraudulentFact is material if likely to play significant role in inducing reasonable person to enter the contractComplaining party entered the contract because of reliance on the assertionElementsReliance of complainant was reasonableReliance means that person entered the contract because of belief in the assertionFifth element for fraud:Injury Elements (cont.)A mistake is a belief about a fact that is not in accord with the truthMistake must relate to facts as they exist at the time the contract is createdMistake not due to other party’s statementsMutual mistakes may be remedied by reformationMistake in ContractsA unilateral mistake will not render a contract unenforceable unless unequal bargaining position existedSumerel v. Goodyear Tire & Rubber Company in which plaintiffs attempted to exploit defendants’ mathematical or clerical error and failedMistake in ContractsDuress is wrongful threat or act that coerces a person to enter or modify contractPhysical, emotional, or economic harmGiven duress, victim must have no reasonable choice but to enter the contractCabot Corp. v AVX Corp.DuressUndue influence involves wrongful pressure exerted on a person during the bargaining processUnlike duress, pressure is exerted through persuasion rather than coercionKey is the weakness of the person “persuaded”Undue InfluenceThought QuestionYour landlord tells you that you will be evicted from your apartment or your rent must increase by $50 per month because your neighbors complain about your dog. If you agree to the increase, would the contract be void or voidable under the theory of duress?