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MGMT 212
Contract Law: Genuineness of Assent (ch 14)
20
Management
Undergraduate 2
06/17/2009

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Cards

Term
Mistakes (two kinds)
Definition
Error or unconscious ignorance or forgetfulness of a past or present material fact to a contract. 1.) Mistake of face. 2.) Mistake of value.
Term
Mutual (Bilateral) Mistake of Fact
Definition
In general, the contract is voidable at the option of either party. If a term in the contract is subject o more than one reasonable interpretation and the parties each attach materially different meanings to the term, the mutual misunderstanding may allow the contract to be rescinded.
Term
Raffles v. Wichelhaus
Definition
R & W were merchants, one Indian and one British. They communicated through telegram. W is buying cotton from R. R says cotton is coming on "Peerless" ship. There are two ships named "Peerless," each departing at different times. Bilateral/mutual mistake of fact.
Term
Unilateral mistakes of fact
Definition
Only one party made the mistake. Not usually a basis for rescission. Exceptions: 1.) The other party knew of the mistake or should have known of the mistake and failed to correct the mistake. 2.) The mistake was made because of an inadvertant mathematical error and the mistaken party was not grossly negligent. // If one party simply misstates the price and the other party accepts, there is no basis for rescission.
Term
Mistakes of value
Definition
Never basis for rescission of contract. Future market value or quality is at question. // A sells land & mineral rights for $100,000 to B. Turns out there is oil under the land and it's actually worth $1,000,000. A cannot have the contract revoked. This is a mistake of value.
Term
Fraudulent misrepresentation, 3 elements of fraud
Definition
A contract is voidable if a party was damaged by being induced to enter into a contract b/c he reasonable relied upon a false representation of a material fact. // 1.) Misrep. of material fact. 2.) Intent to deceive. 3.) Justifiable reliance by innocent party.
Term
(1.) Misrepresentation
Definition
Misrepresentation of a past or present fact was made. Misrepresentation can be words or conduct, including concealment. In general, misrepresentations of future fact, predictions, promises, or opinions (except those made by experts) are not treated as misrepresentation of fact.
Term
Vokes v. Arthur Murray
Definition
Lady taking dance lessons. Was told by teacher she had "great poise and dancing ability," yada yada. These representations made by D were false and not held to be simple opinions b/c the teacher is an "expert."
Term
Misrepresentation of law
Definition
There is a presumption that people know the law of the state in which they reside; a misrepresentation of state/local law doesn't entitle a contracting party to relief. UNLESS the misrepresenting party is in a profession that is known to require greater knowledge of the law than the average person.
Term
Misrepresentation by silence
Definition
In general, there is no duty to inform a contracting party of facts and a party to contract may remain silent. Exceptions: seller must disclose serious latent defects which ordinarily aren't discoverable but which may cause a serious potential problem to buyer.
Term
(2.) Intent to deceive
Definition
1.) party knows a fact that isn't stated. 2.) Party says or implies that a statement is made on some basis, such as personal knowledge or investigation, when it isn't. 3.) Party makes a stmt with reckless disregard or indifference to its truth or falsity.
Term
Sarvis v. Vermont State Colleges
Definition
Sarvis convicted of financial fraud, 4 years in prison. Applies for a teaching job at Vermont State College. His app said he was "semi-retired" for previous 4 years. Hired to teach ethics. When they found out, they fired him. He sued, but lost cuz he committed fraud.
Term
(3.) Reliance on the misrepresentation
Definition
Reliance must be such that a reasonable person would have been justified in relying upon the misrepresentation. Misrepresentation relied upon must be an important factor in inducing the party into the contract. Reliance is not justifiable if the truth would be obvious to a reasonable person.
Term
(4.) Injury to innocent party
Definition
Contract would not have been formed or would have been more valuable if the representation had been true. In some states, in an action for rescission, actual damages need not be established. A court may award punitive/exemplary damages in addition to compensatory damages.
Term
Nonfraudulent Misrepresentation (two kinds)
Definition
Innocent Misrepresentation, Negligent Misrepresentation
Term
innocent misrepresentation
Definition
Party who relied on the misrepresentation may rescind the contract. usually can't seek damages.
Term
Negligent misrepresentation
Definition
A person who makes a negligent misrepresentation is considered to have intentionally made a fraudulent misrepresentation. Equal to scienter; treated as fraudulent even though it was not purposeful. Can seek damages.
Term
Undue Influence
Definition
When a party, who is in a dominant position b/c of a CONFIDENTIAL RELATIONSHIP, secures an unfair advantage in a contract with a weaker, dominated party. Contract is voidable and may be disaffirmed by the dominated party. There is a rebuttable presumption of undue influence when parties are in a familiar or fiduciary relationship based upon trust and confidence, and the contract is extremely unfair to the dominated party. Weaker party gets unfair deal; it's presumed the undue influence happened and dominant party must prove it didn't.
Term
Duress
Definition
NO CONFIDENTIAL RELATIONSHIP. If a party is forced into entering into a contract by threatening a wrongful act (extortion/blackmail), the contract is voidable. // Bodily injury; criminal prosecution of innocent party (not civil litigation); Economic need isn't duress unless party exacting high price is also party creating the need.
Term
Adhesion contracts and unconscionability
Definition
Adhesion contract: one party has overwhelming power, no negotiations allowed (take it or leave it). Will not be enforced if enforcement would be unfair or oppressive and unconscionable.
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