Chapter 11- Conduct invalidating contracts

Question 1

What are 2 types of duress?

Answer 1

Physical and mental

Question 2

What are the 2 types of mental duress?

Answer 2

mental coercion

social

Question 3

What is undue influence?

Answer 3

1. unfair persuasion
2. by a person in a dominant position
3. based on a confidential relationship
   (voidable contract)

Question 4

What is duress?

Answer 4

Any wrongful/unlawful act or threat that overcomes the free will of a party

Question 5

What is physical duress?

Answer 5

an immediate threat of physical violence (compulsion)

ex. gun to head (contract is void)

Question 6

what is mental duress?

Answer 6

leaves victim with no reasonable alternative, explicit or inferred (contract is voidable)
ex. construction work company vs. phone company

Question 7

What are 3 factors in determining undue influence?

Answer 7

1. whether dominant party made full disclosure of all relevant info known to them.
2. whether consideration was adequate
3. whether dependent party received competent and independent advice before completing transaction

Question 8

What is mistake?

Answer 8

a belief that is not in accordance with the facts

Question 9

What are the 3 Ms?

Answer 9

Mistake, Mutual, Material

Question 10

What are 2 types of Mistake?

Answer 10

Mutual (bilateral)- voidable

unilateral- ex: make a contract for a ship they both knew about vs. make contract based on facts known to both parties

Question 11

What is fraud?

Answer 11

it prevents assent from being knowingly given

Question 12

What are 2 types of fraud?

Answer 12

execution: misrepresentation that deceives as to very nature of contract (void)
inducement: any act that compels a person to enter into a contract (voidable)

Question 13

What are 5 elements of fraud in the inducement?

Answer 13

1. misrepresentation
2. fact
3. material
4. knowingly made with the intention to deceive (scienter)
5. justifiably relied upon to detriment of defrauded party

Question 14

What is a fiduciary?

Answer 14

a person in a confidential relationship who owes a duty of trust, loyalty, and confidence to another

Question 15

What is non-fraudulent misrepresentation?

Answer 15

Material, false statement, induce another to rely justifiably, without scienter

Question 16

What are the 2 types of non-fraudulent misrepresentation?

Answer 16

negligent and innocent

Question 17

To obtain relief for non-fraudulent misrepresentation, what must you have?

Answer 17

All other elements of fraud must be present AND misrepresentation must be material

Question 18

What is scienter?

Answer 18

Knowledge of falsity with intention to deceive. “guilty knowledge”

Question 19

If only 1 party is mistaken, can relief still be granted?

Answer 19

Typically, NO. contract is for set of facts known to both parties.

Question 20

What is a negligent misrepresentation?

Answer 20

a false representation that is made without due care in ascertaining its truthfulness

Question 21

What is an innocent misrepresentation?

Answer 21

a false representation made without the knowledge of its falsity but with due care.