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1
Q

Unilateral Mistakes of Fact

A

a mistake that occurs when one party to a contract is mistaken as to a material fact.

2
Q

Are unilateral mistakes of fact rescinded?

A

The general rule is contracts will not be rescinded by the courts

3
Q

John wants to sell his car for $17,250, but his email on the deal has a price of: $12,750.

A

Mistake was definitely made, but the court would say this was enforceable. (Unilateral Mistake of Fact)

4
Q

John wants to sell his car for $17,250, but his email on the deal has a price of: $12,750.

2 exceptions

A
  1. Mary knew or should have known of John’s mistake. (ex: if Mary knew that John turned down an offer of $16,000 yesterday.)
  2. Mathematical miscalculation
5
Q

Exceptions to Unilateral Mistake of Fact.

A

1). The other party knew of the mistake or should have known of the mistake and failed to correct the mistake; or
2). The mistake was made because of an inadvertent mathematical error and the mistaken party was not grossly negligent.

6
Q

Mutual (Bilateral) Mistakes of Fact

A

A mistake that occurs when both parties to a contract are mistaken about the same material fact.

7
Q

In general, the mutual mistake of fact contract is…

A

voidable at the option of either party.

8
Q

If a term in the contract is subject to more than one reasonable interpretation and the parties each attach materially different meanings to the term, the mutual misunderstanding may…

A

allow the contract ot be rescinded

9
Q

Raffles v. Wichelhaus

A

Written communications happen with a telegram. English merchant who has been for the past 10 years getting cotton from US cotton farmers. US ports are closed because of the civil war. He has to do business with someone else go get cotton… He finds a cotton farmer in Bombay, India.

A shipment of cotton is purchased by a merchant in England. The seller is a cotton farmer from Bombay, India. The communication is via telegram which reads: “to arrive Peerless.” The ship is known to both the buyer and the seller as “Peerless.” Peerless arrives empty in England. The merchant thinks the contract has been breached, so goes out to find other cotton from somewhere else. 2 months later “Peerless” shoes up with the cotton. Court calls for the rescission of the contract. The merchant did not have to pay for the cotton. Mutual Mistake (2 parties attaching material different meanings to the same thing)

10
Q

Mistakes of Value

A

more like an opinion, subjective, variable depending upon a variety of factors that we have no control over

11
Q

What is a common example of mistakes of value?

A

Real Estate

12
Q

Mary goes to a garage sale. She finds a very old violin in excellent condition. The seller only wants $200 for it. Mary buys it. Seller is talking to an antique dealer and figures out the violin is worth $1,000.

A

The seller cannot get the violin back or get more money for it.

“excellent condition” and “very old” are relative terms
subjective descriptors

13
Q

NO EXCEPTION TO MISTAKE OF VALUE! NEVER RESCISION!

A

NO EXCEPTION TO MISTAKE OF VALUE! NEVER RESCISION!

14
Q

Simmons finds a stone in his pastures. He believes that stone to be a quartz worth about $10 and contracts to sell the stone to Jenson, who also believes the stone to be a quartz. Just before delivery of stone, it is discovered that the stone is really a diamond worth over $10,000. Can Simmons get out of the contract with Jenson?

A

Mistake of fact, Simmons can get out of the contract. Mistake of fact affects the value. But, it’s still a mistake of fact.

15
Q

I contract to sell a piece of land. The contract includes both the surface and the mineral rights to the land. 6 months after the land has been sold, the buyer strikes oil. Can I sue to get more money for the land claiming mistake?

A

NO. The seller should have done more research, or reserved the mineral rights. (Most times… land is value)

16
Q

Fraudulent Misrepresentation.

A

A contract is voidable (seeking rescission) if a party was damaged by being induced to enter into a contract because he or she reasonably relied upon a false representation of a material fact. Typically seller, but doesn’t have to be..

17
Q

Elements of Fraud

A

– misrepresentation of a material past or present fact (by the defendant)
– intent to desceive AND (by the defendant)
– Justifiable reliance on the misrepresentation (and they the plaintiff relied)

18
Q

The art collector contracts to buy a Van Gogh original painting for $600 million from a reputable art dealer. The art dealer knows the art is a VERY cleaver fake, but represents the art as the original. Art collector pays the high price and then has the art appraised for insurance purposes only to find out it is a VERY CLEVER fake. Can the art collector get out of the contract by claiming fraud?

A

Yes.

19
Q

Misrepresentation

A

A misrepresentation of a material, past or present, fact was made.
The misrepresentation can be words or conduct, including concealment.

20
Q

In general, representations of future facts, predictions, promises, opinions (except those made by ______________________________), and puffery are not treated as representations of fact.

A

experts, who have superior knowledge

21
Q

Experts can be actionable for fraud. Who classify as experts?

A

CPAs, attorneys, brokers, real estate agents…

22
Q

Arthur Murray is a dance studio franchise, sending out invitations to dance parties. Vokes gets an invitation and goes. Vokes is praised for her dancing by a dance instructor, so she starts taking dance lessons (like 2,000 hours worth). Realized she may never actually good at dance and that she was lied to by the instructor. She sues.

A

Florida court said the dance instructor was an expert. So “fraud” and she gets her money back.

23
Q

Misrepresentation of law

A

There is a presumption that people know the law of the state in which they reside; a misrepresentation regarding state or local law, therefore, ordinarily does not entitle a contracting party to relief.

24
Q

Exception to misrepresentation of law

A

When misrepresenting party is in a profession that is known to require greater knowledge of the law than the average person. “experts”

25
Q

Misrepresentation by Silence

A

in general, there is no duty to inform a contracting party of facts and a party to a contract may remain silent.

26
Q

Exceptions ot misrepresentation by silence

A

A seller must disclose serious latent defects which ordinarily are not discoverable but which may cause a serious potential problem to buyer.

27
Q

I have a car that was in a wreck. The engine has been replaced and the body has been fixed. I’m selling the car.

A

I don’t have a duty to tell the seller that the car was in a wreck and was repaired.

28
Q

I have a car that was in a wreck. The engine has been replaced and the body has been fixed. I’m selling the car. I don’t have a duty to tell the seller that the car was in a wreck and was repaired.

But… if the seller asks “has this car ever been in a wreck?”

A

you have to answer – failure to would be concealing or fraud.

29
Q

Intent to Deceive

A

“Scienter” knowledge…broader than just actual knowledge (present if we just make an innocent mistake, or…)

30
Q

Mr. Sarvis was the President of CMI International (investment bank). He is convicted for Felony Bank Fraud and serves a 4 year sentence. He gets out of jail. He forms a fake resume. He says “semi-retired” on his resume instead of jail. Vermont hires him to teach Business Law and Ethics. Parole officer calls the University to verify employment. University fires him. He sues them for breach of contract

A

No. Court says this was fraud.

31
Q

Negligent Misrepresentation

A
  1. Party says or implies that a statement is made on some basis, such as personal knowledge or investigation, when it is not.
  2. Party makes a statement with reckless disregard or indifference to its truth or falsity.
32
Q

Innocent Misrepresentation

A
  1. Party who relied on the misrepresentation may rescind the contract.
  2. Usually cannot seek damages.
33
Q

Reliance on the misrepresentation.

A

a. Reliance must have been such that a reasonable person would have been justified in relying upon the misrepresentation.
b. Misrepresentation relied on must be an important factor in inducing the party into the contract.
c. Reliance is not justifiable if the truth would be obvious to a reasonable person.

34
Q

Injury to the innocent party

A

the contract would not have been formed or would have been more valuable if the representation had been true.
a. In some states, in an action for rescission, actual damages need not be established.
b. In an action for damages due to fraud, proof of injury is required.
c. A court may award punitive/exemplary damages in addition to compensatory damages.

35
Q

Undue Influence.

A

When a party, who is in a dominant position because of a confidential relationship, secures an unfair advantage in a contract with a weaker, dominated party, the contract is voidable and may be disaffirmed by the dominated party.

36
Q

When is there a rebuttable presumption of undue influence?

A

when the parties are in a familiar or fiduciary relationship based upon trust and confidence, and the contract is extremely unfair to the dominated party.

37
Q

The undue influence assumption may be rebutted by…

A

showing that a full disclosure was made, the consideration that was received was adequate and/or competent, and independent advice was received by the weaker party.

38
Q

Duress

A

In general, if a party is forced into entering into a contract by threatening a wrongful act, the contract is voidable.

39
Q

Wrongful/illegal act in duress

A
  1. Bodily injury to the contracting party or a member of his or her family.
  2. Criminal prosecution of (but not commencement of civil litigation against) the party to the contract or a member of his or her family. Civil – NOT duress.
40
Q

Is economic need duress?

A

NO, even when one party demands a very high price for an item that another party needs

41
Q

Exception to economic duress

A

party exacting high price is also the party creating the need.

42
Q

Adhesion Contracts and Unconscionability

A

“shocks your conscious it’s so unfair”

43
Q

Adhesion Contract

A
  1. Example: clauses or provisions in standard form contracts written exclusively by the party who had greater bargaining power.
  2. Will not be enforced if enforcement would be unfair or oppressive and, therefore, unconscionable.
44
Q

Aggrieved party must show…

A
  1. Parties had substantially unequal bargaining positions.
  2. Enforcement of the contract would be manifestly unjust.