Genuine Agreement “meeting of the minds”

Genuine Agreement Genuine Agreement exists when a

valid offer and a valid acceptance has been made along with consideration, capacity and legality

Circumstances that make an agreement defective: mistake, fraud, innocent

misrepresentation, duress, economic duress, undue influence

Fraud Deliberate deception to secure an

unfair or unlawful gain.

Fraud (Cont.) People who are induced to enter

into contracts by fraud can rescind (cancel), sue for money damages & punitive damages- damages designed to punish.

5 Elements of Fraud To succeed in a lawsuit for fraud, the

party bringing the suit must prove 5 elements:1. False Representation Of Fact 2. Representation Known To Be False 3. False Representation Intended To Be

Relied Upon 4. False Representation Reasonably Relied

Upon 5. Resulting Loss

1. False representation of material, existing fact Material fact- is one that is

important; it matters to one of the parties.

Under some circumstances, individuals can make false representation by choosing not to reveal important information.

This is known as concealment or passive fraud.

Opinions & a promise of something to happen in the future are not material facts. Opinions are sometimes called “sales talk”, sales puffing or sales puffery and are allowed.

Other Examples Of Material False Representations: Painting Over Rust Spots On Car

Turning Back Mileage Of Odometer

2. Representation Known To Be False Party Making The Representation

Must Know That It Is False. This may be shown by:

Proving actual knowledgeProving actual knowledge

Showing the statement was made recklessly Showing the statement was made recklessly

3. False Representation Intended To Be Relied Upon To prove fraud, the person making the To prove fraud, the person making the

misrepresentation must intend that the other misrepresentation must intend that the other party will rely upon the information as part of party will rely upon the information as part of the contract negotiations.the contract negotiations.

4. False Representation Actually Relied Upon To prove fraud, the false representation must be reasonably relied upon by the other To prove fraud, the false representation must be reasonably relied upon by the other

party when the agreement is made.party when the agreement is made. Example: If the person asking about the Mustang was accompanied by an

antique car expert, and the expert informs them that the car isn’t the year the seller claims and that it is worth much less that they are asking, they cannot bring suit because they didn’t actually rely upon the false information.

5. Resulting in loss Innocent Party Must Actually Suffer

Some Monetary Loss

Innocent Misrepresentation- Misrepresentation is the act of

making an innocent statement that turns out to be false, when the person honestly believed the statement was true at the time it was made.

Injured party has the right to rescind a contract

Injured party CANNOT sue for damages

MISTAKES People sometimes enter into contracts People sometimes enter into contracts

believing that certain information is true when believing that certain information is true when it is actually not, or that information is not true it is actually not, or that information is not true when it really is.when it really is.

Unilateral Mistake A: Unilateral mistake – an error on

the part of one of the parties to the contract.

A person usually cannot get out of a contract because of a unilateral mistake.

There are two types of unilateral mistakes:

1. Mistake as to the nature of the agreement People who sign an agreement are People who sign an agreement are

bound to it, even if they have not read it bound to it, even if they have not read it or are mistaken about what it says.or are mistaken about what it says.

2. Mistake as to the identity of a party If you make an offer by letter to

one party, but the wrong person mistakenly receives the offer, the mistake may be cause to void the contract

Face to face dealings cannot be voided.

Remedies for Unilateral Mistakes

b. Bilateral mistake (mutual mistake) Both parties to a contract are

mistaken about some important fact. The contract may be avoided by either party.

b. Bilateral mistake (mutual mistake) (Continued) 1. Mistake As To The Possibility Of

Performance If both parties believe that the duties If both parties believe that the duties

can be performed, when in fact, they can be performed, when in fact, they cannot.cannot.

2. Mistake As To The Subject Matter If both parties are mistaken as to the If both parties are mistaken as to the

identity of the subject matteridentity of the subject matter

Duress- Overcoming a person’s will by use

of force or by threat of force or bodily harm.

$$$$$$Economic Duress

Is the threatening of a person’s business or income to cause him or her to enter a contract.

When actual physical force is used, the contract is void. (physical duress)

When a threat is used, the contract is voidable.

Undue influence Is unfair and improper persuasive

pressure exercised by one person in a relationship of trust with another person

Usually exerted by stronger person upon a weaker person (due to ill health, old age)

An attorney’s personal experience with undue influence http://www.youtube.com/watch?

v=_I_HX4L_Ick