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necessary to create an enforceable contract, determined by relevant facts surrounding the negotiation and formation of a contract
occurs when one or both parties to a contract have an erroneous belief about the subject matter, value, or some other aspect of the contract, may be unilateral or mutual, law permits rescission
mistake in which only one party is mistaken about a material fact regarding the supplier matter of a contract, mistaken party will not be permitted to rescind the contract unless..
1. other party knew it was a mistake
2. clerical or mathematical error that is not the result of gross negligence
3. so serious that enforcing the contract would be unconscionable
ex - guy buys car and assumes it has sunroof, but doesnt tell salesperson, his unilateral mistake will not relieve him of his contractual obligation to purchase the car
mutual mistake of fact
mistake made by both parties concerning a material fact that is important to the subject matter of a contract, if there has been a mutual mistake the contract may be rescinded on the grounds that no contract has been formed because there has been no "meeting of the minds" between the parties
ex - two different ships named peerless, no binding contract was formed
mutual mistake of value
exists if both parties know the object of the contract but are mistaken as to its value, contract remains enforceable
ex - andy warhol painting selling at $100, cannot recover painting
event that occurs when one person consciously decides to induce another person to rely and act on a misrepresentation, the contract is not genuine and the contract is voidable by the innocent party
following elements must be shown:
- wrongdoer made false representation of material fact
- wrongdoer intended to deceive the innocent party
- innocent party justifiably relied on the misrepresentation
- innocent party was injured
material representation of fact
may occur by words or by conduct of party, must have been a significant factor in inducing the innocent party to enter into the contract but does not have to be the sole factor
intent to deceive
person making the misrepresentation must have either had knowledge that representation was false or made it without sufficient knowledge of the truth, scienter "guilty mind"
reliance on the misrepresentation
not actionable unless the innocent party to whom the misrepresentation was directed acted on it, innocent must justify his or her reliance
injury to the innocent party
innocent party must prove that the fraud caused him or her economic injury, measure of damages is the difference between the value of the property as represented and the actual value of the property
fraud in the inception
or fraud in the factum, occurs if a person is deceived as to the nature of his or her act and does not know what he or she is signing
ex - heather brings her professor a grade card to sign, prof signs card in front without reading card, on front however are contract terms and transfer all of the prof's property to heather, here there is fraud in the inception, contract is void
fraud in the inducement
innocent party knows what he or she is signing or doing but has been fraudulently induced to enter into the contract, voidable by the innocent party
ex- lyle tells candice that he is forming a partnership to invest in drilling for oil in and oil field and invites her to invest, in reality there is no oil field, lyle intends to use the money for his personal expenses, candice believes lyle and gives him 30k, lyle takes off with her investment, candice can rescind the contract and recover the money if she can find him
fraud by concealment
occurs when one party takes specific action to conceal a material fact from another party
ex - steel inc. contracts to buy used equipment from united inc. united does not show steel the repair invoices for repairs to the equipment even though steel asked to see all of the repair invoices, relying on the knowledge that equipment is in good condition and has never been repaired, steel purchases equip from united. if steel discovers that a significant repair record has been concealed by united, steel can sue united for fraud by concealment
silence as misrepresentation
ordinarily, silence is not a misrepresentation unless 1) nondisclosure would cause bodily injury or death, 2) there's a fiduciary relationship btwn contracting parties, 3) fed and state statutes require disclosure.. restatement (second) of contracts specifies a broader duty of disclosure: nondisclosure is a misrepresentation if it would constitute a failure to act in "good faith"
misrepresentation of law
usually not actionable as fraud, innocent party cannot generally rescind the contract because each party to a contract is assumed to know the law that applies to the transaction, major exception: misrepresentation will be allowed as grounds for rescission of the contract if one party to the contract is a professional who should know what the law is and intentionally misrepresents the law to a less sophisticated party
occurs when a person makes a statement of fact that he or she honestly and reasonably believes to be true even though it is not, it is not fraud, aggrieved party may rescind but may not sue, usually mutual mistake
occurs when one party threatens to do some wrongful act unless other party enters into a contract, not enforceable against innocent party, if physically harm then physical duress, if victim of duress signs contract, it cannot be enforced against the victim
a situation in which one person takes advantage of another person's mental, emotional, or physical weakness and unduly persuades that person to enter into a contract, the persuasion by the wrongdoer must overcome the free will of the innocent party
1) fiduciary relationship must have existed btwn the parties
2) dominant party must have unduly used his or her influence to persuade the servient party to enter into a contract
ex- 70 yr old guy stroke and paralyzed, required to sue wheelchair, before he made a will, giving his property equally to his four grandkids. edward, a nurse, is hired to care for this guy everyday, and this guy is dependent on edwards. he works for him for 2 years before he dies. later we find out that the guy created a written contract with nurse edward 3 months before he died, giving him a huge piece of real estate, if they can show that edward used his dominant and fiduciary position to unduly influence the guy to enter into the contract, then it's invalid, if no undue influence then its valid
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