Defenses Concerning Formation Defects - Mutual Assent
Absence of Mutual Assent
a. Mistake - Factual error regarding a fundamental matter, which has a material effect on the agreed exchange. Adversely effective party may then rescind the contract, provided that that party did not bear the risk of mistake.
1) Mutual - both parties mistaken = no contract
2) Unilateral - only one party mistaken - that party bears the risk
3) By Intermediary - mistake construed against party who chose her
b. Misrepresentation - An innocent or negligent untrue assertion of fact or omission, renders the contract voidable if material and if induced detrimental reliance.
c. Fraud - A deliberate or intentional lie or omission, renders the contract voidable, if party is deceived to her detriment.
1) Physical - void
2) Economic - An improper or wrongful threat, which leaves no reasonable alternative but to agree, renders the contract voidable by the adversely effected party.
e. Unconscionability - Renders the contract voidable
1) Procedural - absence of meaningful choice in bargaining process
2) Substantive - unreasonably harsh terms
f. Latent Ambiguity/Misunderstanding (not obvious on face of contract, but appears as the context unfolds)
1) If both parties knew or had reason to know of ambiguity, then no contract
2) If neither party knew or had reason to know of ambiguity, then no contract
3) If only one party knew or had reason to know of ambiguity, then there is a contract on innocent party's terms