law for business and personal use © south-western publishing chapter 8slide 1 genuine agreement 8-1...

LAW FOR BUSINESS AND PERSONAL USE LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING© SOUTH-WESTERN PUBLISHING

Chapter 8Chapter 8 Slide Slide 11

Genuine Agreement

8-18-1 Duress and Undue Influence

8-28-2 Mistake, Misrepresentation, and Fraud

CHAPTER 8

Lessons



Duress and Undue Influence

Define genuine agreement and rescissionIdentify when duress occursDescribe how someone may exercise undue

influence

LESSON 8-1

GOALS



Hot Debate

Your friend buys a PDA for $250.00, including a foldout keyboard and a portable printer.

The keyboard and printer were shown with the PDA in the ad but noted as optional equipment.



In her excitement, your friend signs the credit card sales receipt, which is not itemized She fails to note that the two items add an extra $198 to the price.

When the bill for the total purchase price of $448 plus sales tax arrives, your friend objects.



State 2 reasons why it would be fair to allow your friend to withdraw from the contract.

Your friend’s obvious excitement left her unfocused and the salesperson did not point out the optional equipment would add to the cost.

The bill was not itemized to show these facts.



State 2 reasons why it would be fair for your friend to be bound to the contract.

The doctrine of -- (let the

buyer beware) does not place a positive duty on the sales personnel to make sure each consumer understands all parts of the transaction.

The goods were marked as optional equipment which implies additional cost.



Conclusion

A unilateral mistake of failure to read a contract still renders the contract valid.



GENUINE AGREEMENT

Genuine agreement is an agreement to enter into a contract that is evidenced by words or conduct between the parties.

The absence of genuine agreement will make what appears to be a contract voidablevoidable (may be voided).



RESCISSION

Rescission is backing out of the transaction by asking for the return of what you gave in the transaction, and offering to give back what you received.

RatificationRatification is conduct suggesting you intend to be bound by the contract.



DURESS

DuressDuress occurs when one party uses an improper threat or act to obtain an expression of agreement

Threats of illegal conduct – to engage in illegal conduct such as crime/tort to win agreement

Threats to report crimes – if you observe a crime being committed then coerce the criminal to contract with you



DURESS

Threats to sue – made for a purpose unrelated to the suit

Economic threats – seeking to modify an existing contract for more favorable terms

Certain actions, such as duress on the part of one party, means genuine assent is lacking.



Duress

i.e. A supplier, knowing of an approaching delivery deadline for a parts user, threatens to slow shipments of parts unless more were paid for them.

This threat of substantial economic harm (through late shipments of orders) would render the contract Voidable



WHAT IS UNDUE INFLUENCE?

Undue influence occurs when one party to the contract is in a position of trust and wrongfully dominates the other party.

There are two key elements in undue influenceThe relationship – trust, confidence, authority

Unfair persuasion – careful examination of terms of contract



Case

Albert had cancer and was being treated by Dr. Bennington. He had carefully followed the doctor’s advice, and the treatment had been successful.

One day, during a periodic checkup, Dr. Bennington said to Albert, “To prevent cancer from recurring, you need to reduce the stress in your life.



Long drives in the country are great for that . Come to think of it, I’m selling my convertible right now. You should buy it.”

Without investigating, Albert followed the doctor’s directions and contracted to buy the car. Later he found the price he’d agreed to pay was nearly double the market.

Could Albert avoid the contract due to undue influence?



Yes, the contract would be voidable by Albert.

Sometimes, a formal relationship is absent and the courts will still allow the injured party to void the contract.



Cooling Off Rule

FTC - Cooling Off RuleThree days to change your mind about

a contract that was made:Door-to-door solicitationTradeshow/hotelmade at a “temporary” residence



Shopping from Home – Cooling Off Rule

When you buy something at a store and later change your mind, your ability to return the merchandise depends upon store policy. If you buy an item in your home you might have three days to cancel.

This Cooling-Off Rule also applies to purchases of $25 or more at your workplace and places rented by a seller on a temporary basis, such as hotel or motel rooms, convention centers, fairgrounds and restaurants.



Does NOT apply:You made the purchase entirely by mail or telephone. The sale was the result of prior contact you had at

the seller's permanent business location. You signed a document waiving your right to cancel. Your purchase is not primarily for personal, family or

household use. . You were buying real estate, insurance, securities, or

a motor vehicle. You can't return the item in a condition similar to how

it was when you got it. You bought arts or crafts at a fair, shopping mall,

civic center, or school.



Mistake, Misrepresentation, and Fraud

Describe the kinds of mistakes that can make a contract void or voidable

Determine when misrepresentation has occurredIdentify when fraud has occurredDiscuss the remedies for mistake,

misrepresentation, and fraud

LESSON 8-2

GOALS



Bugliosi saved more than $25,000 to buy the new car of his dreams.

At the dealership, the sales staff convinced him to purchase option after option until his $25,000 was totally exhausted.

When he went to register the vehicle, he found that the state expected him to pay an 8% sales tax on the purchase price.



Bugliosi thought the $2,000 in sales tax had been included in the $25,000 paid at the dealership, just as it is with purchases at other retail stores.

Is the contract voidable by Bugliosi because of his mistake?

No – it’s valid



WHAT IS A UNILATERAL MISTAKE?

A unilateral mistake occurs when one party holds an incorrect belief about the facts related to a contract. - validRecognized unilateral mistake – if mistake is major, and

other party is aware of mistake = recission may be granted i.e. Genetic Products receives a bid far lower than all other bidders.

They realize the low bidder made an error. There is no contract.



What’s Your Verdict?

Baglio wanted the gutters of his new house to be free of rust.

The specs called for “rust-resistant steel gutters galvanized with zinc.”

Later learns galvanized steel gutters would eventually rust

Aluminum or cooper are best & would not rust



Baglio sues contractor claiming a breach of contract b/c he did not get what he really wanted.

Will he win?

No – unilateral mistake on Baglio’s part



Induced unilateral mistake – one party has encourage or induced the other to make the mistake (diamond example – mixing fake with real – you unknowlingly select the fake and offer a high price for it) voidable



WHAT ARE MUTUAL MISTAKES?

When there is a mutual mistake both parties have an incorrect belief about an important fact (material facts). - void

Mistake about the subject matter – law treats unilateral mistakes about identity of the subject matter as a mutual mistake – void

i.e. Buyer & Seller think a certain piece of property is 41 acres in size and they contract based on this belief. Later they learn the property is really only 28 acres.



Mistake of law - when mistake is about applicable laws, contract is still valid

i.e. Buying property both parties thought would allow construction of duplexes.



UNILATERALUNILATERAL MUTUALMUTUAL

F A C T

L A W

Effect of Types of Mistakes on the Resultant Contracts

enforceable

enforceable

void

enforceable



WHAT IS MISREPRESENTATION?For a statement to be treated as misrepresentation, three elements are required

Untrue statement of fact ( existing / past)

Active concealment – attempting to cover the truth

SilenceMaterialityReasonable reliance



This computer is one-year old.

FACT / OPINION ?



Fact

The engine has 40,000 miles on it.

FACT / OPINION ?



Fact

This dog will be the perfect pet for you!

FACT / OPINION ???



Opinion

This suit will create the image you need to double your business.

FACT / OPINION ???



Opinion



Food Lion vs. Prime Time

Reporters for the ABC news show “Prime Time” went undercover with fake identities in Food Lion stores posing as store workers.

They were acting on a tip from former workers that Food Lion had been washing spoiled meat in bleach and then selling it.



The reporters allegedly found facts to substantiate that the story was true.

However, a No. Carolina judge found ABC news guilty of misrepresentation and trespassing and fined them $315,000 in punitive damages (a jury had originally assessed $5.5 mil. In punitive damages against ABC but the judge reduced it)



Should reporters be able to use misrepresentation on employment applications and contracts to get to the truth of the matter?



INNOCENT MISREPRESENTATION

Innocent misrepresentation occurs when a party to a contract does not know that a statement he or she made is untrue.



FRAUDULENT MISREPRESENTATION

Fraudulent misrepresentation occurs when a party to a contract knows that a statement he or she made is untrue.



FRAUD AND REMEDIES FOR FRAUD

Misrepresentation must be intentional or reckless

The misrepresentation or concealment must injure

Remedies for fraudRescissionDamagesPunitive damages

law for business and personal use © south-western publishing chapter 8slide 1 genuine agreement 8-1...

Documents

existing contract

contract valid

contract voidablechapter

absence of genuine agreement

undue influencelesson

genuine assent

friend objects

optional equipment