Conduct Invalidating Assent Mutual assent is crucial to a valid contract. There are situations, however, where consent may have been given, but it was ineffective in some way. This makes the resulting contract void or voidable. Since mutual assent must be voluntary, if the consent is acquired by force or the threat of force and against the will of one of the parties, the consent is ineffective.
If physical force or the threat of immediate physical force is used to compel a party to agree to a contract, the resulting contract is void. In some cases, the duress comes in the form of economic and social coercion.
If these threats leave the party with no reasonable alternative, but to agree to the contract, the resulting contract is voidable at the option of the offeree. The standard used to determine the effectiveness of the duress in forcing a person to enter into a contract is subjective. It does not matter that a reasonable person would not have been affected by the threat. The issue is whether this particular party was unduly influenced.
Threat of criminal prosecution: When a party is forced to sign a contract in response to a threat that the person would face criminal prosecution unless he or she signed the contract, the resulting contract is voidable. Threatening to bring a civil suit if a contract is not signed does not constitute duress. Undue influence is the application of unfair persuasion by a person in a dominant position in a confidential relationship.
In these relationships, there is a danger that one party who is in a dominant position may persuade the weaker party to accept terms that are disadvantageous. This is especially a source of concern where one party is overly dependent due to age, failing health, inability to speak English or understand the customs of this country, etc. Contracts entered into by undue influence are voidable.
Examples of confidential relationships include lawyer-client, doctor-patient, parent-child, spouses, etc 3. Fraud in the execution: Fraud in the execution takes place when, due to fraud, a person who signs a contract does not even realize that he or she is entering into a contractual relationship.
When a contract is induced by fraud in the execution, the resulting contract is void. A fan approaches Michael Jordan with a piece of paper and asks for his autograph. The paper Michael signed is a contract in which he promised to pay the person a million dollars. Fraud in the inducement: Fraud in the inducement takes place when a person is persuaded to enter into a contract as a result of a material misrepresentation. The resulting contract is voidable.
Elements of this fraud: He tells Jane that the car has only 20, miles on it. In reality the car has over , miles. Concealment takes place when a party deliberately takes steps to conceal a material fact. This is different from misrepresentation which involves a false statement. Concealment can form the basis of fraud. A car dealer uses Bondo and a quick paint job to conceal the fact that the car he is trying to sell was damaged in a serious accident.
Misrepresentation takes place when a statement that is known to be contrary to the facts is made. If a buyer, for example, knows that the car she is trying to buy is worth many times more than the asking price, she is under no obligation to reveal what she knows. In some cases, a party is obligated to disclose information that only he or she may have regarding the subject of the contract.
These involve cases where the information is fundamental to the contract, the facts would not have been discovered through ordinary inspection, and good faith dealing would require that the information be disclosed. When a person is a fiduciary, a person in a confidential relationship of trust and loyalty to another, he or she has an obligation to disclose all relevant facts regarding a contract that the fiduciary is recommending. The misrepresentation must deal with an issue of fact, not one of opinion.
If a car dealer says this car will get 30 miles to a gallon, this claim must be accurate. Other people may or may not agree. In general, predictions are considered to be non-factual. This is because in most instances it is impossible to predict what will happen in the future. But if a person knew that a promise could not or would not be kept at the time it was being made, this fact must be disclosed or it would constitute fraud.
When misrepresentation is being alleged, it must be shown that the misrepresented fact is material. A misrepresentation is material if the fact would persuade a reasonable person to enter into the contract. To establish fraud, the person making the misrepresented fact must have known it to be false and did it to deceive. The person who was deceived must have relied upon the misrepresented fact in his or her decision to enter into the contract. A non-fraudulent misrepresentation is a false statement regarding a material fact that induces the offeree to enter into the contract, but the misrepresentation is made as a result of negligence and not an intentional attempt to deceive.
These contracts are voidable. A mistake is a belief that is not in accord with the facts. The consequences of a mistake in a contract depend upon several factors. If a material mistake is made by both sides, there is no contract. Where only one party has made a mistake, the general rule is that the resulting contract is valid. Where one or more parties assume the risk that a mistake may have been made, the law cannot offer a remedy.
If the car has a defective engine, the buyer has assumed this risk and could not use the condition of the engine as an excuse to set aside the sale.