Chapter 4 – Invalid Assent

Invalid Agreements

• When does offer + acceptance = contract?
• Apparent agreements may be invalid because of duress, fraud, mistake, or misrepresentation

Fraud

• Fraud is a false statement of material fact, made with intent to deceive, on which another reasonably relies, to his or her detriment.

Misrepresentation

• Misrepresentation is a false statement made without intent to deceive, upon which a party justifiably relies to his or her detriment.

Mistake

• The concept of mistake is generally limited to mutual mistakes about the “basic assumptions” of fact in cases where the parties have not specifically allocated risk with respect to assumptions.

Duress

• Duress is a wrongful threat, intended to induce action by the other party.

Undue Influence

• A special relationship can give one person undue influence over another.
• If the dominant party takes advantage of that position in entering a contract, the agreement may be voidable.
• Often, undue influence involves a fiduciary relationship —a relationship in which one party is obliged to act in the best interest of the other party.

Unconscionable

• A contract that is so unreasonable that it is “shocking”.

Review Materials for Chapter 4 

• Adhesion Contract – A take-it-or-leave-it contract in which one party has all of the bargaining power
• Mutual Mistake – All parties are mistaken about a basic assumption
• Justifiable reliance – Reliance on assertion is reasonable
• Basic Assumption of Fact – An assumption essential to the value of a transaction
• Fraud in the Inducement – Fraud relates to the party’s motivation in entering the contract
• Fraud – False statement of material fact, made with intent to deceive, on which another reasonably relies, to his detriment
• Bargaining Power – Ability to influence
• Unconscionable – A contract that is so unreasonable that it is “shocking”
• Criminal Plea Agreement – An agreement in which a prosecutor and a defendant arrange to settle a criminal case against the defendant.
• Unilateral Mistake – Where only one party is mistaken about a basic assumption
• Fiduciary Relationship – Relationship in which one person is under a duty to act for the benefit of the other on matters within the scope of the relationship
• Fraud in the Execution – Fraud relates to the nature of the agreement
• Undue Influence – A dominant party takes advantage of that position in entering a contract with party under domination
• Commercial Impracticability – A party may be excused from contract obligations if an unforeseen circumstance makes performance impracticable
• Punitive Damages – Damages unrelated to loss, intended to punish
• Silence as Fraud – A party has a duty to disclose and knowingly conceals the truth
• Misrepresentation – False statement made without intent to deceive, upon which a party justifiably relies to his detriment
• Duress – A wrongful threat, intended to induce action by the other party