Part 3- Contracts, Chapter 13: Reality of Consent, Doc 2 | Indiana University Bloomington - Edubirdie

University:
Indiana University Bloomington
Course:
Financial and Managerial Accounting: Information for Decisions - John J. Wild
Academic year:

2024
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211

Pages:

2
Author:

bratrochanter

Summary of Key Legal Doctrines from Reality of Consent: 1. Misrepresentation and Fraud Innocent Misrepresentation Remedy: Rescission of contract. Elements: 1. Untrue assertion of fact or equivalent. 2. Assertion relates to a material fact. 3. Actual reliance by the injured party. 4. Justifiable reliance (reliance was reasonable). Fraud Remedies: Rescission and/or tort damages (including punitive). Elements: 1. Untrue assertion of fact or equivalent. 2. Knowledge of falsity (scienter) and intent to deceive. 3. Justifiable reliance. 4. Economic loss (for tort action). 2. Mutual Mistake A mutual mistake occurs when both parties share an erroneous belief about the same fact, which significantly impacts their contract. Elements for Contract Avoidance: 1. Basic assumption: The mistake involves a fundamental fact underlying the contract. 2. Material effect: The mistake must substantially affect the agreed-upon exchange. 3. Risk of mistake: The party seeking to avoid the contract must not bear the risk of the mistake. Reformation as a Remedy: When mutual mistakes occur in the expression of the contract (e.g., clerical errors), courts may reform the contract to reflect the actual agreement rather than void it. 3. Unilateral Mistake A unilateral mistake occurs when only one party is mistaken about a basic assumption. Avoidance is harder to establish unless certain conditions are met. Additional Requirements: 1. The nonmistaken party caused or knew of the mistake, or the mistake was so obvious they should have known. 2. Unconscionability: Enforcing the contract would result in an unreasonably harsh or oppressive outcome for the mistaken party. 4. Duress Duress involves wrongful coercion that forces a party to enter or modify a contract.   Physical Duress: Rare, involves physical compulsion (e.g., forcing someone to sign a contract under threat of harm). Contracts are void. Threats of Harm: More common, includes threats of physical, emotional, or economic harm. These contracts are voidable at the option of the coerced party. Key Concepts Summary: Mutual Mistake Unilateral Mistake Both parties are mistaken. Only one party is mistaken. Can result in rescission. Rescission possible if: Basic assumption, material effect, and risk allocation are key. - Nonmistaken party caused/knew of mistake. - Enforcing contract is unconscionable. Duress Contract induced by coercion. Contracts may be void or voidable. Threats can be physical, emotional, or economic. Understanding these principles helps identify when contracts may be voidable due to lack of genuine consent.

Related Documents

Part 3- Contracts, Chapter 13: Reality of Consent, Doc 2

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