CHAPTER 8 TEST REVIEW

Genuine Assent

6 PARTS OF A VALID CONTRACTOffer and AcceptanceGenuine AssentConsiderationCapacityLegalityWriting

GENUINE ASSENTEntering a contract under your “Own Free Will”

NOT being forced (Duress)NOT being misled (Misrep or Fraud)

NOT holding an incorrect belief about what you are entering into (Mistake)

GENUINE ASSENTAlso known as Genuine Agreement and Mutual Assent

What if there is no Genuine Assent?Contract is VoidableOnly the injured party may end the contract agreement

RatificationShowing Intent to be bound by a contract

Best way to ratify is a signature

Can ratify through an option (Payment)

RescissionBacking out of a transaction by asking for a return of what you gave in exchange for what you received

Must occur “PRIOR” to Ratification

Only damage available in a case of Misrepresentation

DuressUsing an improper threat or act to obtain an agreement

TYPES:Illegal conductThreaten to report a crimeThreaten to sueEconomic threats

Undue InfluenceType of duress2 Elements to prove:Unfair PersuasionUsing a relationship with a person

MISTAKESUnilateral- one side holds an incorrect belief about the Subject matter of the contract (Voidable)

Bilateral- (Also known as Mutual) When both sides hold incorrect beliefs about the subject matter of a contract (Void)

2 Types of Unilateral MistakesRecognized Unilateral Mistake:

Mistake is major (Big) and 1 side knows, but allows the other side to think everything is as agreed (Can get recession)

Induced Unilateral Mistake: One side “encourages” or induces the other side to make a mistake, the contract is immediately “Voidable”

Material FactsSomething important in a contract

Has to do with the main subject matter

2 types of Mutual MistakesMistake of the Subject Matter- Both sides hold incorrect beliefs about what they are agreeing to in a contract (Void)

Mistake of the Law- Both sides agree to something that turns out to against the law (May be void and in some states, the agreement is still valid)

MisrepresentationUntrue Statement of Fact “Told” to a person

Material (Important) to the person making the decision

Relied upon (The person misled relied upon it to make their decision to enter the contract)

Fraud“First” must prove 3 elements of Misrep (Untrue statement, material and relied upon)

“Then” prove:Intent to deceiveInjury

Active ConcealmentIntentionally trying to “hide” something from one side

Ex) Covering up a wall with a hole in it to make a person think it’s not damaged

SilenceSeller may remain silent unless one of 3 things happens:

1. When a material fact omits information

2. When a true statement is made false3. When the seller knows the other

party has made a mistaken conclusion

Remedies for Misrep and FraudMisrepresentation- ONLY rescission

Fraud- Rescission, compensatory damages and punitive damages