mistake, misrepresentation and fraud
DESCRIPTION
What will you learn?? Determine what kinds of mistakes than can make a contract void or voidable Describe the elements of misrepresentation and fraud Identify the difference (And similarities) of misrepresentation and fraud Determine what remedies are available for a victim of mistake, misrepresentation and fraudTRANSCRIPT
Mistake, Misrepresentation and Fraud
Lesson 8-2 Mistake, Misrepresentationand Fraud What will you
learn?? Determine what kinds of mistakes than can make acontract
void or voidable Describe the elements of misrepresentation and
fraud Identify the difference (And similarities)
ofmisrepresentation and fraud Determine what remedies are available
for a victim ofmistake, misrepresentation and fraud What is a
unilateral mistake?
A Unilateral Mistake occurs when one party to a contractholds some
kind of incorrect belief about the subject matter ofthe contract.
Generally, this has NO effect on the validity of a contract Ex) If
a consumer fails to read the details of an agreement orthinks the
purchase they are making can do something it cant,its the Buyers
fault for not reading or asking questions (Buyinga F150 pick-up
truck thinking (Without asking) it can hold lbs of weight and
having the truck break when you learn itcannot) What is the
difference between a recognized unilateral mistake and induced
unilateral mistake?
If the mistake is Major andthe uninjured party was awareof the
mistake, its arecognized unilateral mistake Court may grant the
right torescind to victim Induced Unilateral Mistake If one party
Encourages orinduces the other party tomake a mistake, its ainduced
unilateral mistake Contract becomes voidable(Injured party can
Chooseto end it) Recognized or induced? Sophie has been pushing her
boyfriend to Tiethe Knot and recently, James was thinking Yeah,I
think I am ready.James goes to FrontierJewelry one day and while
looking at a tray ofdiamond rings in the showcase, sees one he
isinterested in.The salesperson, realizes that theone James was
looking at was a Cubic Zirconiathat accidently was in the showcase
in thewrong spot and he allows James to pay $8000 fora ring worth
only $200 because James neverasked any questions.What type of
mistake justoccurred?? ANSWER?? SOPHIE? Recognized Unilateral
Mistake
Why?The seller knew of theerror, allowed the buyer tomake the
mistake Remedy? The right to rescind(Give back the ring and get
yourmoney back) SOPHIE? Recognized or induced? Jake has been
working at Frontier Marts Bakery now for 2 years.Hehas worked his
way up to manager and knows a year end bonus iscoming.His boss, the
store owner, told Jake You have beenthrowing out too much product
lately and that is hurting yourprofit.Jake decides to tell his
employees to mix day old breads anddonuts in with the fresh ones,
thinking no person will tell thedifference.Well, Catherine one day
buys donuts and thinks theydont taste correct.What type of mistake
occurred? ANSWER?? What now? Induced Unilateral Mistake
Why?The seller knew of theerror and tried to trick thebuyer into
making the mistake Remedy? Contract is voidable,meaning Catherine
can get hermoney back) Whatnow? We know what a unilateral mistake
is, so what is a bilateral mistake?
A Bilateral Mistake , also known as a Mutual mistake, iswhen BOTH
parties to a contract hold an incorrect belief about amaterial fact
(Important fact) If a Bilateral mistake occurs, the contract is
void (Contract doesnot exist at all) There are 2 types of bilateral
mistakes:Mistake of the SubjectMatter (Which means the parties dont
understand what is beingcontracted) or Mistake of the Law (Which
means the partiesbroke the law with the contract and did not know
they broke thelaw) Describe a typical bilateral mistake
If Ken has what he believes to be agenuine Jim Kelly rookie
football card thathe had signed by the Bills legend anddecides to
sell it to Mark for $400, based onboth the card and signature being
valid andMark decides after reviewing it that it waslegitimate, a
bilateral mistake could occur ifafter the transaction took place,
Mark findsout the card was a forgery and thereforethe value was
much less. What is misrepresentation?
Misrepresentation occurs when oneparty in a contract makes a
statementthat turns out NOT to be true Its different from a mistake
because amistake is an incorrect belief by eitheror both parties to
a contract andmisrepresentation means passing onsomething that is
untrue 2 types of misrepresentation
Innocent Misrepresentation If a false statement is passedon because
the sellerwaslied to when theyoriginally made thepurchase, they
couldinnocently pass on a lie FraudulentMisrepresentation This is
when the sellerknows the statement beingpassed on was untrue butdid
not necessarily meanto injure the other person How is
misrepresentation Proven
Show that the statement being madewas untrue or the seller tried
toactively conceal information (Hide it) The statement was
material(Important) to the buyer The victim relied on the
falseinformation to make their decision What is fraud and how is it
proven?
Fraud is based on misrepresentation Fraud means to intentionally
try to deceive a person tolead them to an injury (Or to lie to them
to gainsomething leading to the other parties loss) Fraud is the
more serious version of misrepresentation What 5 elements prove
fraud?
Untrue statement of fact or activeconcealment Material to the
decision Relied upon to make decision Intent to deceive or false
statementsmeant to mislead victim intocontract Intent to injure
Misrepresentation (1-3) Fraud (All 5) What are the remedies
available for victims of misrepresentation and fraud?
Right to rescind (Take back contract) Right to rescind Compensatory
Damages Punitive Damages Fraud What are damages? Damages are what
is awarded in a civil trial (Lawsuit) Compensatory damages are
meant to Compensate avictim for their losses (Get the party back to
where theywere before the contract started) Punitive damages are
meant to punish the defendant(Given over and above a compensatory
damage Rule:Compensatory damages are ALWAYS asked for,punitive very
rarely Final Facts.. If a seller remains silent about a problem
that a buyerdoes not question, the buyer cannot later claim they
werelied to because they have a responsibility to ask
questionsbefore deciding Active concealment is proven when a seller
purposelytries to hide a problem from a buyer, therefore not
allowingthem to question problems Key phrase to prove
misrepresentation or fraud is that thebuyer relied upon an untrue
statement made to them tomake a bad decision Ticket out the door
quiz
Complete the practice quizand turn in before end ofclass Review and
quiz within next 3classes