1. Unilateral mistakes occur when only one party is mistaken
about a material fact regarding the subject matter of the
a. General rule is that the mistaken party is not
permitted to rescind the contract.
b. If the other party knew or should have known of the
mistake and took advantage of it, then the mistaken
party may rescind. And it the mistake occurred
because of a clerical or mathematical error that was
not the result of gross negligence, the party
committing this type of error can rescind. And
finally, if the mistake is so serious that enforcing the
contract would be unconscionable.
2. Mutual mistakes occur when both parties are mistaken
about the contract.
a. Mistake of fact concerns the essence or object of the
contract. Either party may rescind.
b. Mistake of value regards the value of the essence or
object of the contract. Neither party can rescind.
B. FRAUDULENT MISREPRESENTATION, also called
fraud or deceit, occurs when a person intentionally makes an
assertion that is not in accord with the facts.
a. false representation of a material fact
b. intent to deceive
c. justifiable reliance on the false representation
The innocent party may rescind and obtain restitution or may enforce the contract and sue for damages.
2. Types of fraud include:
a. fraud in the inception occurs when the innocent
party is deceived about the nature of their act.
b. fraud in the inducement occurs when the party is
fraudulently induced to enter a contract.
c. fraud by concealment occurs when the other party
acts to conceal a material fact from the other party.
d. silence as misrepresentation occurs if the party is
under a legal obligation to disclose a material facts
and fails to do so.
e. misrepresentation of law occurs when a less
sophisticated party is intentionally deceived
regarding the law by a professional party.
3. Innocent misrepresentation contains all of the elements of
fraud except intent. The remedy is rescission, but no
C. UNDUE INFLUENCE occurs when one person takes
advantage of another's mental, emotional, or physical weakness
and unduly persuades that person to enter into a contract.
1. Undue influence has two elements:
a. A fiduciary or confidential relationship existed
between the dominant and servient parties.
b. The dominant party unduly used their influence to
persuade the servient party to enter into a contract.
Presumption: If a dominant party enters into a contract
with the servient party which benefits the dominant
party, the law presumes undue influence. But the
presumption is rebuttable.
2. Duress occurs when one party threatens to do some
wrongful act against the other party unless the other party
enters into a contract. Some examples of duress include:
a. physical duress
c. economic duress
D. STATUTE OF FRAUDS. By statute, certain contracts are
required to be in writing to be enforceable.
1. Requirement of writing
a. Transfer of interests in real property include the sale
of land, buildings and things attached to land, leases
for a term of over one year, and easements.
b. Contracts that cannot be performed within one year
of their formation.
c. Collateral contracts to answer for the debts of
another, unless the main purpose of the promise is
for the benefit of the promisor.
d. Promises in consideration of marriage.
e. Contracts for the sale of goods costing $500 or
2. Promissory estoppel prevents the application of the
Statute of Frauds to prevent injury or unjust enrichment.
This is the same equitable doctrine which prevents a
promisor, in certain situations, from revoking a promise
unsupported by consideration.
E. SUFFICIENCY OF THE WRITING
1. Sufficiency of writing
a. Does not have to be formal or drafted by a lawyer.
Any writing will do, including a letter.
b. It must be signed, but only by the party against
whom enforcement of the contract is sought. A
variety of things constitute a signature, including
c. Several writing may be combined to constitute the
entire agreement by formally referencing another
writing or by just being collected together by paper
clip, file folder or even in one envelope.
2. Parol evidence rule provides that if a written contract is a
complete integration of the agreement of the parties, then
any prior or contemporaneous statements (oral or written)
are inadmissible as evidence to alter or contradict the
terms of the written contract.
a. Parol evidence may be used to:
(1) prove mistake, fraud, misrepresentation,
undue influence or duress.
(2) explain ambiguous language.
(3) explain a prior course of dealings or course of
performance between the parties or explain a
usage of trade.
(4) fill in the gaps in a contract.
(5) correct obvious clerical or typographical
3. Interpretation of contracts is sometimes necessary because
of disagreement over the meaning of words used. The
courts have developed rules for interpreting contracts as
a. Ordinary words are given their usual dictionary
b. Technical words are given their technical meaning,
unless a different meaning is clearly intended.
c. Specific terms are presumed to qualify general
d. Typed words prevail over preprinted words;
handwritten words prevail over both preprinted and
e. Ambiguities in the contract are resolved against the
party who drafted the contract.
f. Unless otherwise agreed, words will be given their
usual meaning in the trade if both parties are
members of the same trade.
g. Words will be interpreted to promote the principal
object of the contract.