Chapter 11:

A. MISTAKES

1. Unilateral mistakes occur when only one party is mistaken

about a material fact regarding the subject matter of the

contract.

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.

1. Elements

a. false representation of a material fact

b. intent to deceive

c. justifiable reliance on the false representation

d. damages

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

damages.

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

b. extortion

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

more.

 

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

initials.

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

errors.

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

follows:

a. Ordinary words are given their usual dictionary

meanings.

b. Technical words are given their technical meaning,

unless a different meaning is clearly intended.

c. Specific terms are presumed to qualify general

terms.

d. Typed words prevail over preprinted words;

handwritten words prevail over both preprinted and

typed words.

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.