Chapter 7 – Genuine Assent Chapter 7 – Genuine Assent Cameron owned a racehorse that Lincoln had offered to buy for an undisclosed party. When Cameron refused to sell, Lincoln lowered his voice and said, “Listen, the people I represent want your racehorse and don’t take ‘no’ for an answer. If you don’t sell they’ll hurt you. They’ll hurt your family. Like a good friend I am telling you to sell. You’re getting a fair price, just sign the contract.”

Cameron who secretly recorded the conversation, signed the contract and sold the horse. Then he called the police. Why isn’t this a valid contract? Contracts – Genuine Assent

What are the reasons a contract can be voidable due to lack of genuine assent? 1) Duress – threat of a crime or tort against offeror or offeree (ex. Threat of a suit in an unrelated matter; high pressure sales tactics, threat of injury) https://www.youtube.com/watch?v=EqXNiD3tFBk&saf ety_mode=true&persist_safety_mode=1 Contracts – Genuine Assent 2)Undue Influence – someone who holds a preferential relationship (ex. Doctor, financial advisor)

This short video gives a good explanation of the concept: https://www.youtube.com/watch?v=Nm0IsUZhvC0&feature=re lated&safety_mode=true&persist_safety_mode=1

3) Unfair Persuasion – someone with a position of power over the individual (ex. Caregiver an the elderly person) Contracts – Genuine Assent

Ratification means conduct or action taken that confirms intent to follow the requirements of the contract. Ex. In our car contract from Ch. 6, the buyer begins making the monthly payments on the car. That would be considered a ratification action.

To void a contract because it is believed there was duress or undue influence, action must taken:

- Promptly – shortly after discovery that genuine assent was not present - Before Ratification (no ratification actions are taken after the duress or undue influence becomes known) Useful Vocabulary for Genuine Assent

Voidable – if a contract lacks Genuine Assent it becomes voidable – meaning the party that signed without genuine assent can cancel their contractual obligations.

Rescission – If certain actions related to the contract have already been taken those can be undone. For example in the sale of the racehorse, Cameron can get the horse back, as long as he gives back any money received. In that way the contract has been rescinded. Contracts – Genuine Assent Mistakes, Misrepresentation and Fraud – Mistakes can be made in the negotiation and signing of contracts. These can be unintentional or intentional. The circumstances/”mistakes” that can impact a contract are explained below:

Unilateral Mistake – one party holds an incorrect belief about the facts or law related to the contract (In this case the CONTRACT IS STILL VALID)

Bilateral Mistake – Both parties share a common incorrect belief (ex. Both parties believes no sales tax is due on the sale of used car. – The buyer finds out there is, he wants to rescind the contract.)

(CONTRACT STILL VALID UNLESS THE MISTAKE IS MATERIAL TO THE CONTRACT) Something is Material if it was important to the contract. (This can be subject to judgement.) (ex. In the case of the sales tax on a used car, this is probably significant/material.)

Remember is always assumed that both parties know the law Contracts – Genuine Assent Misrepresentation - Fraudulent vs. Innocent Misrepresentation – Saying something untrue is call misrepresentation. This can be done intentionally or unintentionally.

A Contract becomes voidable if: - There is an untrue statement – untrue statement of fact (vs. opinion) or active concealment of facts Ex. Real Estate transaction – as seller you fail to disclose that the basement of your house floods whenever it rains - Statement must be material to the transaction - The victim reasonably relied on the statement Contracts – Genuine Assent Three ways for an untrue statement to be material:

1) Causes a reasonable person to enter into the contract (ex. I am selling a low mileage car below fair market value)

2) Know the offeree is relying on the statement (ex. It’s really important to me that the used car I buy have low mileage.)

3) Offeror knows the statement is false – It doesn’t matter what you lie about (why would you have lied if you didn’t think it would influence the other side) (ex. I am the only owner of the car and I only drove it to church on Sunday.) Contracts – Genuine Assent Conditions for simple Misrepresentation (from previous slide): - An untrue statement of fact (vs. opinion) or active concealment of facts - Statement must be material to the transaction - The victim reasonably relied on the statement

There is one additional condition needed to make misrepresentation = fraud - There is intent or reckless statements about the truth - There is injury to the other party Contracts – Genuine Assent

What are the remedies for Misrepresentation or Fraud?

- Misrepresentation:  The contract can be voided

- Fraud: The contract can be voided Damages can be recovered – Compensatory (loss due to fraud) & punitive