PowerPoint Slides to Accompany

BUSINESS LAW
E-Commerce and Digital Law
International Law and Ethics
5th Edition
by Henry R. Cheeseman

Chapter 13
Genuineness of Assent

Slides developed by
Les Wiletzky
Wiletzky and Associates, Puyallup, WA

Copyright © 2004 by Prentice-Hall. All rights reserved.

Assent
 Voluntary assent by the parties is necessary
to create an enforceable contract.
 Assent is determined by the relevant facts

surrounding the negotiation and formation of

the contract.
 Assent may be manifested in any manner

sufficient to show agreement, including

express words or conduct of the parties.

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Genuineness of Assent
 Contracts are unenforceable if parties have
actually consented to the contract but their
assent is not genuine.

 If a party’s assent to a contract is not

genuine, the courts will permit the innocent
party to avoid the contract.

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Genuineness of Assent (continued)
 Genuineness of assent is an issue in the
areas of:
 Mistake
 Misrepresentation
 Duress
 Undue Influence

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Mistakes
 A mistake occurs where one or both of the
parties have an erroneous belief about the
subject matter, value, or some other aspect
of the contract.
 Mistakes may be either:

 Unilateral
 Mutual

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Rescission
 An action to undo the contract.

 The law permits rescission of some

contracts made in mistake.

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Unilateral Mistake
 When one party is mistaken about a material
fact regarding the subject matter of the
contract.
 Generally, the mistaken party will not be

permitted to rescind the contract.

 The contract will be enforced on its terms.

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There are three types of situations where the
contract may not be enforced:
1. One party makes a unilateral mistake of
fact and the other party knew (or should
have known) that a mistake was made.
2. A unilateral mistake occurs because of a
clerical or mathematical error that is not the
result of gross negligence.
3. The mistake is so serious that enforcing the
contract would be unconscionable.

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Mutual Mistakes
 Mutual Mistake of Fact
 A mistake made by both parties concerning a
material fact that is important to the subject
matter of the contract.
 The contract may be rescinded on the ground

that no contract has been formed because

there has been no “meeting of the minds”
between the parties.

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Mutual Mistakes (continued)
 Mutual Mistake of Value
 A mistake that occurs if both parties know the
object of the contract, but are mistake as to its
value.
 The contract remains enforceable by either

party because the identity of the subject

matter of the contract is not at issue.

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Fraudulent Misrepresentation
Misrepresentation
Misrepresentation Intentional
Intentional
 An assertion is made
 An assertion is made Misrepresentation
Misrepresentation
that is
that is not
not in
in accord
accord  Occurs

Occurs when
when oneone
with the
with the facts.
facts. person
person consciously
consciously
decides
decides to to induce
induce
another
another person
person toto rely
rely
on
on aa misrepresentation.
misrepresentation.
 Also

Also called
called fraud
fraud..

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Fraudulent Misrepresentation (continued)
 When a fraudulent misrepresentation is used
to induce another to enter into a contract:
 The innocent party’s assent to the contract is
not genuine; and
 The contract is voidable by the innocent

party.

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To prove fraud, the following elements must be
shown:
1. The wrongdoer made a false representation
of material fact.
2. The wrongdoer intended to deceive the
innocent party.
3. The innocent party justifiably relied on the
misrepresentation.
4. The innocent party was injured.

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Types of Fraud
Fraud in the
Inception Fraud in the
Inducement

Fraud by
Concealment

Silence as
Misrepresentation
Misrepresentation of
Law

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Innocent Misrepresentation
 Occurs when a person makes a statement of
fact that he or she honestly and reasonably
believes to be true, even though it is not.
 Innocent misrepresentation is not fraud.

 The aggrieved party may rescind the contract

but may not sue for damages.

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Concept Summary: Types of Misrepresentation

Legal Consequences – Innocent Party May:

Type of Misrepresentation Sue for Damages Rescind Contract
Fraud in the inception Yes Yes
Fraud in the inducement Yes Yes
Fraud by concealment Yes Yes
Silence as misrepresentation Yes Yes
Misrepresentation of law Usually no Usually no
Innocent misrepresentation No Yes

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Duress
 Occurs where one party threatens to do a
wrongful act unless the other party enters
into a contract.
 The assent is not voluntary if one party has
been forced into making the contract.
 Such contracts are not enforceable against

the innocent party.

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Economic Duress
 Occurs when when one party to a contract
refuses to perform his or her contractual
duties unless the other party:
 Pays an increased price,
 Enters into a second contract with the

threatening party, or
 Undertakes a similar action.

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Undue Influence
 Occurs where one person:
 Takes advantage of another person’s mental,
emotional, or physical weakness, and
 Unduly persuades that person to enter into a

contract.
 A contract entered into because of undue
influence is voidable by the innocent party.

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Undue Influence (continued)
The following elements must be shown to
prove undue influence:
1. A fiduciary or confidential relationship must
have existed between the parties.
2. The dominant party must have unduly used
his or her influence to persuade the
servient party to enter into a contract.

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