7-2 Mistakes, Misrepresentation, and Fraud

What are the types of Contractual Mistakes??

1) unilateral mistakes-an incorrect belief by one of the parties in a contract

Ex: not reading the contract before you sign it or signing contract in language you dont know

2) mutual mistake (bilateral mistake)-an incorrect belief by both parties about an important fact

Ex: suppose both a buyer and a seller think that a land is 42 acres but later they find out it is actually 21 acres. This causes the contract to void.

3) material facts-important details that influence the parties decision about the contract

What is Misrepresentation??


Innocent Misrepresentation-a statement made by a party who didnt know it was untrue

Ex: a seller is unaware that a car has gotten a new odometer and states it has 700mi when in fact it has 90,000mi.

Fraudulent Misrepresentation-a statement made by one party who knew it was untrue

Ex: a seller is aware of the fact that the cars engine is bad but tells consumers that it is fine.

Both result in void contract

What is Misrepresentation?? (contd)

A) Untrue Statements

Active concealment-substitute for a false statement of fact

Ex: Seller place a price sticker over a scratch on a TV screen .

Silence must end when a statement is made false by previous events.

Ex: A owner of a car says he only drove the car once a week but he didnt say he drove it at a drag strip.

What is Misrepresentation?? (contd)

B) Materiality

A statement is material if it causes a reasonable person to want to contract. A statement can be material if defendant a knew the plaintiff would rely on it. A statement is material when the defendant knows that the statement is false. Misrepresentation can only take place when the victim is reasonably reliable.

C) Reasonable Reliance

Fraud and Remedies for Fraud



Fraud- is a crime based on misrepresentation

A) Misrepresentation- Intentional or Reckless??

When a person lies and they know they are lying. It is intentional When a person says something without knowing its true or false. It is reckless.

Fraud and Remedies for Fraud (contd)

B) Misrepresentation or Concealment??

Injury-something that is proven to establish fraud. There can still be misrepresentation but without injury theres no fraud.

Fraud and Remedies for Fraud (contd)

C) Remedies for Fraud

Rescission


Contracts resulting of misrepresentation or fraud can be voidable by the injured party and can be rescinded Are only available if fraud is proven. Then the party defrauded may choose to ratify the agreement instead of rescind. Are also available if fraud is proven.

Damages


Punitive Damages- A form of punishment



THE END
By: Dustin, Gracie, Katie, & Javon