DEFENSES TO MUTUAL ASSENT

1
DEFENSES TO MUTUAL ASSENT

• DURESS
• UNDUE INFLUENCE
• MISREPRESENTATION
• MISTAKE

2
DURESS AND UNDUE INFLUENCE

• BOTH DEFENSES ARE BASED ON A LACK OF FREE WILL OR
  CHOICE
• DURESS IS BASED ON COMPULSION, UNDUE INFLUENCE IS
  BASED ON UNFAIR PERSUASION

3
DURESS TWO ELEMENTS

• WRONGFUL THREAT THAT
• DEPRIVES OTHER PARTY OF FREE WILL

4
WRONGFUL THREAT

• MUST BE WRONGFUL NEED NOT BE THREAT OF VIOLENCE
  OR CRIMINAL ACT
• THREAT OF CRIMINAL PROSECUTION CAN CONSTITUTE A
  WRONGFUL THREAT

5
FREE WILL

• SUBJECTIVE TEST TO
• DETERMINE WHETHER THREAT
• DEPRIVED PERSON OF FREE
• CHOICE

6
ECONOMIC DURESS

• THREAT TO BREACH A CONTRACT OR CAUSE ECONOMIC
  HARM CAN CONSTITUTE DURESS
• COURTS OFTEN REQUIRE A THREAT OF IRREPARABLE
  INJURY TO SHOW ECONOMIC DURESS PARTY HAS NO
  REASONABLE ALTERNATIVE

7
UNDUE INFLUENCE

• DEFENSE BASED ON UNFAIR PERSUASION/ABUSE OF TRUST
• MOST OFTEN OCCURS IN A CONFIDENTIAL OR FIDUCIARY
  RELATIONSHIP

8
UNDUE INFLUENCE

• PRESUMPTION OF UNDUE INFLUENCE WHEN
• PARTIES IN A CONFIDENTIAL RELATIONSHIP ENTER INTO
  A CONTRACT
• DOMINANT PARTY GAINS SOME ADVANTAGE UNDER THE
  CONTRACT

9
MISTAKE AND MISREPRESENTATION

• BOTH DEFENSES ARE BASED ON A MISUNDERSTANDING OF
  THE RELEVANT FACTS RELATING TO THE BARGAIN
• MISREPRESENTATION IS BASED ON A FALSE STATEMENT
  BY ONE PARTY, MISTAKE ON A MUTUAL
  MISUNDERSTANDING OF FACTS

10
MISREPRESENTATION

• FRAUDULENT MISREPRESENTATION
• KNOWLEDGE OF FALSITY OR SCIENTER
• DEFRAUDED PARTY CAN SUE FOR DAMAGES OR RESCIND
  THE CONTRACT

11
MISREPRESENTATION

• INNOCENT MISREPRESENTATION
• INNOCENT PARTY CAN ONLY RESCIND THE CONTRACT AND
  RECOVER ANY CONSIDERATION PAID (RESTITUTION)

12
FRAUD

• Misrepresentation or concealment of material fact
  not opinion/value
• Made with SCIENTER knowledge of falsity and
  intent
• Reasonably or Justifiably Relied upon by the
  defrauded party
• Causes damages to that party

13
DUTY OF DISCLOSURE

• No general duty to disclose material facts to
  another
• Passive nondisclosure or a failure to volunteer
  information is not fraud
• Ordinarily must prove active steps to conceal
  information to show fraud

14
DUTY OF DISCLOSURE

• Exceptions where person is under a duty of
  disclosure
• Latent defects known defects not discoverable
  upon a reasonable inspection
• Confidential or fiduciary relationship between
  the parties
• Statutory duties of disclosure

15
MISTAKE

• UNILATERAL V. MUTUAL MISTAKE
• MISTAKE OF FACT V. MISTAKE OF VALUE/OPINION

16
MUTUAL MISTAKE OF FACT

• GENERALLY A DEFENSE TO A CONTRACT
• MISTAKE CAN RELATE TO THE EXISTENCE, IDENTITY, OR
  QUALITIES OF THE SUBJECT MATTER
• NOT CONSCIOUS UNCERTAINTY

17
UNILATERAL MISTAKE

• UNILATERAL MISTAKE IS GENERALLY NOT A DEFENSE TO
  A CONTRACT
• EXCEPTION OTHER PARTY KNOWS ABOUT THE MISTAKE
  OR SHOULD KNOW ABOUT IT AND ATTEMPTS TO TAKE
  ADVANTAGE OF IT