Exam 11: Conduct Invalidating Assent

A party to a contract may be entitled to relief even if he is contributorily negligent in relying on a fraudulent misrepresentation.

Define "mistake," "mutual mistake," and "unilateral mistake." Explain how the law treats mutual and unilateral mistakes.

Undue influence is the taking of unfair advantage of a person by reason of a dominant position based upon a confidential relationship.

If a confidential relationship exists between parties to a contract, the law presumes that undue influence exists if it appears that the dominant party has gained at the other party's expense, but the presumption can be rebutted by evidence that it was not exercised.

Fraud in the inducement will render an agreement void.

Al owns a farm that he believes is worth $150,000. Betty knows that there is oil under the farm and offers Al $160,000 for it. Al accepts and sells the farm to Betty. Al later realizes that the land was worth more than $160,000. Al can have the contract avoided based upon fraud.

At the marriage of her daughter, Lorna is given papers to sign which the catering company says are the invoices for the food, service, and decorations. Underneath the invoices are a carbon and a contract of sale for a portion of the failing catering business. As Lorna signs the papers, her signature is applied to the sales contract. This is a void contract because it was entered by fraud in the execution.

Which of the following would ordinarily be a basis for making a contract void for mutual mistake?

If untrue, which of the following would probably be considered a misrepresentation of a material fact?

Scienter is the element of fraud that requires that the person who makes the misrepresentation knows that it is false or has reckless indifference as to its truthfulness.

Ralph sold a motel to Steve by stating that he had paid $250,000 for it and that his net average annual profit from the business has been $40,000. In reality he paid $100,000 for the motel and has earned a net average annual profit of only $30,000. Steve made no attempt to verify the statements until after the transaction was completed. In this case:

Define fiduciary and discuss its effect on a contract.

If a seller occupies a fiduciary relationship with the buyer and fails to make full disclosure to the buyer, then the latter will be able to avoid the transaction.

Which of the following would be considered to be a misrepresentation of a material fact for purposes of establishing fraud in the inducement?