1/13/2024 0 Comments Duress vs undue influence![]() Failure to disclose would be an issue of non-disclosure. However, where one party knows of a material fact because of his special position and the other party is unaware of that fact and will not be able to easily discover it there may be a duty to disclose. Here, there is a binding contract because George had no duty to tell Mickey what the bat was really worth. Mickey agrees to sell the bat to George for $200. For example: George, the owner and manager of Babe’s Baseball Memorabilia, offers to buy Mickey’s signed Ted Williams Bat for $200. In general, parties that propose contracts are not required to disclose facts regarding the subject matter of the contract. Although the misrepresentation that the owner made was not fraudulent (because he himself was unaware of the termite problem), it was still a material misrepresentation that Karl relied on. In this case, the contract will also be voidable by Karl. After the contract is signed, Karl finds out about the termite problem. The owner tells Karl that there is no termite problem and Karl and the owner sign a contract under which Karl will buy the house for $250,000. However, the owner is unaware of the problem. After picking out the house he likes, Karl asks the owner if the house has a termite problem. Karl contacts John, a realtor, and arranges to see several houses that are on sale. For example: Karl is looking to buy a house in the Salt Lake City area of Utah. If a misrepresentation is material to the contract, the contract will be voidable by the relying party even if the misrepresentation is not fraudulent. John’s misrepresentation, although not fraudulent, is negligent.Ī material misrepresentation (which is what the owner’s statement in the above example is) is a misstatement of fact that will induce a reasonable person to enter into a contract. If asked directly, John may be tempted to affirmatively deny the existence of termites, even though the owner was aware of the situation. In our case above, John the realtor has no indication or reason to believe that the house has a termite problem. Sometimes, in the use of agents to sell an item on behalf of an owner, mere (allowable) puffing of the item’s value can go so far as negligent misrepresentation. In this case, the contract will be voidable by Karl because the owner made a fraudulent misrepresentation that Karl relied on and, based on that misrepresentation, Karl entered into the contract. Karl and the owner sign a contract under which Karl will buy the house for $250,000. ![]() The house does have a termite problem but the owner, knowing that Karl will not buy the house if he knows about the termite problem, tells Karl that there is no termite problem. ![]() If a party to the contract relies on the fraudulent misrepresentation and enters into a contract based on that misrepresentation, the contract is voidable by the innocent party. Contract Defenses for Lack of Mutual Assent: Mistake, Misunderstanding and MisrepresentationĪ statement about something that is not in line with the facts.Ī false statement that is known to be false or is made recklessly – without knowing or caring whether it is true or false – and that is intended to induce a party to detrimentally rely on it.Ī careless or inadvertent false statement in circumstances where care should have been taken.Ī false statement that is likely to induce a reasonable person to assent or that the maker knows is likely to induce the recipient to assent.Īn unlawful coercion used by the stronger party to induce the weaker party to enter into a contract by threatening the weaker party with financial harm.Ī misrepresentation is a statement about something that is not in line with the facts.Ī fraudulent misrepresentation is where someone misstates a fact and either knows or believes that what he is saying is not true or is not sure whether or not his statement is true but passes it off as true anyway.Short Video: Contract Defenses for Lack of Mutual Assent: Mistake, Misunderstanding and Misrepresentation
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