Mistakes, Fraud and Voluntary
Consent; The Writing
Requirement and Electronic
Records; & Third Party Rights
Chapters 15, 16, 17
Genuineness of Assent
• A party who demonstrates that he or she did
not genuinely assent to the terms of a
contract may avoid the contract.
• Genuine assent may be lacking due to
mistake, fraudulent misrepresentation,
undue influence, or duress.
Mistake
• Unilateral Mistake
– A mistake made by one of the contracting
parties.
– Generally, a unilateral mistake will not
excuse performance of the contract unless
other party knew of the mistake OR
substantial mathematical error
Mistake
• Mutual Mistake
– A mistake on the part of both contracting
parties.
– In this case, either party may rescind.
Fraud
• When an innocent party consents to a
contract with fraudulent terms, he or she
may usually avoid the contract, because he
or she did not genuinely assent to the
fraudulent terms.
Fraud
• Elements:
– misrepresentation of material fact
– made with the intent to deceive (scienter)
– justifiable reliance
– damages
Undue Influence
• Contract lacks voluntary consent and is
voidable.
– Undue Influence or Persuasion is presumed if
weak party talked into doing something not
beneficial to him or herself.
Duress
• Party who enters into a contract under fear or
threat makes the contract voidable.
• Threatened act must be wrongful or illegal and
render person incapable of exercising free will.
– Threat of civil suit is not unlawful.
The Statute of Frauds
• A statute which requires certain types of
contracts to be in writing in order to be
enforceable.
• Some contracts considered important
enough that their terms must be
memorialized in writing to ensure reliable
evidence of their existence and their terms
The Statute of Frauds
• Agreements in consideration of marriagePrenuptial agreements
• Not performable within one year
• Involving an interest in land
• For sale of goods over $500 ($5,000 under
UCC)
• Collateral agreements
The Statute of Frauds:
Exceptions
•
•
•
•
Admissions
Partial Performance
Custom Orders of Goods
Acceptance of Delivery
The Statute of Frauds:
Sufficiency of the Writing
– A writing signed by the party against
whom enforcement is sought.
– A confirmation, invoice, sales slip, check,
or fax, or any combination thereof.
– Several documents which, in
combination, provide the terms for an
agreement.
Privity Of Contract
• As a general rule, only the parties to a
contract owe any duties and enjoy any
rights arising from the contract.
Privity Of Contract
• Exceptions:
– Assignment - a party to the contract (the
assignor) transfers his or her rights to
some third party (the assignee).
– Delegation - a party to the contract frees
himself or herself from duties by having
some third party perform those duties.
Assignment of Rights
• Generally, all contracts may be assigned,
BUT
– Some assignments may be prohibited by
law or by contract.
– Not allowed if for contract is personal in
nature.
– Not allowed if it would materially alter
duties of party.
Assignments
• Effect of an Assignment:
– Obligor: person who is obligated to perform the
duty.
– When rights of assignor are unconditionally
assigned, her rights are extinguished.
Assignments
• Effect of an Assignment:
– The third party (assignee) has right to demand
performance from original party to contract.
Delegations
• Contractual duties in a bilateral contract that
are delegated to a third party.
Delegations
• Effect of a Delegation.
– Delegator remains liable.
– Delegatee is liable if delegation contract creates
a third party beneficiary relationship in the
obligee.
Delegation of Duty
Duties that may not be delegated
• Performance depends on the skill of the
obligor.
• Special trust has been placed in the obligor.
• Performance by a third party will alter the
expectation of the duty contract.
• Contract expressly prohibits delegation.
Privity Of Contract
• Exceptions:
– Third-Party Beneficiary
• The law distinguishes between intended and
incidental third-party beneficiaries.
• Only intended beneficiaries acquire
actionable legal rights in a contract.
Third-Party Beneficiaries
• Intended Beneficiary
– A third party for whose benefit a contract is
formed.
– Example: life insurance.
Third-Party Beneficiaries
• Incidental Beneficiary
– A third party who benefits from the
performance of a contract, but whose
benefit was not the reason the contract
was formed.
– Example: include construction contracts.
Third Party Beneficiaries
• Intended v. Incidental. Factors:
– Performance is rendered directly to TPB.
– TPB’s right to control contract details.
– TPB expressly designated as beneficiary.
Mistakes, Fraud and Voluntary
Consent; The Writing
Requirement and Electronic
Records; & Third Party Rights
Chapters 15, 16, 17