Chapter 10
Consent and Performance
I. Consent
A. Caveat Emptor

Means buyer beware

RECISSION means the contract is extinguished

Rescission is an appropriate remedy when
consent was given by mistake or was obtained
through duress, menace, fraud, or undue
influence [CC§ 1689]
II. Mistake
 Mistake of Fact
 Mistake of Law
A. Mistake of Fact
1.
MUTUAL MISTAKE – No contract formed.

2.
When both parties make the same mistake of a material
fact and neither is at fault
MUTUAL MISTAKE – Contract formed.



Mistake must be material
Mutual mistake does not deal with the subject matter of
the contract, rather it deals with something contained in
the contract
Rescind the contract
A. Mistake of Fact (cont.)
3.
4.
UNILATERAL MISTAKE

Rescission is possible if only one person made a mistake,
but only in certain situations

Generally, if one party makes a mistake that causes that
person to enter into a contract, and the other party was not
making the same mistake, the parties are bound to the
terms of the contract and there will be no rescission by the
mistaken party
MISTAKE OF JUDGMENT

Generally, relief is refused for errors of judgment
B. Mistake of Law

In certain circumstances, California will permit a
rescission of a contract on the basis of a
mistake of law

MISTAKE OF LAW – occurs when a person
who is truly acquainted with the existence or
nonexistence of the relevant facts is ignorant of
or arrives at an erroneous conclusion as to the
effect of those facts
III. Offensive Conduct

California requires that consent be freely given,
and in situations where it has not been given
freely, the innocent party is able to disaffirm the
contract
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Fraud
Duress and Menace
Undue Influence
IV. Fraud
Remedies

CONTRACT REMEDY for fraud includes rescission
and restitution

TORT REMEDY for deceit of keeping the contract
and suing for money damages

Possible exemplary damages
A. Actual Fraud
“consists in any of the following acts, committed by a party
to the contract, or with his connivance, with the intent to
deceive another party thereto, or to induce him to enter into
the contract:

1.
The suggestion, as a fact, of that which is not true, by one who does not
believe it to be true;
2.
The positive assertion, in a manner not warranted by the information of
the person making it, of that which is not true, although he believes it to
be true;
3.
The suppression of that which is true, by one having knowledge or
belief of the fact;
4.
A promise made without any intention of performing it, or
5.
Any other act fitted to deceive.”
1. Intentional Misrepresentation

[CC§ 1572(1)]

If you make a mistake that you know to be false,
you are committing an “intentional
misrepresentation”
2. Negligent Misrepresentation

[CC§ 1572(2)]

If you make a positive statement, not knowing
if it is true, you may have committed “negligent
misrepresentation”
3. Suppression (Concealment)

[CC§ 1572(3)]

Actively suppressing or concealing a known
material fact is considered actual fraud
4. False Promise

[CC§ 1572(4)]

If, at the time of entering into a contract, one person
makes promises about performance of an
obligation with absolutely no intention of performing
that obligation, that is actual fraud
5. Any Other Act
Intended to Deceive

[CC§ 1572(5)]

This is a catch-all that the legislature uses to give the
courts latitude in finding other types of fraud that were
not specifically identified in the Civil Code Section 1572
B. Reliance and Puffing

RELIANCE occurs when the misrepresentation
alters a party’s conduct, which usually means the
party changes legal positions by entering into a
contract; or absent that misrepresentation, the party
would not have entered into the contract

PUFFING is a statement that exaggerates through
superlative comments or opinions, a property’s
benefits
C. Remedies for Fraud

In a normal fraud case, one party is induced by the
other, through either actual fraud or constructive
fraud, to enter into a contract that is voidable
because of the fraud [CC§ 1689(b)(1)]
D. Constructive Fraud

Constructive fraud results from a breach of a
confidential relationship, which gains an advantage
for the person, because of a tendency to mislead
the other

Not telling a client all the material facts necessary
to make a decision amounts to “constructive fraud,”
even though there was no intention to defraud the
client
E. Innocent Misrepresentation

An innocent misrepresentation occurs when a party
makes a material misrepresentation, but does so
honestly believing it to be true
V. Duress and Menace
A. Duress

DURESS - is the wrongful use of threats to obtain
a person’s consent to a contract

In California, duress actually involves the unlawful
confinement of a person or a relative of that person
or the unlawful detention of his or her property
[CC§ 1569]

Duress makes the contract voidable
B. Menace

In California, menace is a closely related form of
coercion

If a person threatens to cause the unlawful
confinement of another person, to inflict unlawful
and violent injury to another person or their
property, or injure the other person’s character, he
or she has committed menace [CC§ 1570]

A threat of criminal prosecution, as opposed to a
threat of civil prosecution on a bona fide claim, will
constitute menace if used to gain an advantage in
a civil matter
C. Economic Duress

Economic duress is not specifically mentioned by
statute in California; however, it is recognized by the
courts

ECONOMIC DURESS exists whenever a person is
induced by the unlawful act of another to give
apparent consent to a contract under circumstances
that prevent the exercise of free will
VI. Undue Influence
Undue Influence

UNDUE INFLUENCE occurs when a person takes
advantage of a relationship with another person so that the
other person’s consent is not freely given

Confidential relationships

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Accountants
Attorneys
Trustees
Stockbrokers
Two other situations where undue influence may exist:
1.
If a grossly and unfair advantage was taken of a person as a result
of that person’s needs or distress
2.
If an unfair advantage was taken because one party had a
weakness of mind
VII. Adhesion Contracts
and Unconscionability
A. Adhesion Contracts

An adhesion contract is typically prepared by one
party who had such overwhelming bargaining
power over the other party that there is no
negotiating possible by the weaker party

Adhesion contracts are not necessarily bad, they
are just one-sided
B. Unconscionability

A contract or a portion of a contract so one-sided
the courts will find it shocking to their conscience is
consider UNCONSCIONABLE

Inserting an unconscionable provision in a contract
is unlawful as a deceptive practice under the
Consumer Legal Remedies Act
[CC§ 1770(a)(19)]
VII.Contract
Performance

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Common Contract Conditions
Satisfaction Clauses
Time of Performance
Substantial Performance
A. Common Contract
Conditions

CONDITIONS are provisions in the contract that
determine the time for performance, the order of
performance, or establish the circumstances
under which a performance obligation begins or
ends


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Condition Precedent
Condition Subsequent
Conditions Concurrent
B. Satisfaction Clauses

A contract may contain a clause that provides
that one party’s performance must be
satisfactory to the other party before that
performance must occur

Courts imply an obligation of good faith in
determining satisfaction

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Personal taste
Judgment
Mechanical Utility
Operative Fitness
C. Time for Performance

If a contract specifies the time for performance, it
may be either general, “by the end of the rainy
season,” or specific, “by five P.M., Thursday,
March 17”

If no time is specified for the performance of an act
required to be performed, a reasonable time is
allowed

“time is of the essence”
D. Substantial Performance
 To reach the level of SUBSTANTIAL
PERFORMANCE, the act/task must be so close to
completion that the other party has obtained the
substantial benefit of the bargain
Chapter Summary
 Consent
 Mistake


Mistake of Fact
Mistake of Law
 Offensive Conduct
 Duress and Menace

Economic Duress
 Undue Influence
 Adhesion Contracts and
Unconscionability
 Fraud

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Actual Fraud
Reliance and Puffing
Remedies for Fraud
Constructive Fraud
Innocent Misrepresentation
 Contract Performance
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Common Contract Conditions
Satisfaction Clauses
Time of Performance
Substantial Performance