Chapter 11
Reality of Assent
McGraw-Hill/Irwin
Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter 11 Case Hypothetical and Ethical Dilemma
John Hammonds recently purchased a used Fjord Mastodon sedan from Square Deal
Pre-Owned Auto Sales, Inc. During contract negotiations, John did not ask any
questions related to the fuel efficiency of the car, and Square Deal’s sales representative,
Wink Eubanks, did not volunteer any information about the Mastodon’s gas mileage.
John had saved for a car for five (5) years, and he paid ten thousand dollars cash for the
vehicle.
After his purchase, John kept meticulous records regarding the fuel consumption of the
Mastodon, and he calculated that the Mastodon was getting approximately twelve (12)
miles per gallon. He immediately returned to Square Deal (John thought the dealership
should be renamed “Raw Deal”), found Wink Eubanks in front of one of the store’s
vending machines, and stated “You should have told me that Mastodon only gets twelve
miles per gallon. I am the victim of fraud, and I want my money back. Here are the keys
to your Mastodon with the mammoth appetite!”
Do you agree with John Hammonds? Is John the victim of fraud? Is he entitled to a
rescission of the contract based on Square Deal’s nondisclosure of the Mastodon’s gas
mileage?
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Chapter 11 Case Hypothetical and Ethical Dilemma
For Greta Harrington and her husband Robert, it was love at first sight. The two were married for 52
years until cancer took her husband at the age of 84. Greta is currently 83 years old, and her marriage
produced three offspring: Samuel, 50 years old; Katherine, 45 years old; and Benjamin, 40 years old.
In his will, Robert left all of his financial interests, a considerable sum valued at $5 million, entirely to
his wife; in his will, he also expressed love and affection for his three children, as well as the desire
that Greta devise the remainder of the couple’s estate to their children, in equal portions, upon her
death.
Greta has recently been “keeping company” with Gary Watson, a twice-divorced, 65-year-old bachelor
with a reputation for “womanizing.” While visiting her mother one weekend, Katherine is shocked to
see a fully-executed will on the desk in the living room, devising all of her mother’s estate to Gary
Watson. She immediately calls Samuel and Benjamin, schedules an emergency “sibling meeting” for
Sunday, and wonders what to do about her mother’s ill-advised decision. She has noticed in recent
months that her mother is often forgetful, frequently calls her “Sharon” (her aunt’s name,) and often
confuses the days of the week.
Do the children have any legal rights in terms of successfully invalidating Greta Harrington’s will? From
a legal and/or ethical standpoint, should a mother (even of adult children) be allowed to “disinherit” her
offspring?
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Legal Assent
• Definition: Voluntary, willing promise to transact the
law will require contracting parties to obey
• Without assent, contract may be avoided/rescinded
• Cancellation of contract due to lack of assent means
party with power of avoidance can require return of
consideration given to other party; similarly, party
with rescission right must return consideration
received from other party
• Major “obstacles” to legal assent: Mistake,
misrepresentation, undue influence, duress, and
unconscionability
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Mistake
• Definition: Misunderstandings regarding
material facts of contract at time agreement
made
• Unilateral Mistake: Mistake made by one
contracting party; generally, contract still
binding
• Mutual (Bilateral) Mistake: Mistake made by
both parties; if mutual mistake of material
(significant) fact, either party can rescind
contract
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For a mutual mistake to interfere with
legal consent, it must involve:
• A basic assumption about the subject
matter of the contract;
• A material effect on the agreement; and
• An adverse effect on a party who did not
agree to bear the risk of mistake at the time
of the agreement
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Negligent or Fraudulent Misrepresentation
• Negligent Misrepresentation (Definition): Negligent,
untruthful assertion of material fact by contracting party;
aggrieved party can rescind contract, and sue for damages
-Contrast with “innocent misrepresentation”, when party
making false assertion believes it to be true, and is not
negligent in making false assertion; although innocent
misrepresentation permits misled party to rescind
contract, he/she cannot sue for damages
• Fraudulent Misrepresentation (Definition): Intentional,
untruthful assertion of material fact by contracting party;
aggrieved party can rescind contract, and sue for damages
• Courts permit contract rescission for negligent or
fraudulent misrepresentation, assuming:
-False assertion
-Negligence resulting in deception, or intent to deceive
-Justifiable reliance on false assertion by innocent party
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Undue Influence
• Definition: Persuasive efforts of dominant
party, who uses special relationship to unduly
persuade the other party
• Any relationship involving one party’s unusual
degree of trust in another can give rise to
undue influence
-Examples include attorney-client relationship,
and doctor-patient relationship
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Questions Affecting Determination of
Undue Influence
• Did dominant party “rush” the other party to
consent?
• Did dominant party gain unjust enrichment from
the agreement?
• Was non-dominant party isolated from other
advisers at time of agreement?
• Is contract unreasonable, in that it
overwhelmingly benefits dominant party?
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Duress
• Definition: Occurs when one party threatens
other with wrongful act unless assent given
• Duress is not legal assent, since coercion
interferes with contracting party’s free will
• For courts to rescind agreement, injured party
must prove duress left no reasonable
alternatives to contractual agreement
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Situations Involving Duress
• One party threatens physical harm or extortion to
gain consent to contract
• One party threatens to file criminal lawsuit unless
consent given to terms of contract
• One party threatens to file frivolous civil lawsuit
unless consent given to terms of contract
• One party threatens the other’s economic
interests (although in many jurisdictions, recovery
based on economic duress/pressure rarely
granted)
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