Chapter 8
GENUINE AGREEMENT
OBJECTIVES
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Define genuine agreement and rescission
Identify when duress occurs
Describe how someone may exercise undue
influence
Describe the kinds of mistakes that can make a
contract void or voidable
Determine when misrepresentation has occurred
Identify when fraud has occurred
Discuss the remedies for mistake,
misrepresentation, and fraud
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HOT DEBATE, pg 114
Where do you stand???
Chapter 8-1
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Goals:
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Define genuine agreement and rescission
Identify when duress occurs
Describe how someone may exercise undue
influence
1. What is genuine agreement?
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Read ‘What’s your verdict?’, page 115
An agreement to enter into a contract that
is evidenced by word or conduct between
the parties

AKA Genuine assent or mutual assent
2. Genuine Agreement may be
lacking due to …
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Fraud
Misrepresentation
Undue Influence
Duress
Mistake
3. Voidable Contract

Voidable – a contract in which the injured
party can withdraw, thus cancelling the
contract
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A contract is voidable in the absence of
genuine agreement
The injured party can RESCIND   
4. Rescission and Ratification
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Rescission: backing out of the transaction by
asking for the return of what you gave and
offering to give back what you received
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Must be PROMPT!!
Must be done shortly after you discover there is no
genuine assent
Must occur BEFORE ratification of the contract
Ratification: Conduct suggesting you intend to
be bound by the contract
READ In this case, pg 115
Situation…
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The Thompsons were told by a man that if
they did not sign a contract to repay a
$2000 loan at 40% interest, their son
would be in danger of physical harm.
Afraid the threat would be carried out, the
Thompsons signed the contract.
Is it enforceable??? Why or why not??
5. Duress

Occurs when one party uses an improper
threat or act to obtain an agreement

If duress is evident the contract is voidable!
6. Examples of Duress
1. Threat of Illegal Conduct
a.
b.
c.
d.
Committing an Act of Violence (ie: stabbing)
Threatening a Crime (ie: threatening to stab)
Committing a Tort (ie: unlawful detention)
Threatening a Tort
a.
Defamation, libel, infliction of emotional distress
**Actual crime or tort may be to the physical life, liberty
or property of victim, family, or near relatives
Other Examples of Duress
2. Threats to report crimes

May also be extortion – obtain something of value
through coercion
3. Threats to sue
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Purpose must be UNRELATED to the suit
Ie: If during a divorce, a husband threatens to sue
for custody of children if wife doesn’t sign stocks over
to him
4. Economic threats
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Courts will look at both the THREAT and the
ALTERNATIVES to the threatened party
If threatened party had no other choice, but to enter
into contract duress
READ: Economic Threats paragraph
Situation…
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The IRS assessed a large tax and penalty
against Stan. Stan retained Ashley to
represent him to reduce the tax and
penalty. The last day before the deadline
for filing for a reply with the IRS, Ashley
refused to represent Stan. She said she
would reconsider if Stan signed an
agreement to pay a much higher fee than
originally agreed for her services.
Is this agreement enforceable?
7. What is Undue Influence?

Undue Influence – occurs when one party
to the contract is in a position of trust and
wrongfully dominates the other party
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The dominated person does not exercise free
will in accepting favorable terms
8. Two Key Elements in Undue
Influence:
A. The Relationship:
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A relationship of trust, confidence or authority between the two parties
of a contract
Formal relationship is NOT necessary
EXAMPLES
B. Wrongful or Unfair Persuasion
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Difficult to prove in court
Courts look at unfair terms in contract
To prevent this, the stronger party should act with honesty, fully
disclose all important facts, insist weaker party obtain independent
counsel
* Nagging and persuasion do not necessarily mean undue
influence occurs
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9. The Lindbergh Kidnapping
Case
Read: Law in the Media, pg 116
When the press descended upon the grounds of
the Lindbergh mansion, they trampled over
everything they could have used for evidence.
What could have been done to prevent this?
UNDUE MEDIA INFLUENCE:
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The media declared Hauptmann guilty before he
went to trial. Can you think of examples where
the modern media has passed judgment on a
person accused of a crime?
Quick Re-cap!
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What is genuine agreement?
What is rescission and when can it be
used?
What is duress?
What are the 2 main parts of undue
influence?
How can someone use undue influence in
a contractual setting?
TO DO…
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Compare and contrast Duress and Undue
Influence
Page 118, 1-15
Undue Influence
Chapter 8-2:
Mistake, Misrepresentation, and Fraud
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Read, What’s your verdict, pg. 119
Will he win????
GOALS:
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Describe the kinds of mistakes that can
make a contract void or voidable
Determine when misrepresentation has
occurred
Identify when fraud has occurred
Discuss the remedies for mistake,
misrepresentation, and fraud
Ignorance of the law is no
excuse!!!
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How do you think this statement relates to
a person’s failure to read a contract and
the voidability of a contract???
10. Unilateral Mistake
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UNI – one… LATERAL – related to one
side
Occurs when one party holds an incorrect
belief about the facts related to a contract
Examples:
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Failing to read the contract
Hurried or careless reading of a contract
Signing a contract written in a language you
don’t understand
USUALLY not able to rescind
11. Two types of Unilateral
Mistakes
A. Recognized Unilateral Mistake
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If the other party to the contract is aware of the
mistake  court MAY grant rescission
Read, In this case, page 119
B. Induced Unilateral Mistake
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If one party has encouraged the other party to make
the mistake, the contract is voidable
Ie: Looking at a tray of diamonds mixed with one CZ,
and the jeweler encourages you to choose the CZ and
pay a diamond’s price, this was induced
What’s your verdict??, pg 120
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Is the contract valid????
12. What are mutual mistakes?
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Mutual Mistake – when both parties have an
incorrect belief about an important (material) fact
of the contract, AKA: Bilateral Mistake
Material facts: important facts that influence the
parties’ decisions about a contract
A. Mistake about subject matter
B. Mistake about the law
In this case, page 120
Situation…
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Jane contracts with Mike to purchase one of his
two skateboards. Mike thinks Jane has bought
the blue one, his less valuable skateboard. Jane
thinks she bought the red, more expensive one.
Does a contract exist???
NO – Mutual Mistake – both were mistaken on
subject matter – materiality – central fact to
contract.
13. REMEMBER…
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Mistakes about subject matter make the
contract void for lack of genuine
agreement
Mistakes about the law may still result in
valid contract, depending on state laws
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Ie: Local zoning laws
MOST mutual mistakes create the right to
rescind or void the contract
14. What is
Misrepresentation???
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Read, What’s your verdict, pg 120
Innocent Misrepresentation – a party to the
contract does not know a statement he/she
made is untrue
Fraudulent Misrepresentation – a party to
the contract knows that a statement he/she
made is untrue
* BOTH make contract voidable*
15. Statements are treated as
misrepresentation only if:
1.
2.
3.
The untrue statement is ONE OF FACT or
there is active concealment, and
The statement is material to the
transaction or is fraudulent, and
The victim REASONABLY RELIED on the
statement.
16. Untrue Statement of Fact
The statement must be one of ‘past or
existing’ fact rather than opinion
 If EXPERTS express opinion, the law may
treat that statement as a statement of fact
1. Active Concealment: a substitute for a
false statement of fact
 Examples:
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1. Painting the ceiling to cover the roof leaks
2. If the price sticker is placed over a scratch
on a TV
Untrue Statement of Fact
2. Silence:
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1.
2.
3.
Remaining silent about defects or allowing mistaken
assumption about something
3 situations where disclosure is required:
Where statement about material fact omits important
info (ie: Race car)
When a true statement is made false by subsequent
events (ie: Roof leak)
When one party knows the other party has made a
mistake (ie: House foundation)
Refer to PAGE 121
17. Materiality
1. A statement is material in the following cases:
a.
If a statement would cause a reasonable
person to agree to a contract
a.
(total miles on a car, rebuilt engine, baseball card)
b. If the defendant knew the plaintiff would rely on
the statement
* (oil changes)
c. If the defendant knew the statement was false
*(serviced at local gas station and not dealer)
Fact or Opinion??
This computer is one year old
 The engine has 40,000 miles on it
 This dog will be the perfect pet for you!
 The suit will create the image you need to
double your business.
*****************************************
 Why is a person generally not legally required to
tell all he or she knows about a product or
service being bought or sold???
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18. Fraud and Remedies for
Fraud
 Read, What’s your verdict???, pg 122
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FRAUD: Intentional misrepresentation of an
existing or important fact
ALL elements of misrepresentation are
required to be considered FRAUD, PLUS
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Misrepresentation: Untrue statement of fact,
material, reasonably relied
Intent
Injury
19. Misrepresentation must be:
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Intentional: when a person deliberately
lies or conceals a material fact
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To induce victim to contract
Reckless: if a person recklessly makes a
false statement of fact, without knowing
whether it is true or false
20. Misrepresentation or
Concealment MUST Injure
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There must be proof of injury
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Does not have to be physical – can be
monetary
If there is a misrepresentation but no
injury, there is no fraud
Situation..
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Matt tells Bret: “This Cadillac gets great gasoline
mileage. I took it on a trip last week and got
over 40 miles to the gallon.” Bret knows about
cars and knows the statement is an
exaggeration. Still he decides to buy the car
from Matt.
If later, Bret changes his mind, does he have an
action for fraud when it turns out the car only
gets 13 miles per gallon?
21. Remedies for Fraud
1. Rescission:
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If the contract is entered into as a result of
misrepresentation, the contract is voidable
Must usually return anything received
2. Damages:
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Monetary or property damages are available if fraud is
proven
May still ratify seek damages for loss created by fraud
3. Punitive Damages:
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A form of punishment against the person who committed
fraud (ie: Judge awards you $5,000 to punish the party
who committed the fraud)
Quick Re-cap!
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What kinds of mistakes make a contract
voidable?
What items are required for
misrepresentation to occur?
What elements are required for FRAUD to
occur?
What are the remedies for mistake,
misrepresentation, and fraud?
TO DO:
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Questions, pg 123 (1-10)
Chapter 8-2 quiz
Internet Activity: Misrepresentation
CHAPTER 8 REVIEW:
Worksheet
2. Legal vocab, 124
3. Think Critically, 125 (21, 22, 23)
4. Real Cases, 125 – pick 1 from 25, 26, 27
1.