Wrongful or unlawful threat that overcomes the free will of a party. Invalidates assent.
Physical Compulsion (Duress)
Makes the agreement void. Involves use of physical threat.
Improper Threats (Duress)
Makes contract voidable. Involves economic and social coercion.
Taking unfair advantage of a person by reason of a dominant position based on a confidential relationship. Makes contract voidable.
When contract is voidable...
Victim can honor contract OR have it canceled/recinded
Fraud (2 types)
When someone has been decieved. Invalidates assent.
Fraud in the Execution
Decdit that causes a person to sign a document that is different then the person believed he/she was signing. Makes agreement VOID. (very rare)
Fraud in the Inducement
The contract is VOIDABLE if all of the following are true:
- False representation of
- Fact, that is
- Material, and made with
- Scienter (intent to decieve), upon which there is
- Justifiable Reliance
*Opinions are NOT considered fraud but FACTS are. (exception is if it is a professional opinion, it may be considered statement of fact)
NOT Considered Fraud
If you have opportunity to read a contract and you don't, it is not fraud even if verbal statements were different.
"Failure to Speak"
*Under CL, not required to educate the other party, just cannot lie or misslead.
*Today, it is different (by statute, many disclosures must be provided to consumers); there are 3 requirements: (1) reveal hidden defects [something physical inspection would not reveal]; (2) correct prior misstatements; (3) if you have a fiduciary relationship.
An understanding not in accord with the facts.
Makes the contract voidable by either party.
No relief for mistaken party. (Exception: Palpable Unilateral Mistake - when other party knows you're mistaken. *contract is voidable by mistaken party)