Business Law Chapter 8
Mistake one or both parties make a mistake. Have a problem with consensus. The courts may find the
contract void, voidable, rescission, or one party should sue in tort.
1 party mistake (unilateral)
1) General rule: caveat emptor (you are responsible for what you contracted for) no remedy
2) Exception: If mistake as to identity remedy contract VOID
3) If mistake as to nature of document remedy contract VOID. “non est factum” – not what I
meant to do (most of time, there is no remedy you are responsible for what you sign)
Misrepresentation false statement of fact that induces someone to enter into a contract
1. Fraudulent misrepresentation a lie remedy rescission put parties back into original
position (could be a remedy unless the victim affirms it the victim drives the car for 6 months,
the victim used it for benefit, the victim sells it, the victim isn’t quite so innocent, etc. or it is
impossible to be restored) + tort action (you owed me a duty to tell me the truth, you fell below
standard of care might even request for punitive damages)
2. Negligent misrepresentation careless remedy- rescission or tort action (likely not going to
get any punitive damages, likely only tort of negligence)
3. Innocent misrepresentation you weren’t even careless, you did everything you could – no
maliciousness remedy is rescission if available (no tort remedy because you never fellow
below standard of care)
2 parties making mistake
1. Shared mistake- both making same mistake before the agreement and they are both wrong
(both in agreement and both wrong).
a. If the mistake made is fundamental to the contract remedy contract VOID.
b. If mistake as to value (how much the thing is worth) no remedy.
c. Document wrong Remedy rectification (correct the typo in the contract). Not
usually a remedy that someone comes and asks for. If both parties agree the contract is
wrong, not likely to be in court. Usually the judge declares it is a shared mistake and
rectifies it because something is wrong in the document.
2. Misunderstanding both made a mistake, but didn’t make the same mistake – the court
interprets the contract and they are going to enforce the most reasonable interpretation.
a. The court will enforce the most reasonable interpretation
b. If equally reasonable declare contract VOID
Duress and Undue Influence
Duress: threat of violence makes contract voidable
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