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