Lecture 4 – Contracts II: Mistake, Misrepresentation and Duress
5 factors to determine legality of contract:
Arguments that result in no contract even though it appears there is:
Legal definition; much narrower than the dictionary definition
Example: shared mistake:
When both parties are mistaken by the existence of the subject
matter at no fault of their own, there is no contract
Example: mistaken about the term of the contract:
I send an email offering to buy 1000 computers for $1 million and
the person accepts. CONTRACT.
However, when the email was sent the person thought he was
buying 1000 PCs and the other thought he was selling 1000 Macs.
Therefore, NO CONTRACT.
Both are mistaken about the essential terms – lack of consensus
Example: Suppose I learn of the mistake
It is beneficial to me (take advantage of the other’s carelessness). NO
Can’t take advantage of someone else’s carelessness
In the examples above they will look at dictionary definition, past
transactions between the two, and then go to industry analysis. Courts will
go through everything possible to uphold the reasonable expectations of the
parties. If, however, they can’t determine it and the parties are mistaken
with no fault of their own, then there is no consensus.
If a written document contains of typical or clerical error, the contract will
be rectified by the court
Be as specific as you can when entering into an agreement; don’t want terms
to be vague (this increases the likelihood the contract will be void)
What if I enter into a contract to buy a bunch of computers from you, but
really I’m entering into a contract with somebody else? Mistake if the
person’s identity was an essential term of the contract
Involved someone saying something that isn’t true
If it was not a term of the contract – only recision
If it was a term of the contract – recision o