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Chapter 11

BUL3130 Chapter Notes - Chapter 11: Undue Influence, Uberrima Fides, Determinative

Business Law
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Legal Environment of Business Chapter 11 Conduct Invalidating Assent
o A person should not be held to an agreement that is not voluntarily
The law will not enforce any contract, any wrongful or unlawful act or threat
that overcomes the free will of a party
Physical Compulsion
o When one party compels another to manifest assent to a contract through actual
physical force
o Renders the agreement void and the party exerting the duress is liable in restitution as
necessary to avoid unjust enrichment
Improper Threats
o Economic and social coercion, compels a person to enter into a contract
o May be explicit or may be inferred from words or conduct, must leave the victim with
no reasonable alternative
o Makes contract voidable and party exerting the duress is liable in restitution as
necessary to avoid unjust enrichment
o More Common type of duress, the fact that the act or threat would not affect a person
of average strength and intelligence is not determinative if it places the particular
person in fear and induces him to perform an action against his will
o The act need not to be criminal or tortious to be wrongful
Need to be contrary to public policy or morally reprehensible
o Courts see that contracts induced by threats of criminal prosecution are voidable
Undue Influence
o Unfair persuasion of a person by a party generally in a dominate position based upon a
confidential relationship
o Law scrutinizes contracts between those in a relationship of trust and confidence to
permit one party to take unfair advantage of another
o Undue influence on the part of the dominant party is voidable, and the dominant party
is liable in restitution as necessary to avoid unjust enrichment
o The weakness or dependence of the person persuaded is a strong indicator of the
fairness of unfairness of the persuasion
o Important factors in determining fairness of the contract
Dominant party made full disclosure of all relevant information known
Whether the consideration was adequate
Whether the dependent party received competent and independent advice
before completing the transaction
o Without limitation every situation in which confidential relationship exists
Dominant party is held to utmost good faith in his dealing with the other.
o The validity of consent given by contracting party is fraud, prevents assent from being
knowingly given
Fraud in the execution
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