When the party making the statement would have known the truth about the fact had he used reasonable care to discover or reveal it a negligent misrepresentation results?

GENUINENESS OF ASSENT 4310-4315

����� A party who demonstrates that he or she did not genuinely assent to the terms of a contract may avoid the contract. Genuine assent may be lacking due to mistake, fraudulent misrepresentation, undue influence, or duress.

����� As was true with contracts entered into by persons lacking contractual capacity, contracts lacking genuine assent are voidable, not void.

MISTAKE 4314

����� Mistake: The parties entered into a contract with different understandings of one or more material fact(s) relating to the subject matter of the contract.

����� Unilateral Mistake: A mistake made by one of the contracting parties. Generally, a unilateral mistake will not excuse performance of the contract unless:

(1)�� the other party to the contract knew or should have known of the mistake; or

(2)�� the mistake is one of mathematics only.

����� Mutual Mistake of Fact: A mistake on the part of both contracting parties as to some material fact. In this case, either party may rescind.

����� Mutual Mistake of Value: If, however, the mutual mistake concerns the future market value or some quality of the object of the contract, the contract can normally be enforced by either party.

FRAUDULENT MISREPRESENTATION 4310

����� When an innocent party consents to a contract with fraudulent terms, he or she may usually avoid the contract, because he or she did not genuinely assent to the fraudulent terms.

����� Elements of Fraudulent Misrepresentation:

(1)�� A misrepresentation of material fact was made,

(2)�� with the intent to deceive,

(3)�� on which the innocent party justifiably relied

(4)�� resulting in injury to the innocent party.

����� Most courts do not require proof of an injury to the innocent party if the only remedy sought by the innocent party is rescission of the contract -- that is, returning the parties to their pre-contractual positions.

����� However, in order to recover damages, it is universally held that the innocent party must prove injury as a result of the misrepresentation.

TYPES OF MISREPRESENTATIONS

����� Predictions and Expressions of Opinion: Generally, these will not give rise to an actionable misrepresentation, unless the person making the statement has a particular expertise and knows or has reason to know that the listener intends to rely on the statement.

����� Misrepresentation by Conduct: The conduct of a party -�particularly a party�s concealment of some material fact from the other party -- will support a claim of misrepresentation.

����� Misrepresentation of Law: Generally, this will not support a misrepresentation claim, unless the speaker is a member of a profession that is commonly known to require greater knowledge of the law than possessed by the average citizen.

����� Misrepresentation by Silence: Generally, neither party to a contract has a duty to come forward and volunteer facts unless the other party asks. However, the common law recognizes exceptions where a duty to speak exists, for example, where there exists a serious defect or serious risk of injury. In addition, some statutes create duties to speak not otherwise present under common law.

INTENT AND RELIANCE

����� Scienter: A defendant acts with the intent to deceive if he:

(1)�� knows a statement to be false,

(2)�� makes a statement he reasonably believes to false,

(3)�� makes a statement recklessly, without regard to its truthfulness or falsity, or

(4)�� implies that a statement is made on the basis of information that he does not possess or on some other basis on which it is not, in fact, based.

����� Reliance: The plaintiff must have acted based on (although not necessarily solely based on) the defendant�s misrep�resentation. Moreover, in some jurisdictions, the plaintiff�s reliance on the misrepresentation must be reasonable.

OTHER MISREPRESENTATIONS

����� Innocent Misrepresentation: A statement made by a person, believing it to be true, that actually misrepresents some material fact.

>���� An innocent misrepresentation results, in essence, in a mutual mistake of fact. Therefore, the only remedy to an injured party is generally rescission of the contract.

����� Negligent Misrepresentation: An untrue statement made by a person believing it to be true who failed to exercise reasonable care in determining its truthfulness and/or failed to use the skill and competence required by her business or profession.

UNDUE INFLUENCE AND DURESS 4313

>���� Undue Influence arises from relationships in which one party can influence another party to the point of overcoming the influenced party�s free will.

����� The essential feature of undue influence is that the party being influenced does not, in reality, enter into the contract of his or her own free will.

>���� Duress: Forcing a party to enter into a contract because of the fear created by threats. While a party forced to enter into a contract under duress may choose to perform the contract, duress is grounds for cancellation, or rescission.

ADHESION CONTRACTS

����� Adhesion Contract: A contract written exclusively by one party (the �dominant� party, usually the seller or creditor) and presented to the other party (the �adhering� party, usually the buyer or borrower) on a �take-it-or-leave-it� basis, such that the adhering party has no opportunity to negotiate the terms of the contract.

����� To avoid enforcement of a contract based on adhesion, the adhering party must show that:

(1)� the parties had substantially unequal bargaining positions and

(2)�� enforcement against the adhering party would be

manifestly unfair or oppressive.

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