Mistakes Only a mistake of fact not value allows a contract to be canceled Mistakes of fact occur in two forms unilateral and bilateral 1 Voluntary Consent Mistakes Unilateral ID: 549949
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Voluntary Consent
Mistakes.Only a mistake of fact (not value) allows a contract to be canceled. Mistakes of fact occur in two forms: unilateral and bilateral.
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Voluntary Consent
Mistakes.Unilateral Mistakes cannot be canceled unless:(1) Other party to the contract knows or should have known that a mistake of fact was made,
OR
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Voluntary Consent
Mistakes.Unilateral Mistakes cannot be canceled unless:(2) Mistake was mathematical, made inadvertently and without gross negligence.
Bilateral
(Mutual) Mistakes can be rescinded by either party.
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Exhibit 8.1 Mistakes of Fact
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Voluntary Consent
Fraudulent Misrepresentation.Contract is Voidable by Innocent Party.Consists of the following elements:Misrepresentation of Material Fact.Intent to Deceive.
Reliance on Misrepresentation.
Injury to the Innocent Party.
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Voluntary Consent
Fraudulent Misrepresentation.Misrepresentation Has Occurred.By Conduct: Occurs when a party takes specific action to conceal a fact that is material to the contract.Statements of
Opinion
: generally, opinions are not actionable, unless it is an “expert” opinion.
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Voluntary Consent
Fraudulent MisrepresentationMisrepresentation Has Occurred.By Law: ordinarily does not entitle a party to cancel a contract.By
Silence
: ordinarily neither party has duty to disclose facts. However, seller will be liable if she knows of material defect that cannot be reasonably discovered by buyer.
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Voluntary Consent
Fraudulent MisrepresentationMisrepresentation Has Occurred.By Silence: when parties are in a fiduciary relationship, failure to disclose material facts may be fraud.
CASE 8.3
Fazio v. Cypress/GR Houston I, LP
(2012). What was the fiduciary relationship in this case?
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Voluntary Consent
Fraudulent Misrepresentation.Intent to Deceive requires scienter (guilty knowledge).Party knows that a ‘fact’ is not true, or makes a reckless statement without regard for the truth, or implies that statement is based on personal knowledge or investigation.
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Voluntary Consent
Fraudulent Misrepresentation.Reliance on Misrepresentation.Deceived party must have justifiably relied on representation.Reliance is not justified if the innocent party knows the true facts or relies on extravagant statements.
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Voluntary Consent
Fraudulent Misrepresentation.Injury to the Innocent Party.No proof of injury is required when the action is to rescind contract.Proof of injury is universally required to recover damages.
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Undue Influence
Contract lacks voluntary consent and is voidable.Based on confidential or fiduciary relationship, or dependence.Presumed if weaker party is talked into doing something not beneficial to him or herself.
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Duress
Forcing a party to enter into a contract under fear or threat makes the contract voidable.Threatened act must be wrongful or illegal and render person incapable of exercising free will.Threat of civil suit is not duress.
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Duress
Economic Duress: generally not sufficient to constitute duress, unless same party who created the need also requires the money.14