LSB 3213 1st Edition Lecture 15 Current Lecture One more illegality example Chap 14 Chap 15 mistake and misrepresentation Review of Illegality examples If the contract involves illegal activity you risk making the contract invalid Architecture firm not licensed in D C o The firm did not have a license to build in DC the contract involved a risk to public safety Medical clinic with incomplete corporate registration o The company not having the correct registration did not directly relate to the contract in question Final Illegality Example Burrito Express restaurant in Kansas hires an illegal immigrant and agrees to pay him 6 hour50 hours a week 300 The worker was actually pain only 50 week because the restaurant didn t think that the worker could do say anything about it because he didn t have the right papers The worker goes to Kansas court and sues Burrito Express but they claim that the contract is void because he was an illegal immigrant Was this an enforceable contract Court enforceable contract Public policy company must pay for work performed Purpose immigration laws not designed to invalidate employment contracts Illegality Analysis More than obvious criminal violations Public policy does the illegality relate to public safety Purpose is the illegality related to the contract issue CHAPTER 15 Mistake and fraud in contracts Both parties consent to the same bargain Genuine meeting of the minds Mistake 2 ways o Mutual mistake either party can rescind These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute o Unilateral mistake enforceable against the mistaken party except for three exceptions Mutual Mistake Example Elena wants to sell her jet ski to Chen for 2 500 They agree and Elena makes a contract that says 250 instead of 2 500 They both sign the contract and then Chen brings only 250 for the jet ski Both parties knew of mistake so court will correct or rescind the contract Unilateral Mistake Analysis Not enforceable against mistaken party in three situations o Other party knew or should have known o Results in unconscionable outcome o Substantial inadvertent mathematical error actual mistake in calculation Unilateral Mistake Example Elena makes posters to sell her jet ski for 2 500 and posts them all over campus She hears that Chen might be interested in buying her jet ski for 1 500 Elena sends Chen an email asking if he wants the jet ski for 1 500 but meant to write 2 500 Chen agrees to this lower price and never saw Elena s posters asking for 2 500 so he brings 1 500 for the jet ski Analysis o Should Chen know or would have known Obvious mistake NO o Unconscionable NO o Mathematical error vs typo Error no typo yes o Doesn t fit 3 factors so Elena would be forced to still sell the jet ski for 1 500 Which mistakes are considered Not mistakes regarding market value Mistakes as to what you were buying fundamental mistake o But not if you bear the risk of the mistake Item sold as is where is can waive defense of mistake Conscious ignorance example sold locked metal box for 5 later find out that the contents are worth thousands Mistake Example An Oklahoma based company makes and signs lots of contracts and usually always includes a clause in their contract that states that the contract signer can only sue the company in Oklahoma or Texas However in a contract with a large Florida company client the Oklahoma company agrees to include a clause that allows the Florida company to sue the Oklahoma company in Florida not just Texas or Oklahoma The Oklahoma company then makes a contract with a Virginia company and they simply copy the Florida clause into the Virginia contract and don t read it before signing it The Virginia company then sues the Oklahoma company but has to sue them in Florida The Oklahoma company takes this to court and claims that it was a mistake but the Virginia company did not know it was a mistake Court unilateral mistake Must read the contract Three exceptions don t apply o Not obvious not unconscionable not math error Dog Track Races Example A small dog track race owner decides to advertise in a local newspaper that there will be a grand jackpot for correctly choosing all of the winner right of 825 000 The race track owner hand wrote the ad and the newspaper writer mistakenly read the sign for an 8 A man who has never been to a dog race track before wins the grand jackpot and goes to collect his winnings but is only given 25 000 He then sues the race track to collect the remaining 800 000 winnings Can he collect Contextual analysis o Obvious mistake No mistake was known to the jackpot winner typos are not corrected by the courts The track owner didn t know of the mistake until it was printed o Unconscionable Possibly if the track is too small doesn t make enough money to make a 825 000 jackpot possible o Mathematical error No Sumerel v Goodyear Plaintiffs in Colorado sue Goodyear Rubber hoses made by Goodyear run under floors to heat them However if water is shut off at anytime to the hoses they crack causing leakage that can ruin floors Instructions clearly stated that the water must be running at all times The jury in the case felt that it didn t make sense to make a product that the company knew could crack So they hold Good year 30 liable and the homeowners 70 liable The homeowners want to appeal but decide instead to settle with Goodyear instead of going to court Goodyear creates a damage spreadsheet for the homeowners that shows what 30 cost for Goodyear and 70 cost for homeowners is Instead the spreadsheet made a mistake and instead showed a 100 cost for Goodyear and 0 cost for the homeowners The homeowners agree to this number and sign a contract etc The Goodyear accountant later finds the mistake a difference of 550 000 between what Goodyear should have to pay and what the spreadsheet says they will pay Can Goodyear get out of the contract Court inadvertent math error and unfair for plaintiffs to take advantage Misrepresentation 4 Elements to Analyze Material fact o A reasonable person would consider the information important to decision making Intent to deceive o Meant to deceive the other person Justifiable reliance on misrepresentation o The other person listened to believed and reasonably relied on the misrepresentation information Harm has to be proven to collect damages but not for rescission Active Concealment A homeowner wants to sell their