TodayUnilateral Mistake – AnalysisAdhesion ContractsSumerel v. GoodyearMisrepresentationActive ConcealmentHaunted House (NY)The Watcher (NJ)Timothy v. Keetch – FactsTimothy v. Keetch – Legal AnalysisIn-Class AssignmentNext WeekToday•Finish chap. 15 (misrepresentation)Unilateral Mistake – Analysis•Usually, courts don’t undo unilateral mistakes•But, in three situations, contracts are not enforceable against mistaken party1)Other party knew or should have known2)Results in unconscionable outcome3)Substantial, inadvertent mathematical errorAdhesion Contracts•Take-it-or-leave-it contracts•No negotiation•Can be challenged for unconscionability•Example: Bank v. Elderly Widow•$250 loan for microwave, to be repaid in 12 months•Misses last payment ($20 balance)•Contract terms clearly specify penalties•Unconscionable? Usury? Unequal bargaining power?Sumerel v. Goodyear•Defective rubber hoses for heating system, despite Goodyear’s warning•100% vs. 30% equals $550,000 difference•Court: inadvertent math error and unfair for plaintiffs to take advantageMisrepresentationFour elements to analyze1) Material fact•Effect on reasonable person’s decision to enter the contract?2) Intent to deceive•By words? By conduct? By silence?3) Justifiable reliance on misrepresentation4) Harm to collect damages (but not for rescission)Active Concealment•Seller covers rotting floors from toilet leak…•Four elements1) Material?2) Intent?3) Reliance?4) Harm?•Real estate: must disclose known defectsHaunted House (NY)•Caveat emptor (buyer beware)?•Obligation to disclose?•Stambovsky v. Ackley: riverfront home (with ghost)•Misrep: Material? Intent? Reliance? Harm?•Court: unreasonable for buyer to discover on its own. Seller told the public; must also tell the buyerThe Watcher (NJ)•Family purchased $1.4 million home•Letters from “the Watcher”•“Kindly brought in young blood when I asked”•“Once I know their names, I will draw them to me”•Misrepresentation?•Material? Intent? Reliance? Harm?Timothy v. Keetch – Facts •Keetches buy a horse property in Utah•Bank has security interest in stallion, “Son of a Dun”•To open ranch for children who were abused, Keetches get second loan from Timothys•Keetches say they own stallion “free and clear”Timothy v. Keetch – Legal Analysis•Keetches default on bank loan (horse taken)•Then default on Timothys loan•Timothys sue for fraud•Misrep: Material? Intent? Reliance? Harm?•Court: fraud. No duty for buyers to inspect public records to verify seller’s statements, unless reason to suspect deceit.•What if Keetches were silent and Timothys never asked?In-Class Assignment1) Is it possible for a buyer to be liable for contractual misrepresentation if the buyer remains completely silent about a known defect and the seller never asks about it?2) If a seller blatantly lies about an unimportant minor detail in the contract, is the seller likely liable for contractual misrepresentation?Next Week•Chapters 16 and 17 (briefly)•Intellectual property (bonus material)•Graded assignment (take home)•Review for Exam