BCOR 3000 1nd Edition Lecture 14 Outline of Last Lecture I No Lecture Exam Outline of Current Lecture I Overview II Mistakes 1 Unilateral 2 Bilateral III Fraudd 1 Inducement 2 6 requirements IV Execution Inception In factum Current Lecture Chapter 12 Defenses to Contract Enforceability The 4 elements of the contract were there however this chapter will look at the ways to get out of it and defend yourself from what has been committed Overview A defense allows a party to avoid its obligations under a contract Even though the 4 basic reqs of a contract are present something allows one party to avoid the contract Mistakes Unilateral One party or one side has a mistaken impression about subject matter of the contract 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 Mistaken party cannot avoid E g I buy your iPad but didn t know that it is wifi only Usually you cannot get out of this contract Example 12 2 on p 306 of text not a great example However there are exceptions If the non mistaken party knows of the mistake and takes advantage of it There is an obligation to clear up any mistakes if there is prior knowledge of it Car A C example 1st car to ever have A C Shows off her car and Ballantine sees that there is no A C in the car under the hood She reached a conclusion that there was A C Salesperson did not disclose information that there was an A C Buyer test drove car under the impression that there was A C and then purchased it B c she was the only one who had a mistaken impression she CANNOT get out of the contract IF it were to have been that the sales person was easedropping and heard the buyer talking about that the car had A C and did nothing to correct the mistaken impression then the buyer CAN get out of the contract Mathematical mistake Subcontractor bidding Other clerical error adding up numbers in a contract A numerical typo Hire a general contract to build an addition on to a house A bathroom will be a part of this addition The general contractor contacts 4 plumbers to do the job Hears back from all the plumbers and there offers 10 000 11 000 12 000 and 1300 The last offer was a mistake by the plumber b c a zero was accidentally dropped You cannot take advantage of this offer under this rule of the mathematical mistake clerical error Bilateral Mistakes Both parties are wrong Either party can void Both hold same mistaken belief Ex Both parties with the car sale both thought that the car did not have A c both had a mistaken belief Very often what happens is that the buyer knows nothing about the car In reality the buyer reached her own conclusion with no influence of the dealership But if the dealership has on the car a sticker that says there is A C If she gets home and realizes there is no A C she can get out of the contract Or Two different beliefs both reasonable no way to know which is correct Peerless case p 307 Peerless without equal Ship Peerless Freight forwarding company to have stuff shipped 2 different ships with the same name Freight company thought it was on the later ship Buyer of goods thought it was on the early ship Both parties had 2 different beliefs Are the both reasonable yes IF asked to ship from Loveland to Boulder and you live in Boulder CO then the only reasonable belief is that the location would be Boulder CO If you try to get out of it by saying no I meant Boulder Montana you cannot get out of it b c that is not a reasonable belief Mistakes of Value Not really a mistake Not a defense Opinions of value differ from person to person therefore this mistake is not valid to be removed from a contract Contract for general item that is actually a special item no mistake Text violin example p 306 Ex Is it a violin or is it a brand name violin Rembrandt at yard sale Ex painting at a garage sale sold for 7 but actually worth 40 000 The basis of the bargain is the painting If you buy something that is an ordinary item is something special there is no case The basis is a painting and what you got was a painting no mistake Contract is for a painting and it is in fact a painting However if you try to sell a Cadillac that is said to be previously owned by Elvis Presley but in fact it is not then that is a mistake because of false advertisement There is a mistaken impression on both sides Can get out of contract and get money back Contract for special item that is not the special item but a general item Contract for Elvis s Cadillac that turns out not to be his It is NOT Elvis s Cadillac thus a mistake but one of fact What is the basis of the bargain Elvis s Cadillac but this basis does not exist since it is not actually Elvis s Cadillac Fraud Inducement 98 of fraud cases Lie about the subject matter of the contract e g a car s mileage Ex I know that the car is not A C and the customer asks me if it is The dealer knows it is not and says that it actually is A C This is fraud a lie to induce someone to sign a contract All fraud involves a bad guy Contract is voidable by the deceived party Must meet all 6 requirements Note Text on p 308 lists 3 reqs some in text are 2 in list on next slide Fraud overlaps tort and contract law Minimum of 3 types of lawsuits that could be brought to you The 6 requirements 1 Misrepresentation a false statement 2 Of a material fact 2 parts Exceptions Predictions and Opinions Material it matters in a decision 3 Intent to deceive known to be false or Reckless or should know Hard to prove Indirect evidence To prove 1 Prove that the speaker knew the statement was wrong 2 One party is an expert in the matter easier to prove 3 Reckless disregard do know a statement is wrong b c you have no way of knowing it is right or wrong having no basis of knowledge in the matter 4 Relied upon the plaintiff has to say that they believed it There is no reliance if the party knows and goes through it anyways Ex Go to a seller of a used car Has the car ever been in an accident No Taken to a mechanic to be inspected before purchase Mechanic says that the accident damage says it was repaired well Buyer says wait a minute they told me that there was no accident Mechanic said it was …