Mistake, Duress, Undue Influence, Fraud,
Misrepresentation, Unconscionability and
Contract Interpretation
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Only a material Mistake of Fact allows a
contract to be canceled.
Bilateral (Mutual) Mistakes can be rescinded
by either party.
Prof. Nichole Hatcher PA 130
Kaplan University
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
Unilateral Mistakes cannot be canceled
unless:
◦ If other party to the contract knows or should have
known that a mistake of fact was made.
Prof. Nichole Hatcher PA 130
Kaplan University
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

Generally, contract is enforceable by either
party.
“Caveat Emptor”
Exceptions:
◦ -Party knew of mistake
◦ -Fraud
◦ -Misrepresentation
Prof. Nichole Hatcher PA 130
Kaplan University
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
Contract Voidable by Innocent Party.
Elements:
◦
◦
◦
◦
Misrepresentation of Material Fact.
Intent to Deceive/Gross Negligence.
Reliance on Misrepresentation.
Injury to the Innocent Party.
Prof. Nichole Hatcher PA 130
Kaplan University
5

Misrepresentation can be express or implied.
◦ Concealment.
◦ Misrepresentation of future facts and statements of
opinion are not fraud, unless person professes to be
an expert.
◦ Misrepresentation of Law is not fraud, unless person
has greater knowledge of the law.
◦ Silence is not fraud, unless serious problem or defect
known or asked and person lied.
Prof. Nichole Hatcher PA 130
Kaplan University
6

Intent to Deceive.
◦ Party has knowledge that fact is not as stated.
◦ Party makes a reckless statement with disregard of
the truth.
◦ Party implies that statement is based on personal
knowledge or investigation.

Gross negligence is considered intent.
Prof. Nichole Hatcher PA 130
Kaplan University
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Deceived party must have Justifiable Reliance.
◦ Depends on the knowledge and experience of the
party relying.
◦ Must be “Reasonable reliance”
Prof. Nichole Hatcher PA 130
Kaplan University
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
Proof of injury is universally required to
recover damages, unless
◦ Only recovery is to rescind the contract.
Prof. Nichole Hatcher PA 130
Kaplan University
9

Contract is Voidable.
◦
◦
◦
◦

Confidential or Fiduciary Relationship.
Relationship of dependence.
Influence or Persuasion.
Weak party talked into doing something not
beneficial to him or herself.
Presumption of Undue Influence.
Prof. Nichole Hatcher PA 130
Kaplan University
10
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
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Forcing a party to enter into a contract under
fear or threat makes the contract voidable.
Threatened act must be wrongful or illegal.
Threats:
◦ Threat to exercise legal rights (criminal or civil suit)
are not included, unless the only purpose is to
induce someone to do something against their will
(i.e. Abuse of process
◦ Threat to induce terms.
Prof. Nichole Hatcher PA 130
Kaplan University
11
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What is a unilateral mistake? Are these
usually approved by a court as a defense to
contract formation?
What is economic duress?
What is undue influence?
What is abuse of process?
What is blackmail?
What is negligent misrepresentation?
What is mistake of value?


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
Suppose that you purchase a purebred Scottish Terrier
puppy. You pay $800 for the dog because you think it comes
from champion lines. The dog's owner did not discuss the
dog's ancestors with you. If you discover, later, that the dog
was not worth $800, but only $400, can you have the
contract rescinded, or canceled, based on your mistake?
A. Yes, the dog was clearly not worth $800.
B. Yes, because you had a duty to investigate.
C. Probably not, because you made a mistake about the
dog's value, not a mistake of a material fact.
D. Probably so, because you made a mistake of an immaterial
fact.
Prof. Nichole Hatcher PA 130
Kaplan University
15
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C
Prof. Nichole Hatcher PA 130
Kaplan University
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A misrepresentation of a material fact can
occur:
A. by action alone.
B. by words alone.
C. by words or actions.
D. by fax alone.
Prof. Nichole Hatcher PA 130
Kaplan University
17
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C
Prof. Nichole Hatcher PA 130
Kaplan University
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