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rescinded by either party.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 Misrepresentation
• Misrepresentation 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 Misrepresentation
• Misrepresentation 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.
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