Chapter 13

Contracts — Genuineness
of Assent
 Introduction
Contract may be unenforceable if the
parties have not genuinely assented
to its terms by:
Mistake.
Misrepresentation.
Undue Influence.
Duress.
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 §1: Mistakes
Unilateral vs. Bilateral Mistakes of Fact.
Unilateral Mistakes: One party mistaken
as to some Material Fact.
Does not afford the mistaken party any right to
relief from the contract.

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 Mistakes [2]
Exceptions:
If other party to the contract knows or should have
known that a mistake of fact was made.
If mistake was due to mathematical mistake in addition,
summation, subtraction, division, or multiplication and
was made inadvertently and without gross negligence.
Bilateral Mistakes of Fact.
Mutual mistake as to some Material Fact, the contract
can be rescinded by either party.

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 Mistakes of Value
Contract enforceable by either party.
Unilateral or Bilateral mistake are not
basis for avoiding a contract.
Exception:
Mistake of value because of a mistake of
material fact.

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 §2: Fraudulent
Misrepresentation
Contract Voidable by Innocent Party.
Elements:
Misrepresentation of Material Fact.
Intent to Deceive.
Reliance on Misrepresentation.
Injury to the Innocent Party.

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 Misrepresentation
Has Occurred
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.
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 Intent to Deceive
Scienter is an Intent to Deceive.
Party 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.

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Reliance on Misrepresentation
Deceived party must have Justifiable
Reliance.
Depends on the knowledge and experience of
the party relying.

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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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 §3: Nonfraudulent
Misrepresentation
Innocent Misrepresentation.
Negligent Misrepresentation.
Equal to Scienter.
Is treated as fraudulent misrepresentation, even
though the misrepresentation was not
purposeful.

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 §4: Undue Influence
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.

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 §5: Duress
Forcing a party to enter into a contract under
fear or threat.
Contract is Voidable.
Threatened act must be wrongful or illegal.
Improper Threat.
Threat to exercise legal rights (criminal or civil suit).
Economic or physical.

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 §6: Adhesion Contracts
and Unconscionability
Adhesion Contracts.
Preprinted contract in which the adhering party has no
opportunity to negotiate the terms of the contract.
Unconscionability.
One sided bargains in which one party has substantially
superior bargaining power and can dictate the terms of
the contract.
• “Standard-form.”
• “Take-it-or-leave-it” adhesion contracts.

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Case 13.1: Vokes v. Arthur Murray
(Misrepresentation)

FACTS:
Arthur Murray operated dancing schools through local,
franchised operators.
At a “dance party” at one of the schools, Vokes was praised
by an instructor for her potential as “an excellent dancer.”
The instructor sold her eight half-hour dance lessons for
$14.50 each. Over the next 16 months, Vokes spent
$31,090.45 on dance lessons but finally realized she did not
have the potential to be an excellent dancer.
Vokes sued Arthur Murray and the court dismissed the case
based on fraud. She appealed. 

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Case 13.1: Vokes v. Arthur Murray
(Misrepresentation)

HELD: REVERSED. FOR VOKES.

The District Court of Appeal of Florida reinstated the
complaint and remanded.
“A statement of a party having * * * superior
knowledge may be regarded as a statement of fact
although it would be considered as opinion if the
parties were dealing on equal terms. It could be
reasonably supposed here that defendants had ‘superior
knowledge’ as to whether plaintiff had ‘dance
potential.’”

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 Case 13.2: Sarvis v.
Vermont State College
FACTS:
In 1995 Sarvis was convicted of bank fraud and ordered to pay
more than $12 million in restitution, and sentenced to forty-six
months in prison.
While incarcerated, he worked in the prison’s electric department.
After his release in 1998, Sarvis applied for an adjunct professor
position at Community College of Vermont (CCV) stating that
during “1984-1998” he was “President and Chairman of the
Board” of “CMI International Inc., Boston, Massachusetts,” where
he was “[r]esponsible for all operations and financial matters.”

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 Case 13.2: Sarvis v.
Vermont State College
FACTS (Cont’d)
Sarvis was hired at CCV as an academic coordinator,
teacher, and independent studies instructor.
After he began work, his probation officer alerted CCV
to Sarvis’s criminal history, and CCV terminated his
employment.
Sarvis sued CCV alleging breach of contract. CCV
filed a motion for summary judgment, in part on the
ground of fraud, seeking rescission. The court granted
CCV’s motion, and Sarvis appealed to the Vermont
Supreme Court.

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 Case 13.2: Sarvis v.
Vermont State College
HELD: AFFIRMED. FOR CCV.
The Vermont Supreme Court rescinded the
contract between Sarvis and CCV.
The court explained that “[t]he
misrepresentation in this case occurred through
plaintiff’s partial disclosure of his past work
history and references and his effort to limit
defendant’s inquiry into his past.”

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 Case 13.3: Meade v.
CedarRapids
FACTS:
Meade was offered a job at the El‑Jay Division of Cedarapids, Inc.,
in Eugene, Oregon. During the interview, Meade asked about El-
Jay’s future and was told that El-Jay was growing. In fact,
however, Cedarapids management already planned to close El-Jay.
Meade signed an at-will employment agreement, quit the job he
was doing or passed up other employment opportunities, and
moved his family to Eugene.
When El-Jay closed soon after, Meade sued Cedarrapids alleging
fraudulent misrepresentation based on the statements made to them
during the interviews.

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 Case 13.3: Meade v.
CedarRapids
HELD: FOR MEADE.
Ninth Circuit held that employer may be liable for
misrepresenting its future to prospective employees if they
act to their detriment in reliance.
The plaintiffs’ “injuries were suffered as a result of the
fraudulent inducement to enter employment, not the
premature termination of that employment.”
The court reasoned that “allowing at‑will employment to
defeat Plaintiffs’ reliance would effectively allow
employers to make any representations to prospective
employees and then not fulfill those representations once
employment began.”

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