Which of the following statement is incorrect concerning ratification of a voidable contract
What common situations give rise to a voidable contract?The common contract scenarios that allow one or more party to void the contract include Fraud, Misrepresentation, Duress, Undue Influence, Mutual Mistake, or (in some cases) Unilateral Mistake. Each of these are discussed below. Show
Next Article: What is a Valid Offer? Back to: CONTRACT LAW When does Fraud lead to a voidable contract?Fraud involves an intentional misstatement of the material (important) fact that induces one to rely justifiably to his or her injury. If a person is defrauded into entering a contract, the defrauded party may void the contract upon learning of the fraud. Voiding the contract is at the option of the defrauded party, as she may wish to remain in the contract. The party committing fraud may not void the contract. If the defrauded party fails to void the contract upon learning if the fraud, she is deemed to have ratified it and is bound. When does Misrepresentation lead to a voidable contract?Misrepresentation is a material misstatement of fact that induces one to rely on the statement. The difference with misrepresentation and fraud is that misrepresentation does not involve the intent to mislead. As in the case a fraud, a party who enters a contract as a result of a material misrepresentation may void the contract upon learning of the false representation. The misrepresenting party may not void the contract. If a party fails to void the contract upon learning of the misrepresentation, she is deemed to ratify the agreement. When does Duress lead to a voidable contract?Duress means the use or threat of force to convince a person to act according to ones wishes. If a party enters into a contract due to the physical or economic duress imposed by the other party, the contract is voidable at any time by the party subject to duress. When does Undue Influence lead to a voidable contract?Undue influence arises when one party unfairly takes advantage of another party by using a position of trust, influence, or confidence.
When does Mutual Mistake lead to a voidable contract?A mistake by both parties regarding material facts or circumstances relevant to the contract may make a contract voidable. In such a situation, either party may void the contract upon learning of the mutual mistake. The standard for whether the mistake of fact is material is whether a reasonable person would have entered into the agreement if the true facts were known. A mutual mistake of law may make a contract voidable if it caused the parties to not have a meeting of the minds with regard to the core aspects of the contract. If no meeting of the minds exists, there is never a valid agreement between the parties. When does Unilateral Mistake lead to a voidable contract?Generally, unilateral mistake by one party to the contract does not make the contract voidable. A unilateral mistake about the basic assumptions of the contract will only make the contract voidable when the non-mistaken party knew or had reason to know of the other party's mistake. In such a case, the effect of enforcing the contract against the mistaken party must be unconscionable and the non-mistaken party would not suffer a substantial hardship by voiding the contract. If the non-mistaken party did not know about the other party's mistake, the standard for voiding the contract is even higher. In such a case, the contract must not yet have been performed or the parties must be easily restored to their pre-performance positions. The mistake must be substantial, and the mistake must directly relate to some computational or clerical error in the construction of the terms of the agreement.
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Discussion QuestionHow do you feel about the idea that both parties may hold the right to void a contract? Is there any justification for holding that the contract is void rather than voidable? Do you agree with the scenario under which a unilateral mistake if voidable? Why or why not? Practice QuestionConstance enters into an agreement to purchase Gerald's business. The contract contains a calculation for the business's cash on hand at the time of sale to be added to the purchase price. Constance and Gerald did not pick up on the calculation error at the time of signing the agreement. The week prior to closing, Constance's attorney caught the error, which causes a huge increase in the calculated value of the business. Gerald wants to hold Constance to the dramatically increased price, as she signed the contract containing the calculation error. What are Constance's options?
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