Genuine Agreement and Rescission By John Yazici Do Now When can an injured party rescind? Give an example of a situation when an individual would want to rescind. Vocabulary Genuine Agreement: agreement to enter into a contract that is evidenced by words or conduct between the parties Voidable Contract: contract in which the injured part can withdraw, thus cancelling the contract Rescission: backing out of a transaction by asking for the return of what you gave and offering to give back what you received Ratification: acting toward the contract as though one intends to be bound by it Vocabulary Continued Duress: occurs when one party uses an improper threat or act to obtain an expression of agreement Undue influence: occurs when one party to a contract is in a position of trust and wrongfully dominates the other party To Clarify Two parties make a genuine agreement Not valid in cases of fraud, misrepresentation, undue influence, duress, or mistake Without a genuine agreement, the contract is voidable and allows the injured party to rescind. A rescission must occur promptly, and before a contract is ratified Duress: Threats of Illegal Conduct Threat to engage in any illegal activity, such as a crime or tort, to win an agreement Committing an act of violence (ex: stabbing) Threatening to commit act of Violence( ex: threatening to stab) Committing Tort (ex: unlawful detention) Threatening Tort Duress: Threats to Report Crimes If an individual observes a crime, they have a duty to report that crime to the proper authorities. If an individual threatens to report the criminal in attempt to get them to contract; this is duress (extortion) Duress: Threats to Sue Parties are encouraged by law to settle disputes without a suit Communicating the threat to sue IS okay UNLESS… The threat to sue is made for any purpose unrelated to the suit Duress: Economic Threats When bound by valid contract, parties seek to modify it They sometimes are tempted to result to use economic power one holds over the other to negotiate Courts look at both the threat and alternatives in economic duress cases. If the threatened party had no other choice to enter into or modify a contract, then it is duress Undue Influence When dominated by one party, the dominated person’s free will is restricted and thus usually must accept unfavorable terms Two Key Elements Exist: The relationship Unfair persuasion Relationship & Unfair Persuasion A relationship of trust, confidence or authority must exist between the parties (formal relationship not necessary) Ex: Attorney and Client, Housekeeper and elderly employer Best evidence of unfair persuasion found in contract Ex: Elderly Mother dependent on child sells home to him/her for half its value. No free will. Case of Smith p.129 Smith was in the hospital near death. His nurse said she would not give him drugs for pain unless he signed a contract transferring certain stock to her for half its market value. Smith signed. IS SMITH BOUND??