POLICING CONTRACTS FOR IMPROPER BARGAINING Sample Clauses

POLICING CONTRACTS FOR IMPROPER BARGAINING. MISREPRESENTATION, AND FRAUD A. If the court finds that the apparent manifestation of one party’s assent was induced by improper means, it may refuse to enforce the contract as a whole or some aspect of it. B. The remedy is to allow the victim of the improper conduct to avoid the contract. i. A contract that is void – a legal nullity. ii. A voidable contract – the aggrieved party can elect either to keep it in force or to exercise a right to rescind it (avoid it). 1. If a contract is avoided, the general rule is that each party is entitled to restitution of any benefits conferred on the other under the contract up to the time of avoidance. 2. A party entitled to avoid a contract may either sue affirmatively for avoidance or may use the right of avoidance defensively if sued by the other party. C. Misrepresentation – an assertion not in accordance with the facts (also recognized as a tort). i. When a fact forming the basis of the contract is misrepresented, the problem is perceived not as a matter of breach but as a question of accountability for making a false statement. ii. If a misrepresentation is made with the knowledge that it is untrue (called “scienter”) and with an intent to mislead the other party, it is fraudulent. 1. Might take the form of an express statement, or 2. A deliberate concealment of or failure to disclose a fact. iii. A fraudulent misrepresentation is most serious form and most likely to justify relief. iv. A negligent misrepresentation (made carelessly rather than dishonestly) could also give rise to a remedy. v. Restatement 2nd § 164 states that a misrepresentation makes a contract voidable if it is either fraudulent or material. Most courts include materiality as an element of fraud. D. Nondisclosure – Silence as Fraud? i. General rule is that a party who proposes a contract does not have an obligation to affirmatively disclose facts concerning the subject matter of the contract. Disclosure of material facts is required if the parties are in: 1. A fiduciary relationship, or 2. A relationship of trust or confidence.
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