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CHAPTERASSESSMENTSection 6.1 Fraud and Misrepresentation● Fraud is deliberate deception to secure an unfairor unlawful gain. To succeed in a lawsuit forfraud, the party bringing suit must prove fiveelements: (1) false representation of fact,(2) representation known to be false, (3) falserepresentation intended to be relied upon,(4) false representation reasonably relied upon,and (5) resulting loss. Fraud requires a falserepresentation of a material, existing fact. Itcannot be a promise of something that willhappen in the future, nor can it be someone’sopinion. Material false representations are notconfined to oral or written statements. Actionsintended to deceive are considered to be falserepresentations.● Concealment, also called nondisclosure andpassive fraud, is a type of fraud. This type offraud is employed when a party keeps silentabout a material fact of which the other partyhas no knowledge. The other person relies onthe first person’s special knowledge and getshurt. Concealment can occur when a seller keepsquiet about a hidden defect that cannot be easilydiscovered by the buyer. Concealment can bejust as fraudulent as actively deceiving aninnocent party.● An innocent statement of supposed fact thatturns out to be false is a misrepresentation. Thelaw gives an injured party the right to rescind acontract because of misrepresentation. You maynot win damages if a false representation isinnocently made.● If you have been induced to enter a contract byfraud, you have several remedies available. Youmay cancel, or rescind, the contract. You mayalso sue for damages. Damages are designed topunish the wrongdoer for his or her conduct andcan greatly exceed the amount of money neededto repay the victim. If a person has merely madea misrepresentation, remember that, althoughyou can rescind the contract, you cannot windamages.Section 6.2 Mistake, Duress, and UndueInfluence● Unilateral mistake is an error on the part of oneof the parties to the contract. A person usuallycannot avoid a contract because of such a mistake.A unilateral mistake may be a mistake as to thenature of the agreement or a mistake as to theidentity of a party. When both parties to a contractare mistaken about some important fact, abilateral mistake has been made. A bilateralmistake may be a mistake as to the possibilityof performance or a mistake as to the subjectmatter.● When you make a unilateral mistake, you arebound to the contract, except when you make amistake as to the identity of the party. Whenthere has been a bilateral mistake, either partymay rescind the contract.● Duress is defined as overcoming a person’s willby using force or by threat of force or bodilyharm. Economic duress occurs when a personthreatens another person’s business or income tocause someone to enter a contract without trueconsent.● Unfair and improper persuasive pressure used bya person to force a close friend, family member,or otherwise vulnerable person into entering intoa contract is called undue influence.140 Unit 2: Entering Into Contracts