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An otherwise valid contract might still be unenforceable if the parties did not genuinely agree to its terms.  The lack of voluntary consent can be used as a defense against the contract’s enforceability.  This assent might be lacking due to a mistake, misrepresentation, undue influence or duress, any of which mean there is no true meeting of the minds.  If one party can demonstrate that she did not truly agree to the terms of a contract, she has the option of either carrying out or rescinding the agreement.

There are instances in which a mistake may be used to avoid a contract, however only if it is a mistake as to a material fact.  Mistakes of value or quality do not meet this standard, nor do facts that would not be considered important to a reasonable person.  A unilateral mistake of fact is made by only one party, whereas a bilateral mistake is made by both.  While a bilateral mistake is a mutual misunderstanding regarding a basic assumption on which the contract was made, and allows either party to rescind the contract, a unilateral mistake typically does not provide the mistaken party any right to relief from the contract, and normally the contract is enforceable.  The exceptions are when the other party to the contract knows or should have known that a mistake was in fact made, or if the error was due to a substantial mathematical mistake and was made inadvertently and without gross negligence.  Whether a unilateral or bilateral mistake, the mistake must involve a material fact.

When an innocent party is fraudulently induced to enter into a contract, the contract can usually be avoided because that party did not voluntarily consent to its terms.  The innocent party can either rescind the contract and be restored to her original position, or enforce the contract and seek damages for any harm resulting from the fraud.  Fraudulent misrepresentation generally refers only to misrepresentation that is consciously false and is intended to mislead others.  Fraudulent misrepresentation must include misrepresentation of a material fact, with intent to deceive, that is justifiably relied on by the innocent party and, to collect damages, the innocent party must have been harmed due to the misrepresentation.

Undue influence arises from a relationship in which one party can greatly influence the other, thus overcoming that party’s free will.  A contract entered into under excessive or undue influence lacks voluntary consent and is thus voidable.

Agreement to terms of a contract is not voluntary if one of the parties is forced into it.  Use of threats to force a party to enter into a contract constitutes duress, as do blackmail and extortion.  Generally there must be proof that the threat is wrongful or illegal, rendering the threatened person incapable of exercising free will.  Duress is both a defense to the enforcement of a contract and a ground for the rescission of a contract.

Finally, a contract may be unconscionable if it is a one-sided bargain in which one party has substantially superior bargaining power and can dictate the terms of the agreement.  In this case the signer must agree to those terms or go without the commodity or service in question.  These take-it-or-leave-it (adhesion) contracts often use standard forms, giving the adhering party no opportunity to negotiate terms, and may be considered unconscionable and lacking in voluntary consent.

Post Author: Stacy Bauer