13 9 January 2006ECONOMIC LAW (Ms Hawkins)13 Much of coercive law focuses on the nature of the threat: threats to report crimes If you observe a crime, you have a duty to report it. If you use a threat of complaint to force a criminal to sign a contract with you, it is coercion. CHAPTER 7: REAL AGREEMENT 31 January 9, 2006ECONOMIC LAW (Mrs Hawkins)31 Baglio wanted the gutters of his new house to be free of rust. The specifications of the contract he signed called for rust-resistant steel channels galvanized with zinc. After the house was built, he learned that the galvanized steel gutters would eventually rust and need to be replaced. Aluminum or copper gutters are the ones he should have contracted for because they wouldn`t rust. Baglio is now suing the contractor for breach of contract because he didn`t get what he really wanted. CHAPTER 7: REAL AGREEMENT What is your verdict? (page 119) What is common error in contract law? 1 January 9, 2006BUSINESS ACT (Mrs Hawkins)1 CHAPTER 7: AUTHENTIC AGREEMENT Chapter 7 deals with the conditions that may make a contract voidable in the absence of an authentic agreement. 7-1 Coercion and undue influence may lead to a countervailable contract. 7-2 A genuine agreement may be missing due to errors, misrepresentations or fraud. 8 9 January 2006ECONOMIC LAW (Ms Hawkins)8 What is your verdict? (Page 115 Cameron owned a promising racehorse that Link had offered to buy for closed parties. When Cameron refused to sell, Link lowered his voice and slowly said: Look, the people I represent don`t take no as an answer. If you don`t sell, they will hurt you.

They will harm your family. As a good friend, I tell you to sell. You get a fair price, just sign the contract. Cameron, who had secretly recorded the conversation, sold. Then he called the police. CHAPTER 7: AUTHENTIC AGREEMENT 6 9 January 2006ECONOMIC LAW (Mrs Hawkins)6 Conditions to be known. The absence of a real agreement makes a contract voidable. This means that the aggrieved party can withdraw (from returning from the transaction). Withdrawal is done by requesting a return of what you gave in the transaction and offering to return what you received. CHAPTER 7: COMPELLING GENUINE AGREEMENT AND UNDUE INFLUENCE 17 9 January 2006BUSINESS ACT (Ms Hawkins)17 Undue influence occurs when one party is in a position of trust and the other party illegally dominates. The relationship A relationship of trust would include: Lawyer and client Wife and husband Doctor and patient Housekeeper and elderly PERSONS CHAPTER 7: REAL AGREEMENT Lawyer and client Teachers and students* Minister and municipality Neighbour and disabled 5 9 January 2006ECONOMIC LAW (Mrs Hawkins)5 COERCION AND UNDUE INFLUENCE Documents may indicate a valid offer and acceptance.

However, if one of the parties has used physical threats to obtain the signature of the others under a contract, there is no real consent. An authentic agreement is also called authentic consent or mutual consent. CHAPTER 7: AUTHENTIC AGREEMENT 27 9 January 2006ECONOMIC LAW (Ms Hawkins)27 Statements will only be considered false statements if: False factual allegation The statement must relate to a past or existing fact. It cannot be an expression of opinion. When experts express an opinion, the law will treat the statement as a statement of fact. CHAPTER 7: GENUINE ERROR OF AGREEMENT, MISREPRESENTATION AND FRAUD 4 9 January 2006ECONOMIC LAW (Ms Hawkins)4 Lively debate (page 114). Give three reasons why it would be fair to allow your friend to withdraw from the contract. Give three reasons why it would be right for your friend to be bound by the contract. What are the most compelling reasons? CHAPTER 7: ACTUAL AGREEMENT (1) It thought the total price was $519.97 (2) The price was quoted at $519.97 (3) The seller did not draw attention to the additional charges. (1) The case and the special lens were advertised as optional, supplied at an additional cost (2) Both items and their costs were listed in the contract signed by her (3) Carrying bags and special lenses are usually charged separately, so she should have known. The legal reasons for binding the friend to the contract are the strongest. She made a unilateral mistake because she was not reading.

48 January 9, 2006BUSINESS ACT (Mrs. Hawkins)48 CHAPTER 7: REAL AGREEMENT When you enter into contracts, remember. 1. Investigate carefully before entering and consult a trusted independent expert. 2. Don`t make a decision in a hurry, legitimate proposals will usually survive a delay. 3. Learn to distinguish between facts and opinions 4. If you suspect a deception, run! 5.

If you have been scammed, act immediately. 14 January 9, 2006BUSINESS ACT (Ms Hawkins)14 Much of the coercive law focuses on the nature of the threat: threats against Sue Many may threaten to take legal action if the other party does not take up. BUT, if the threat of legal action is made for a purpose that has nothing to do with the trial, it may be coercion. Example: During divorce negotiations, a husband threatens to apply for custody of the children if the wife does not remit valuable shares. If, for example, it was later determined that one of the parties was unable to enter into a legally enforceable contract when the original was approved, that party may ratify the contract if it proves to be legally viable. 7 9 January 2006ECONOMIC LAW (Mrs Hawkins)7 Withdrawal is only effective if the withdrawal is immediate (shortly after you discover that there is no real agreement) Withdrawal takes place before you ratify the contract. Ratification is behaviour that indicates that you intend to be bound by the Treaty. Coercion occurs when a party uses an inappropriate threat or action to obtain an expression of consent. CHAPTER 7: ACTUAL CONTRACTUAL PRESSURE AND UNDUE INFLUENCE A voidable contract is originally considered legal and enforceable, but may be rejected by a party if it is determined that the contract has defects. If a party with the power to reject the contract decides not to refuse the contract despite the default, the contract remains valid and enforceable. In most cases, only one of the parties will be affected by the acceptance of a questionable contract in which that party does not acknowledge the misrepresentation or fraud committed by the other party.

18 9 January 2006ECONOMIC LAW (Ms Hawkins)18 Undue influence occurs when one party is in a position of trust and the other party illegally dominates. Unfair condemnation The best evidence of unfair persuasion is found in unfair contract terms. Example: An elderly person who depends on the daily care of a child sells his or her home to a child for half of its value. CHAPTER 7: AUTHENTIC AGREEMENT A countervailable contract is a formal agreement between two parties that cannot be made enforceable for a number of legal reasons. Reasons that can make a contract voidable include: January 10, 9, 2006BUSINESS LAW (Ms. Hawkins)10 In this case (page 115), Steven inspected a 5-year-old car with the intention of buying it. He asked the owner, Allan, how many kilometers there were on the engine. Allan said: “As you can see on the odometer, there are only 30,000 miles, and I`m the only one who has ever owned it. A written contract was signed and Steven took the car to the local car dealership for inspection. The dealer informed Steven that the car had been serviced there several times and that the odometer had been replaced approximately 100,000 miles away. It was a fraud on Allan`s part that made Steven`s contract questionable.

Steven continued to make his monthly payments to Allan after discovering the scam. Can Steven terminate the contract? CHAPTER 7: REAL AGREEMENT No.Why? He ratified the treaty by paying. 15 January 9, 2006BUSINESS LAW (Ms Hawkins)15 Much of the coercive law focuses on the nature of the threat: economic threats If a party to a valid contract attempts to modify it (for example. B increase the price of the goods with the threat of withholding the goods), this may be a constraint if the damage caused to the manufacturer is significant. In such cases, the courts will consider both the threat and the alternatives available to the threatened party. CHAPTER 7: AUTHENTIC AGREEMENT 45 9 January 2006ECONOMIC LAW (Mrs Hawkins)45 Three remedies in case of fraud are available. Compensation Compensation is available if fraud is proven. According to the UCC, there are also damages for innocent misrepresentation, but the subject matter of the contract must be goods. CHAPTER 7: GENUINE ERROR OF UNDERSTANDING, MISREPRESENTATION AND FRAUD 22 9 January 2006ECONOMIC LAW (Ms Hawkins)22 A unilateral error occurs when a party falsely believes in the facts surrounding a contract […].