Assent-Based Defenses

AuthorFranklin G. Snyder, Mark Edwin Burge
Unit 15
Part Three
Assent-Based Defenses
Contract law exists largely to enforce voluntary transactions. As a result, when
facts suggest that a transaction was not voluntary in some serious way, contract law
provides for defenses to be raised against enforcement of the agreement. Reasons to
attack a contract based on the lack of true assent include fraud or misrepresentation,
a party’s failure to disclose important facts, threats of violence, irresistible pressure,
or even an honest mistake of fact. Just as the statute of frauds can prevent
enforcement of an otherwise enforceable contract, so can these matters that we here
label “assent-based defenses.”
Fraud and Misrepresentation. You may have run across fraud in your Torts
class because it is an intentional tort. In broad terms, fraud occurs when one party
makes a false statement with the intent to mislead the other, and the other
reasonably believes the statement and is damaged as a result. As a defense to
enforcing a contract, fraud is easy to understand: a contact is always voidable by the
defrauded party. More difficult questions arise when the false statement is not
deliberate and misrepresentation occurs instead. Here, a party simply fails to disclose
information that would be critical to the other party’s decision.
Duress. The threat of force or other unlawful action to induce a party to
consent is called duress. Consider the scene in the Godfather movie, where a
bandleader has refused to release singer Johnny Fontaine from his contract. Don Vito
successfully obtains the bandleader’s assent with “an offer he couldn’t refuse,”
namely, having a gun held to his head and telling him that either “his brains or his
signature” will be on the contract release. The “gun to the head” fact pattern is the
classic (and easy) example case of duress, but pressure that is much less than that
can also render a contract voidable for duress. Just how much is enough?
Undue Influence. Somewhat related to duress is the concept of undue
influence. Improper pressure to enter a contract is sometimes not the result of direct
threats. Instead, an overwhelming influence by a more powerful party is overriding
the judgment of a vulnerable party. In a claim of undue influence, lawyers call these
the “dominant” and “servient” parties. Undue influence most typically occurs in two
broad categories. The first is the one in which a party in a position of truste.g.,
lawyers, physicians, trustees, guardians, and so on, often called “fiduciaries”—abuses
a “confidential relationship” to steer the trusting other party into bad deals, including
deals that personally benefit the fiduciary. The less-sophisticated party was harmed
because he reasonably relied on the fiduciary’s advice. The second situation is when
a party who is not actually a fiduciary has developed a position of dominance over
another and effectively imposes his will on the other party. A typical situation
involves a family member, neighbor, or servant who so insinuates himself into the
life of an elderly and often incapacitated person, and then exploits that position to
obtain gifts or promises to rewrite a will. While this is perhaps the most common
category of undue influence, the doctrine can be used in a wide range of situations.
Mistake. Yet another ground for voiding contracts is mistake. In most
agreements, each party knows at some level that her knowledge is incomplete. The
parties do not necessarily know everything about the current situation of the world,
and they know even less about the future. Almost by definition, a party who signs a
contract that turns out to be a bad deal was “mistaken” in some sense. The old toy we
sell at a yard sale may turn out to be an incredibly valuable “Sheriff Woody” action
figure. The stock we buy with every expectation that it will go up suddenly drops like
a rock. One popular television show features auction attendees who are given only
minutes to appraise a storage locker full of flotsam for five minutes and then bid on
it. The excitement comes from knowing that there may nothing but trash, but that
there may also be a lost Rembrandt drawing worth millions. This uncertainly is
involved in a large number of contractseven buying gasoline for your car today
involves taking a gamble, because the price tomorrow might be much less or much
more. Being wrong about the normal uncertainties of life does not establish the
defense of mistake.
Some mistakes, in contrast, are so fundamental to the nature of the deal that
the law will allow the contract to be avoided. An obvious and uncontroversial example
would be a contract to build and install a swimming pool where both parties assume
that the yard consists only of dirt that can be excavated cheaply. If, in fact, a massive
granite boulder six inches below the surface requires costly blasting, or if the area
turns out to be a major archaeological site or to contain dozens of buried and
extremely hazardous World War I chemical weapons that require hundreds of
thousands of dollars to remove, the doctrine of mistake would protect the pool
installers from extraordinary costs that neither party anticipated. Unsurprisingly,
the difficult question with the doctrine of mistake is determining which mistakes are
so fundamental that they will allow avoidance of the contract, and which mistakes
are ones where a party simply came out on the bad side of the contract’s allocation of

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