Fraudulent misrepresentation by silence may result during a long contract negotiation if one of the parties to the contract withholds material information they learned during the negotiation process.

A severable contract is a contractunenforceable that can still remain in effect despite those provisions which are void. In order for the blue pencil test to be satisfied, the phrase stricken by the court must not result in a change to the purpose for which the contract was created by the parties. The contract must still make grammatical sense after the edits have been made to the contract. Otherwise the contract will not be considered to have become a severable contract.

A severable contract can be formed if the parties who entered into the contract do not consider it essential that all the actions be performed together. Divisible contracts may exist if a convenience store orders the soda, chips and candy it sells from the same company in three separate clauses. An indivisible contract is formed if the store hired a vendor to provide the soda, chips, and candy in a single clause. 

Whether divisible contracts or indivisible contracts have been formed can often be determined by examining the terms under which consideration has been provided. If the set of contracts provide the consideration in a lump sum, it is usually an indivisible contract. If consideration is itemized for each thing exchanged, a severable contract often exists.

If a contract contains both legal and illegal clauses, the court will attempt to enforce only the legal clauses in the event the contract is already a severable contract. If the court can employ a blue pencil test to create a severable contract, it will.

Fraudulent misrepresentation may be claimed by a party attempting to have a contract declared void if three different criteria are met. The first is that there is an occurrence intended to create justifiable reliance on a fraudulent misrepresentation. 

The party seeking to have a contract invalidated must show that they entered into the contract due to a justifiable reliance on the other party’s fraudulent misrepresentation. Justifiable reliance only becomes an issue if the claim is not readily apparent to be false. Failure to investigate a claim may be used to support a claim of justifiable reliance. The material misrepresentation must be made about an area that the injured party had no way of proving and thus was forced to rely on the other party’s statement.

A mistake of fact which affects the genuineness of the assent given to the terms of a contract may be bilateral or unilateral. Mistakes of fact apply when the party concerned was operating under a mistaken understanding of the facts involved in the contract.

A mistake of fact is unilateral when only one party is mistaken. A bilateral mistake of fact occurs when both parties to the contract are operating under a mistaken reality. Bilateral mistakes are also known as mutual mistakes or common mistakes.

A mistake of fact that is unilateral in nature is not normally a reason to set aside a contract or a reason that will allow a plaintiff in a civil trial to seek damages. A unilateral mistake of fact will result in an enforceable voidable contract.

For example, a contract would be voidable at Luke’s discretion if Ben took advantage of Luke’s unilateral mistake regarding the purchase of a painting Luke thought was genuine. If Ben did not know that Luke thought he was buying the genuine painting, then Luke’s unilateral mistake would not prevent the contract from being enforceable.

A bilateral mistake would result in a contract that could be voided by both individuals in the event that Luke and Ben both believed the forgery was a genuine work by Dali. If Ben believed Luke intended to buy an artificial Dali painting, and Luke believed Ben was selling a genuine work by Dali, a mutual mistake has again been made because there was no intention to defraud and both parties made a mistake of fact.

Mistakes of fact should not be confused with mistakes of value. A mistake of value would occur if Jim sold Jack a random painting that he believed had only a slight value for $50. If Jim later learns that the painting was in fact done by a famous artist and worth $500, he cannot sue Jack to make up the $450. This sort of mistake is not permitted because the value of an object is not a fact. It can change. In order for a mistake to provide the basis to overturn a contract, the mistake must be of a fixed and provable nature.

 

As a legal concept, duress has a long tradition. Duress is related to the concept of undue influence. Duress exists when there is a threat of bodily harm, and the threat is immediate and cannot be avoided. Duress also exists in criminal law proceedings. In order for duress to exists in a contract law court proceeding there must be a wrongful or illegal threatened act. 

A contract also cannot normally be made voidable because one of the parties is suffering from economic duress. Claims of duress are filed by parties to a contract seeking to prove that their assent to a contract was not genuine, and thus did not fulfill the essential requirements needed to form a contract.

A contract cannot be invalidated by a party to that contract who claims duress because the other party threatened to sue them for a larger amount, because the filing of a law suit is a legally permitted action. A claim of duress is distinct from instances where the consideration offered by one of the parties is the forbearance of an action. 

Duress can be invoked if the party claiming they were acting under duress was in fear for their safety. An example of duress would be if a person is told to sign a contract or their family or they themselves would be harmed. This qualifies as duress because the consideration of forbearance is to forbear from doing an illegal act. If it is a wrongful or illegal threatened act then it constitutes an instance of duress.

A claim of economic duress is not usually permitted. Individuals are usually only able to successfully invoke a claim of economic duress if the other party in the contract is the immediate cause of the economic duress. Sometimes the courts permit a claim of economic duress to be filed in contracts which involve one party claims they are suffering from economic difficulties which are not caused by the other party in the contract, although such claims of economic duress are not usually accepted. 

Economic duress does not exist simply if exorbitant prices are charged for goods or a service. However, if the high prices are charged by the same party that created the need for the good or service then a claim of economic duress may be permitted by the courts.

If the individual claiming the contract was formed under duress is able to prove their claim, then the courts may declare the contract voidable. 

Fraud is voidable by the injured party. The justifiable reliance cannot be easily disproven and must constitute a claim that a reasonable person would believe. A promisee who entered into a contract with a car salesman that claimed that the car in the contract could go one hundred miles per gallon would not be able to claim justifiable reliance on the salesman’s claim because the claim is unjustifiable. 

The claim that a car is brand new, despite extensive and obvious damage to the car, would not be grounds for justifiable reliance by an individual claiming the salesman duped them. Justifiable reliance only applies to instances where the injured party relied upon a claim that could not be easily disproved.

A person could claim justifiable reliance if they bought a car they believed was in perfect working order but upon driving the car home discovered extensive body damage, a faulty ignition system, failing brakes, or other serious defects in the car. In such a situation, the person may be able to claim that they were damaged by a justifiable reliance on the salesman’s claims.

The party claiming that they were induced to enter into a contract due to justifiable reliance on misrepresentations by the other party must be able to show that their reliance was not based on something that they could reasonably be expected to discover on their own.