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Why fraud invalidates a contract

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The next primer you will prepare for your department's training series will give your colleagues additional information on some advanced contractual principles beyond formation. Prepare a 2 to 3 page, double-spaced document explaining how and why fraud invalidates a contract. Include in your treatment of this subject examples of undue influence and duress that can arise in the business context. Finally, you should describe some of the different types of damages and equitable remedies available in contract cases, and explain the common law doctrine of election of remedies from a business contract standpoint, using examples that might arise in your company's day-to-day operations.

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Advanced contract law is explained in a structured manner in this response and answers why fraud invalidates a contract. The answer includes references used.

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Fraud invalidates a contract: When consent to an agreement is caused by fraud, the agreement is a contract voidable at the option of the party whose consent was so caused. A contract formed by fraud or misrepresentation will not be considered a contract of satisfaction. For example, business X tells business Y that X's property is free from encumbrances. Y buys that property and later realizes that the property is subject to mortgage. Y can simply rescind the contract or may insist that X repay the mortgage debt.
Similarly if a contract is formed under undue influence or coercion, the contract is voidable by the innocent party. For example, a religious adviser persuades the person to whom he is giving advice to buy a property from him. There is undue influence and the victim has the option of setting aside the contract. It can be rescinded. Also, if a person enters into a contract under duress, ...

Solution provided by:
Hatim Baxamusa, MBA
Education
  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
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