Explaining How and Why Fraud Invalidates a Contract.

In: Business and Management

Submitted By blanquita
Words 1599
Pages 7
Business

I. Explaining how and why fraud invalidates a contract. A. There are certain grounds under which a compromise and settlement agreement can be invalidated. If a settlement agreement fails to establish certain elements like offer, acceptance and consideration, it can be invalidated. Similarly, a settlement agreement can be invalidated due to:

* Fraud * Nondisclosure as fraud * Duress * Illegality * Mistake * Undue influence

A compromise induced by fraud can be invalidated. In approving a proposed settlement agreement, a court must determine that the agreement is not the outcome of fraud. Fraud exists if all of the following elements are present:

* An untrue representation of fact knowingly by a party * Making such representation recklessly * Making untrue representation to deceive the other party and to induce him/her to act upon the same.

Similarly, an unintentional nondisclosure without an intention to deceive will not constitute fraud. However, a compromise can be invalidated for fraud if one party deliberately conceals facts with the intent to induce the action of other party. The duty of disclosure is more comprehensive when there is a fiduciary relationship between the parties to the compromise. At the same time, it cannot be presumed that the elements of fraud exist only because of the existence of a fiduciary relationship.

Likewise, a person who makes a compromise as a result of duress invalidates the same. Duress is defined as the imposition, oppression, undue influence or the taking advantage of the stress of another whereby one is deprived of the exercise of his/her free will. The party asserting duress must prove the allegation by clear and convincing evidence. However, a compromise agreement will not be set aside on the ground of duress if the person alleging it can get relief from the…...

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