Contract Law Principles and Concepts Term Paper

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Breach of Contract and Failure of Consideration:

Black is only obligated to pay the original $150,000 for the equipment. As a fundamental principle, courts do not interfere with the terms or obligations of contracts merely because one of the parties regrets the deal he made. The fact that market prices or other external circumstances reduce the value of the contract to one of the parties is not a legal justification to refuse to perform under the contract (Friedman, 2005; Halbert & Ingulli, 2008).

Black agreed to pay the additional $8,000 but White will not be able to enforce that part of the agreement because there was no consideration for it; unlike the contract itself, that subsequent agreement was unilateral because it did not change what Black was already entitled to receive from White for the amount originally agreed upon (Friedman, 2005).

McMullen v. Joldersma:

McMullen v. Joldersma (174 Mich App 207) was a 1988 Appeal to the Michigan Appellate Court from a 1986 decision by a Michigan trial court (435 NW 2d 428) in which the plaintiff's case was dismissed for failure to state an actionable claim.

Nature of Case

In McMullen, the plaintiffs had purchased a store from the defendants. After the purchase was complete, the plaintiffs discovered that the municipality had been considering plans to construct a highway that would dramatically reduce the traffic flowing past the store and probably substantially reduce the commercial value of the property. The purchaser sued the seller claiming that the seller had known of the highway plans but purposely and fraudulently withheld that information from the buyer at the time of the sale.

Concise Rule of Law

A contract is not negated by fraud based on patent conditions that were not disclosed by the seller where that condition could have easily been ascertained by the buyer and where the patent condition has not yet actually occurred.

Relevant Facts, Issues, and Legal Distinctions

The law does recognize fraud as a justification for rescinding contracts or compensating the defrauded party (Friedman, 2005). Generally, the circumstances sufficient to constitute fraud must be material to the contract, the party accused of fraud must have been aware of and either misrepresented or purposely failed to disclose information to induce the contract, and the defrauded party must have relied on the fraudulent act and suffered actual harm by that reliance (Friedman, 2005).

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In this case, none of the elements for establishing fraud in connection with the contract were satisfied by the plaintiff. The municipality had not yet actually decided to build the highway so the buyer was not actually harmed by the sale. For the same reason, the fact that the county was considering building a highway in the future is not material to the contract. The seller was aware of the circumstances but never did anything to hide the information and did not provide any false information, such as by answering falsely in response to a direct question or tearing down a road sign publicizing a new highway. Finally, the purchaser did rely on any misrepresentation or nondisclosure of the circumstances because the information about the proposed highway was freely available because it was a matter of public record and not information known exclusively to the seller.

Where the circumstances are material, the seller purposely conceals a latent condition that is not easily knowable to the buyer, or where the seller misrepresents or omits the truth in response to a direct question and the buyer relies on that information, the elements of "silent fraud" are met. However, where the condition is equally knowable to both parties, the condition is considered a patent condition.

Holding and Decision

The court held that where an undisclosed condition is equally ascertainable to both parties and relates exclusively to future events, a buyer may not recover against a seller for fraudulent misrepresentation or omission. The court decided to affirm the trial court's decision to dismiss the plaintiff's case because the seller did not commit any fraud in the transaction and the buyer was not harmed in any way that gave rise to a right to rescission or any compensation from the seller.

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