A business consultant was hired to advise a small tech startup on marketing strategies. During contract negotiations, the consultant represented that she had successfully enabled a client to increase profits by 30%. After signing the contract and receiving payment for her services, the startup discovered that the consultant had no documentation supporting this claim and fabricated the results to secure the job. The startup wants to have the contract rendered unenforceable. Which principle is most likely to apply in this scenario?
The principle of fraud applies in this scenario because the consultant knowingly made a false statement of fact (fabricated client success) with the intent to induce the startup into entering the contract. This misrepresentation materially influenced the startup's decision, and the startup reasonably relied on it when agreeing to hire her. Misrepresentation or fraud in the inducement is a justification to render a contract unenforceable.
As for the incorrect answers:
Mistake applies to errors related to facts made by one or both parties, but here, only one party knowingly misrepresented facts.
Duress involves coercion or threats that leave one party with no reasonable alternative but to agree to the contract, which didn’t happen here.
Undue influence refers to taking advantage of a special or trust-based relationship in a way that unfairly persuades another party, but there’s no evidence of such a relationship in this scenario.
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