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Law School Case Brief

Jordan v. Knafel - 378 Ill. App. 3d 219, 317 Ill. Dec. 69, 880 N.E.2d 1061 (2007)

Rule:

In order for a representation to constitute fraud that would permit a court to set aside a contract, the party seeking such relief must establish that the representation was: (1) one of material fact; (2) made for the purpose of inducing the other party to act; (3) known to be false by the maker, or not actually believed by him on reasonable grounds to be true, but reasonably believed to be true by the other party; and (4) was relied upon by the other party to his detriment.

Facts:

Karla Knafel and Michael Jordan, a renowned basketball player who was married, had unprotected sex, which allegedly resulted in pregnancy. Before the child was born, the parties discussed possible resolutions of their dilemma, and in the spring of 1991, Jordan offered and urged Knafel to accept $5 million in return for her agreement not to file a paternity suit. Jordan also asked Knafel to keep their romantic involvement confidential. Jordan failed to pay the $5 million under the alleged agreement, and denied that he had promised to pay Knafel that amount of money. Obtaining knowledge thereafter of a mutual mistake about the child’s paternity, Jordan filed an action to declare the aforementioned agreement between him and Knafel as unenforceable.

Issue:

Should the agreement between Knafel and Jordan be declared unenforceable because of fraud or mutual mistake?

Answer:

Yes.

Conclusion:

The Court noted that a paternity test revealed that Knafel had sexual relations with someone other than Jordan; hence, she knew that she lacked the certainty about the paternity of the child or, at least, knew that she did not have the basis that she stated or implied for that categorical representation, thus making it fraudulent. The Court opined that even if the representation was not fraudulent and was made in good faith, Knafel’s representation regarding paternity, a basic assumption of the contract, was ultimately mistaken. According to the Court, a misrepresentation was material if the party seeking rescission would have acted differently had he been aware of the fact or if it concerned the type of information upon which he would be expected to rely when making his decision to act. Th e Court further stated that Knafel’s representation regarding the paternity of the child was a substantial factor in inducing Jordan to act.

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