C4. Limits on Bargains: Defenses Flashcards
What are the limits on bargains?
1) With bargain, it doesn’t matter how valuable the consideration is
2) In general a waiver of any legal right at the request of another party is sufficient consideration for a promise
3) Mere inadequacy of consideration will not void a contract
What is duress?
When a manifestation of assent is induced by an improper threat by the other party that leaves the victim no reasonable alternative
*Duress can’t be a lawful act (i.e. threating to file bankruptcy)
What is the minority view to prove duress?
1) coercion
2) putting a person in such fear that he is bereft of the quality of mind essential to the making of contract; and
3) that the contract was thereby obtained as a result of this state of mind
What is the elements for mutual mistake?
1) Mutual - both parties must believe the mistaken assumption
2) Mistake - a mistake must have accidently been made
3) Of material fact - must be a material mistake, meaning it must be large or serious
4) As to the subject matter (substance - not quality or accident, as to the whole consideration)
What is a legal mistake under mutual mistake?
It’s when making a contract based on a set of facts you thought to be true where it turn out they were not in fact true
Mutual mistake fall into which 3 categories?
1) present impossibility
2) Present frustration of purpose
3) Drastic change in value
What is present impossibility?
It’s when selling a non-existing thing renders the contract voidable ( selling a dead horse when neither knew it was dead)
What is present frustration of purpose?
When something or performance is possible but would be pointless
What is drastic change in value?
If the thing actually delivered or received is different in substance from the thing bargained for and intended to be sold
What are the elements for a unilateral mistake?
1) the mistake was to a basic assumption on which the contract was made (substantive); based on the premise of the contract
2) the mistake had material fact on the agreed exchange of performance
3) the mistake is so great that the enforcement of the contract would be unconscionable
4) regardless of ordinary care
5) possible to place other party in status quo
6) either party can’t have previous knowledge of mistake
7) prompt notice of mistake
What is misrepresentation?
It renders a contract voidable by the party relying on the misrepresentation
Misrepresentation exist if?
1) one party makes a false statement, or omission in breach of a duty to speak
2) of a material fact (or an immaterial fact if the false statement is made with the intent to mislead)
3) one which the other party relies in entering the contract
4) reasonably
When is there no duty to speak exists under misrepresentation?
When the parties deal at arm’s length and the underlying facts are reasonably within the knowledge of both parties
*under such circumstances, the other party is obligated to take reasonable steps to inform himself and to protect his own interests
When does a duty to speak arises under misrepresentation?
When the omitting party is or should be aware of circumstances that would make an omission misleading
What is “caveat emptor” under misrepresentation?
It means “buyer beware”. Which only apply when the seller created a physical condition that can be seen (i.e. termites, holes in floor).
