Chapter 12: Defenses to Contract Enforceability Flashcards
Voluntary Consent may be lacking because of
Mistake
Fraudulent Misrepresentation
Undue Influence
Duress
What are the different kinds of mistakes?
Mistakes of Fact
Mistakes of Quality
What is the only mistake to allow a contract to be canceled?
Mistakes of Fact
One party is mistaken as to a material fact
Unilateral Mistake of fact
Does not give the mistaken party any right to relief from the contract
Unilateral Mistake of fact
Mutual misunderstanding concerning a basic assumption on which the contract was made
Bilateral Mistakes of fact
Presence of _____ effects the authenticity of the innocent party’s to consent to a contract
fraud
Usually can be avoided (voidable) because she or he has not voluntarily consented to a contrct
Fraudulent Misrepresentation
What are the 3 elements to Fraud
Misrepresentation of a material fraud must occur
Must be an intent to deceive
Innocent party must justifiably rely on the misrepresentation
To collect damages on fraudulent misrepresentation, a party must have been
Harmed as a result of the misrepresentation
A party takes specific action to conceal a fact that is material to the contract
Misrepresentation by Conduct
Untruthful denial of knowledge or information concerning facts that are material to the contract when such knowledge or information is requested
Misrepresentation by Conduct
Not subject to claims of fraud
Statements of Opinion
When a naive purchaser relies on an opinion from an expert, the innocent party may be entitled to
Rescission or Reformation
Ordinarily does not entitle a party to be relieved of a contract
Misrepresentation of Law
Neither party to a contract has a duty to come forward and disclose facts
Misrepresentation by silence
Seller must disclose only
Latent Defects
When parties are in a fiduciary relationship, there is a duty to disclose
Material Facts
Knowledge by a misrepresenting party that material facts have been falsely represented or omitted with an intent to decieve
Scienter
Exists if a party makes a statement that he or she believes not to be true or makes a statement recklessly without regard to whether it is true or false
Intent to Deceive
The misrepresentation must be an important factor in inducing the party to enter into the contract
Justifiable Reliance on the Misrepresentation
Reliance is not justified if the innocent party knows the true facts or relies on
obviously extravagant statements
Most courts do not require a showing of harm when the action is to rescind the contract
Injury to the innocent party
To recover damages for injury to the innocent party, this is universally required
Proof of an injury
Arises from relationships in which one party can greatly influence another party, overcoming the party’s free will
Undue Influence
What is the essential feature of undue influence
The party being taken advantage of does not exercise free will in entering into a contract
Use of treats to force a party to enter into a contract
Duress
This is generally not sufficient to constitute duress
Economic Duress
Primary purpose is to ensure that for certain types of contract, there is reliable evidence of the contracts and their terms
Statute of Frauds
What kinds of contracts need to be in writing?
Contracts involving interests in land
Cannot by their terms be performed within one year from the day after the date of formation
Collateral Contracts
Promises made in consideration of marriage
Under the UCC - contracts for the sale of good prices at $500 or more
Describe the one year rule
If a contract cannot, by its terms, be performed within one year from the day after the date of formation
A secondary promise to a primary transaction, such as a promise made by one person to pay the debts of another if the latter fails to perform
Collateral Promises
An oral promise to answer for the debt of another is covered by the statute of frauds unless the guarantor’s purpose in accepting secondary liability is to secure a personal benefit
Main Purpose Rule
An agreement made before marriage that defines each partner’s ownership rights in the other partner’s property
Prenuptual Agreements
Contract will not be enforceable for any quantity than that set forth in writing
Contracts for the Sale of Goods
Under the UCC, a contract for the sale of goods must be more than
$500
Exceptions to the Statute of Frauds include
Partial Performance
Admissions
Promissory Estoppel
Customized Goods
Any confirmation, invoice, sales slip, check, fax, or e-mail constitutes this
Writing
A rule of contracts under which a court will not receive into evidence prior or contemporaneous oral statements and agreements that contradict the terms of the parties written contract
Parol Evidence Rule
Testimony or other evidence of communications between the parties that is not contained in the contract itself
Parol Evidence
Exceptions to the Parol Evidence Rule
Contracts subsequently modified
Voidable or Void contracts
Contracts containing ambiguous terms
Incomplete contracts
Prior dealing, course of performance, or usage of trade
Contracts subject to an orally agreed on condition precedent
Contracts with an obvious or gross clerical error
Determination of whether evidence will be allowed basically depends on whether the written contract is intended to be a complete and final statement of the terms of the agreement
Integrated Contract
A written contract that constitutes the final expression of the parties’ agreement
Integrated Contract
Evidence extraneous to the contract that contradicts or alters the meaning of the contract in any way is inadmissible with this kind of contract
Fully Integrated
