Chapter 8: non-enforcement of contracts Flashcards
why does the law need to enforce contracts?
the value of contracts would be lost if they didnt
what are the exceptions of contracts
-unequal relationships
misrepresentation and important mistakes,
-defect in contract
capacity of a contract
valid - legally binding, it has all 5 elemetns
void- there was never a contract, both parties are free from obligations
voidable- one party has the right to escape
legal capacity
ability to make binding contracts, some people however are incapable, including infants (minors), insane, and intoxicated
Legal capacity of infants and minors
- voidable contract
- anyone under the age of majority (19) in bc
- do not have the option to fulfill contract or enforce it on others
- parents not responsible for contract of infants unless they are authorized as the quaranteer
legal capacity and insanity/ intoxication
- must show you did not understand the transaction and the other party new this
- you must repudiate contract as soon as your sane or sober
what are the 5 ingredients of a contract
- agreement
- consensus
- intent
- capacity
- legality
illegal contract
cannot be enforced because it is contrary to legislation or public policy
it is a void contract - courts act as if it never happened and will not assist either party
statue of frauds
certain contracts must be in writing to be enforceable to prevent fraud and forgery
what are the 3 disputes of a contract
- existence of contract (5elements)
- conduct of parties at the time of negotiating
- performance of obligations under the contract
when does a court get involved in contracts (5)
- mistakes
- misrepresentation.
- duress
- undue influence.
- privity
mistakes in a contract
error that seriously undermines contract -- leads to parties having different understanding of the terms of the contract. the error destroys consensus. types of mistakes 1. shared mistakes 2. misunderstanding. 3. one sided mistake
shared mistake
-both parties made the same mistake
contract therefore void for lack of consensus.
-If shared mistake relates to value of subject matter then it does not void the contract.
-mistake only in the terms the court will rectify the agreement.
misunderstanding
each party has a different understanding of the subject matter of the contract. courts imply reasonable interpretation and enforce contract.
one sided mistake
unilateral mistake
-one party has misled himself as to the subject matter
usually has no effect on contract
if the mistake is a result of misrepresentation then the contract would be void
misrepresentation
false and misleading statement of fact that causes someone to enter a contract
Must prove that statement is
-false
-concerned with fact not opinon
-** silence is not misrepresentation unless duty to disclose
types of misrepresentation
innocent
fraudulent
negligent
innocent misrepresentation
- misleading without knowing
- person honestly believed what was said was true
- only remedy is rescission- restore parties to original position before contract.
fraudulent misrepresentation
- intentionally misleading another to induce him or her to enter into the contract
remedies: - victim may seek rescission, damages, or both
- may seek punitive damages in extreme cases
- easier to sue for innocent or negligent misrepresentation
negligent misrepresentation
- person making misrepresentation should have known what they said was false and careless
remedies: rescission/ damages or both
Duress
threat of physical, economic harm (coercion) that results in a contract
- Law assumes that the threatened party did not freely consent
- contract voidable
- threats also may be a criminal offense - intimidation or harassment
undue influence
-unfair manipulation that comprises someones free will or choice
-contract voidable at the option of the victim
undue influence can be:
-actual pressure
-presumed pressure based on relationship (lawyers, doctors, gaurdians)
unconscionable contract
-unfair contract formed when one party takes advantage of the weakness of another party
-bargaining positions unequal
-contract grossly unfair to victim
two step process to prove:
-inequality between parties
-improvident bargain or proof of exploitation
court may void or modify (voidable) contract
Privity
only the parties to a contract are bound and may enforce it– they have the rights
exception
-interests in land bind other property owners
-trusts- beneficiary may enforce
-life insurance
-some statutory exceptions – can sue manufacturer
