Chapter 8: non-enforcement of contracts

Question 1

why does the law need to enforce contracts?

Answer 1

the value of contracts would be lost if they didnt

Question 2

what are the exceptions of contracts

Answer 2

-unequal relationships
misrepresentation and important mistakes,
-defect in contract

Question 3

capacity of a contract

Answer 3

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

Question 4

legal capacity

Answer 4

ability to make binding contracts, some people however are incapable, including infants (minors), insane, and intoxicated

Question 5

Legal capacity of infants and minors

Answer 5

• 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

Question 6

legal capacity and insanity/ intoxication

Answer 6

• 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

Question 7

what are the 5 ingredients of a contract

Answer 7

1. agreement
2. consensus
3. intent
4. capacity
5. legality

Question 8

illegal contract

Answer 8

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

Question 9

statue of frauds

Answer 9

certain contracts must be in writing to be enforceable to prevent fraud and forgery

Question 10

what are the 3 disputes of a contract

Answer 10

1. existence of contract (5elements)
2. conduct of parties at the time of negotiating
3. performance of obligations under the contract

Question 11

when does a court get involved in contracts (5)

Answer 11

1. mistakes
2. misrepresentation.
3. duress
4. undue influence.
5. privity

Question 12

mistakes in a contract

Answer 12

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

Question 13

shared mistake

Answer 13

-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.

Question 14

misunderstanding

Answer 14

each party has a different understanding of the subject matter of the contract. courts imply reasonable interpretation and enforce contract.

Question 15

one sided mistake

Answer 15

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

Question 16

misrepresentation

Answer 16

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

Question 17

types of misrepresentation

Answer 17

innocent
fraudulent
negligent

Question 18

innocent misrepresentation

Answer 18

• misleading without knowing
• person honestly believed what was said was true
• • only remedy is rescission- restore parties to original position before contract.

Question 19

fraudulent misrepresentation

Answer 19

• 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

Question 20

negligent misrepresentation

Answer 20

• person making misrepresentation should have known what they said was false and careless
  remedies: rescission/ damages or both

Question 21

Duress

Answer 21

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

Question 22

undue influence

Answer 22

-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)

Question 23

unconscionable contract

Answer 23

-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

Question 24

Privity

Answer 24

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