Contract Formation Defenses

Question 1

Defenses

Answer 1

(1) Incapacity
(2) Mistake
(3) Misunderstanding
(4) Misrepresentation (5) Duress
(5) Undue Influence
(6) Illegality
(7) Unconscionability

Therefore, can be Void or Voidable

Void- treat the K as though it never existed

Voidable-
At that party discretion, only one party bound to terms, Other party is free to walk away but still enforceable

Question 2

Incapacity

Answer 2

In order to enter into K, both parties must not be
(1) Party to K under age 18
(2) Mental illness
(3) Intoxicated

Question 3

Mistake

Answer 3

One party or Both
is mistaken to a basic assumption for K is form

Question 4

Misunderstanding

Answer 4

Different interpretation of meanings/ multiple

Question 5

Misrepresentation

Answer 5

a lie, assertion or fact that is untrue

Question 6

Duress

Answer 6

Use of improper threats to

Question 7

Undue influence

Question 8

illegality

Question 9

unconscionability

Answer 9

So unfair or oppressive

Question 10

Mutual Mistake

Answer 10

exaamples:Both parties mistaken
Seller- Realizes something more valuable
Buyer- Gets ring that is fake, thought getting something more expensive

A K IS VOIDABLE at the discretion of the adversely affected party

IF ADVERSELLY affected party can get out of deal if show
(1) There is a mistake of FACT existing at the time that the deal is made

(2) The mistake relates to a BASIC ASSUMPTION (getting what advertised) of the K
(Market Value prediction is NOT basic assumption)

(3) The mistake has a MATERIAL impact on the deal AND

(4) The adversely affected party did NOT assume the risk of mistake.

**a party assumes the risk of mistake when
(a) The risk is expressly allocated to him by agreement of the parties (Told buyer buying as is), OR
(b) He is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to which the mistake relates but treats his knowledge as sufficient (consciously ignorant)

More research someone does to learn about deal, less risk and K can be voidable

Question 11

Unilateral Mistake

Answer 11

All of Mutual Mistake plus (maybe miscalculation on one side)

(5)
The mistake would make the contract UNCONSCIONABLE; OR the other side had reason to know of OR caused the mistake

Question 12

Misunderstanding Analysis

Answer 12

Look at subjective belief “meeting of the minds”

IF the agreement includes a term that has multiple possible meanings, the result depends on the party’s knowledge or awareness of the misunderstanding

(1) If neither party knows or should know = No K unless both parties intended same meaning
(2) If Both parties know or should know= No K Unless both intended same meaning
(3) If One party knows or should know= Binding K on the ignorant party’s reasonable interpretation
“If P knows that other party will think one thing, but D doesn’t know ignorant… than based on D interpretation”