Contracts 2 Flashcards
What are the available defenses to contract enforcement?
Statute of Frauds Misrepresentation/Nondisclosure Capacity Duress, Undue Influence Illegality, Public Policy Unconscionability Mistake Impossibility, Impracticability, Frustration of Purpose
What is the UCC statute of frauds?
A contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought
Broken Down:
Elements:
Sale of goods
Price more than $500
Requirements:
A writing of the sale,
signed by the party against whom enforcement is sought (defendant)
What are the exceptions to the statute of frauds?
- “Answer the Damn Letter”: Between merchants a writing within reasonable time of confirmation of contract satisfies requirements (unless written notice of objection to its contents is given within 10 days after received
- Specially manufactured for buyer, not suitable for sale to others in ordinary course of business, before notice of repudiation is received and has made either a substantial beginning of manufacture or commitments (like estoppel)
- If the party against whom enforcement is sought admits there was a contract for sale
- If partial performance is made and accepted or if payment is made and accepted
- Equitable Estoppel (detrimental reliance)
What types of contracts does the common law statute of frauds apply to?
A contract of an executor/administrator to answer for a duty of his decedent (the executor administrator provision)
A contract to answer for the duty of another (the suretyship provision)
A contract made upon consideration of marriage (the marriage provision)
A contract for the sale of an interest in land (the land contract provision)
A contract that is not to be performed within one year from the making thereof (the one-year provision)
What is the restatement elements regarding reliance on an oral contract which falls within the Statute of Frauds?
A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promise of a third person and which does induce the action or forbearance is enforceable notwithstanding the STatute of Frauds if injustice can be avoided only by enforcement of the promise. The remedy granted for breach is to be limited as justice requires.
Are electronic signatures acceptable for the statute of frauds?
The Uniform Electronic Transactions Act: electronic signature is a-okay for “writing” as well as “subscription”
What is fraudulent misrepresentation?
intentional or negligent assertion not in accordance with facts and which maker intends to induce other party’s assent
What is material misrepresentation?
assertion not in accordance with facts and that is likely to affect conduct of reasonable person and maker so knows
What happens if material or fraudulent misrepresentation is found?
If a party’s manifestation of assent is induced by either a fraudulent or a material misrepresentation by the other party upon which the recipient is justified in relying, the contract is voidable by the recipient.
When does a misrepresentation become material?
A misrepresentation becomes material when it becomes likely to affect the conduct of a reasonable person.
Do misrepresentations have to be direct?
Action intended or known to be likely to prevent another from learning a fact is equivalent to an assertion that the fact does not exist.
What are the two thoughts on disclosure?
Majority: deliberate non disclosure of material facts amounts to assertion if disclosure necessary to negotiate in “good faith” and with accordance with standards of fair dealing.
Minority: no duty to speak; can “passively” conceal
When is a person’s nondisclosure of a fact known to him equivalent to a misstatement?
Where he knows that disclosure of the fact would correct a mistake of the other party as to a basic assumption on which that party is making the contract and if non-disclosure of the fact amounts to a failure to act in good faith and in accordance with reasonable standards of fair dealing.
Test: Deliberate concealment, not observable, and a significant nature
When does a person lack capacity to assent to a contract?
If that person is: Under guardianship, or An infant, or Mentally ill or defective, or Intoxicated
What happens to contracts formed with someone who lacks capacity?
It is voidable by the person lacking capacity.
How does physical duress impact a contract?
If conduct that appears to be a manifestation of assent by a party who does not intend to engage in that conduct is physically compelled by duress, the conduct is not effective as a manifestation of assent.
The contract is therefore void.
(This is also known as physical compulsion under duress)
How does economic duress impact a contract?
(1) If a party’s manifestation of assent is induced by an improper threat by the other party that leaves the victim no reasonable alternative, the contract is voidable by the victim.
(2) If a party’s manifestation of assent is induced by one who is not a party to the transaction, the contract is voidable by the victim unless the other party to the transaction in good faith and without reason to know of the duress either gives value or relies materially on the transaction.
A threat is improper if the threat breaches the duty of good faith and fair dealing.
(This is also known as the improper threat + no reasonable alternative equation of duress)
What is undue influence?
Undue influence is unfair persuasion of a party who is under the domination of the person exercising the persuasion or who by virtue of the relation between them is justified in assuming that that person will not act in a manner inconsistent with his welfare.
Undue influence= undue susceptibility of the servient person, excessive pressure of the dominant person
Makes the contract voidable by person subject to undue influence.
How does illegality impact contracts?
things that are illegal you cannot contract for, illegal subject matter cannot be enforced by either party, completely void.
How can one invalidate a contract for unconscionability?
If you’re going to invalidate a contract for unconscionability it has to be procedurally unconscionable and substantively unconscionable. Procedural = was there a meaningful choice. Substantive = do the terms of the agreement unreasonably favor one party
What does the UCC say about unconscionability?
UCC 2-302
If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.
What are the seven factors that are relevant in determining whether a contract is unconscionable?
(1) a standardized agreement executed by parties of unequal bargaining power;
(2) lack of opportunity to read or become familiar with the document before signing it;
(3) use of fine print in the portion of the contract containing the provision;
(4) absence of evidence that the provision was commercially reasonable;
(5) the terms of the contract;
(6) the relationship of the parties, including factors of assent, unfair surprise, and notice; and
(7) all the circumstances surrounding the formation of the contract.
How is unconscionability different from undue influence?
Undue influence is just looking at the process of formation of the contract. Unconscionability is broader than this.
How is public policy different from unconscionability?
Public policy looks at the effect of contracts on society as a whole, and looks at the big picture. Broader than unconscionability.
What are the mistake elements?
Basic assumption
Material effect
Voidable
Unless that party bears the risk of the mistake
What is a bilateral mistake?
Where a mistake of both parties at the time a contract was made as to a basic assumption on which the contract was made has a material effect on the agreed exchange of performances, the contract is voidable by the adversely affected party unless he bears the risk of the mistake under the rule stated in 154
154: A party bears the risk of mistake when:
The risk is allocated to him by agreement of the parties,
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 limited knowledge as sufficient, or
The risk is allocated to him by the court on the ground that it is reasonable in the circumstances to do so.
