Contracts - Defences at Formation

Question 1

What are the five types of defenses to formation

Answer 1

Illegality
Duress
Undue Influence
Mistake 
Fraud - Misrepresentation / Inducement

Question 2

Types of capacity to enter into a contract

Answer 2

Age - Minors

Mental

Question 3

Minors - Basic rules of entering into contract

Answer 3

not prohibited from entering contracts except illegal ones
minors right to dis-affirm before maturity or within reasonable time after attaining maturity
give back what was earned even if only a part of it remains
Exceptions - Necessities - minor is bound to reimburse the other party for value received to a reasonable extent
Ratification - Implied and Express

Question 4

Mistakes

Answer 4

Unilateral - voidable

Bilateral - voidable

Question 5

Innocent Misrepresentation

• Elements
• Damages

Answer 5

Stating of material facts of the subject matter of the contract , that the other party depended on to make a decision about the contract, but not with intention to deceive, puffing is Sales tricks

Recission is the only remedy

Question 6

Fraud in the inducement

• Elements
• Remedy

Answer 6

deception of material facts regarding subject matter with a intention to deceive and the party depended on the presentation to make decisions

Rescind or damages incl. punitive damages

Question 7

Undue Influence

• Define
• Remedy

Answer 7

When one person holds influence over the weaker person and exploits the relationship

Voidable at the option of the weaker party

Question 8

Duress

Answer 8

Physical threat/actual harm - void
economic harm
blackmail

Question 9

Illegality

• contracts in violation of statues
  
  • Usury clause
  • Gambling
    
    • Licensing statutes
    -
• not in violation of statutes but against public policy
  
  • Exculpatory clauses
  • Restraining clauses
  • -Unconscionable clauses in contracts

Answer 9

• loans at rates higher than max stipulated by law. Whole contract void, interest void, the rate above the max void
• Gambling contracts are illegal but debt needs to be repaid

-The real estate example -. If contract with person not licensed when he is supposed to be then illegal
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-Where any responsibility is denied irrespective of fault
- restraining clauses in conducting business unless for a reasonable time period and a specified location
- where it is humanely wrong to put a person in contract that never ends his liability (farmers in India where generations keep paying the loans)