Contracts Defenses Flashcards
Types of Defenses
(1) Missing formation elements
(2) Formation elements negated (lack of capacity, mistake)
(3) Public Policy Defenses (illegality, SOF)
Statute of Frauds
Rule: A contract within the statute is not enforceable unless it is evidence by a writing signed by the party to be bound
Types of Contracts the fall under the SOF
MYLEGS
(1) Marriage - contracts in which the consideration is marriage
(2) Year - contracts that cannot be performed within a year
(3) Land - contracts for interests in land
(4) Executor - contracts by executors/administrators to personally pay the debt of an estate
(5) Goods - contracts for the sale of goods for $500 or more
(6) Suretyship - contracts to answer for the debt of another
3 most important - Goods, year, land
Sale of Goods SOF Exceptions
4 UCC exceptions - SWAP
(1) Specially manufactured goods
(2) Written confirmation by merchant
(3) Admissions
(4) Performance
Specially Manufactured Goods Exception
Rule: A contract for the sale of goods for $500 or more can be enforced without a writing if the goods are specially manufactured goods
Specially manufactured: goods that are made to order - custom made
*Once there’s been a substantial beginning of the making or obtaining of these specially manufactured goods, the contract can be enforced against the buyer even if there is no writing evidencing the terms of the contract
Written Confirmation by Merchant Exception (Merchant’s Confirmatory Memo Rule)
Only applies in contracts between merchants
Rule: In contracts between merchants, if one party, within a reasonable amount of time after an oral agreement has been made, sends the other party a written confirmation of the deal that is sufficient under the SOF to bind the sender, it’ll also bind the recipient as long as the recipient does not object to it in writing within 10 days of receiving it
Admission Exception
Rule: If you admit to having a contract in court (for example in the pleadings, in response to discovery, or in a deposition), you’re bound
Performance Exception
Rule: performance takes the contract out of the SOF to the extent of the performance accepted
Contracts that Cannot be Completed within One Year
Contracts that, by their terms, cannot possibly be performed within one year from the date the contract is made
if no matter, that contract performance will take beyond one year, it’s considered a long term contract and is within the SOF
Traps:
- an oral contract of relatively short duration but which, by the terms of the contract, cannot be completed within a year - within the SOF
- a contract to complete a task with no set date of performance - not within the SOF
Contracts for the Sale of Land
Typically talking about land sale contracts - BUT any contract that creates an interest in land for more than a year is also within the SOF
Traps:
- Contracts that sound like they involve an interest in land, but actually don’t (ex: construction contracts; real estate person hired to show property and find a buyer)
Exception: Performance
- Full performance by the seller will take the contract out of the SOF
- part performance that unequivocally indicates that the parties have contracted for the sale of land
Suretyship Contracts
Surety: a guarantor of the debt for another person
- ex: I promise to pay Arya’s loan if she does not; your parent when they co-signed to help you buy your first car
- This promise has to be evidenced by a writing signed by the surety, otherwise, the surety is not bound
What type of writing will satisfy the SOF?
The contract does not have to be in writing. Just need a writing containing the essential terms that is signed by the party being sued
Trap: the only essential term in a contract for the sale of goods is the quantity
- see example
*A check can serve as a writing; the writing does not have to be on one piece of paper; the signature requirement is easily satisfied (it can be any sort of mark that was intended to authenticate the writing - can be printed, written, or typed) - initials, or sending a letter on letterhead will suffice
Defenses - Absence of Mutual Assent
(1) Mistake
(2) Misunderstanding
(3) Misrepresentation
Mistake
Rule: a factual error regarding a fundamental matter than has a material effect on the agreed exchange (basically a mistake regarding a fact that goes to the heart of the deal rather than some ancillary matter)
Mutual Mistake: generally is a defense
Unilateral Mistake: generally is not a defense
Mutual Mistake: Effect of Assumption of Risk
Situations in which one or both parties might have assumed the risk about being wrong about a material fact
Rule: a party who assumed the risk of mistake can’t then use the mistake as a defense to enforcement of the contract
A party assumes the risk of mistake when:
- the parties know they don’t know a fact OR
- when a party is in a superior position to know a fact
