Contracts IV--Defenses

Question 1

What is a mutual mistake as to existing facts?

Answer 1

A mutual mistake is generally a mistaken assumption shared by both parties. Thus, when both parties entering into a contract are mistaken about existing facts (not future happenings) relating to the agreement, the contract may be voidable by the adversely affected party if:

(i) The mistake concerns a basic assumption on which the contract is made;
(ii) The mistake has a material effect on the agreed-upon exchange; and
(iii) The party seeking avoidance did not assume the risk of the mistake.

Contracts IV–Defenses

Contracts>Absent of Mutual Assent(IV.B.1.)
.

Question 2

If the parties to a contract make assumptions as to the value of the matter, can the mistakes in those assumptions be remedied?

Answer 2

Generally no,
If the parties to a contract make assumptions as to the value of the matter, mistakes in those assumptions will generally not be remedied. – even though the value of the matter is generally a basic assumption and the mistake creates a material imbalance – because both parties usually assume the risk that their assumption as to the value is wrong. However, it is possible for the facts to show that the adversely affected party did not assume the risk in determining the value.

Contracts IV–Defenses

Contracts>Mistake in value generally not a defense(IV.B.1.a.1.)
.

Question 3

Is mutual mistake a defense if the party asserting mistake as a defense bore the risk that the assumption was mistaken?

Answer 3

No,
Mutual mistake is not a defense in that case. This commonly occurs when one party is in a position to better know the risks than the other party or where the parties knew that their assumption was doubtful. In other words, to be a defense it must be a mistake, not a mere uncertainty.

Contracts IV–Defenses

Contracts>Not a defense if party bore the risk(IV.B.1.a.)
.

Question 4

Can contract rights be deemed unenforceable even if an agreement is supported by valuable consideration or a recognized substitute?

Answer 4

Yes if:

(1) there is a defense to formation of the contract
(2) because there is a defect in capacity(making the obligations voidable by one of the parties),
(3) or because a defense to enforcement of certain terms exists.

Contracts IV–Defenses

Contracts>Requirement That No Defenses Exist(IV.A.)
.

Question 5

Can you cure an illusory promise?

Answer 5

Yes:
Even if a promisor retains the power to select an alternative without legal detriment, his actual selection of an alternative involving legal detriment would cure the illusory promise.

Contracts IV–Defenses

Contracts>Right to Choose Among Alternative Courses? (III.C.8.a.)
.

Question 6

Is a promise to choose one of several alternative means of performance Illusory?

Answer 6

Yes, unless:
(1) Every alternative involves some legal detriment to the promisor. However, if the power to choose rests with the promisee or some third party not under the control of the promisor, the promise is enforceable as long as at least one alternative involves some legal detriment.

Contracts IV–Defenses

Contracts>Right to Choose Among Alternative Courses? (III.C.8)
.

Question 7

What does ‘canceled in equity’ mean?

Answer 7

Contracts with errors, such as mistakes in computation, may be canceled in equity, assuming that the nonmistaken party has not relied on the contract.

Contracts IV–Defenses

Contracts>Requirement that no defenses exist (IV.B.2.a)
.

Question 8

What is an ‘error in judgment’?

Answer 8

An error in judgment by one of the parties as to the value or quality of the work done or goods contracted for will not result in a voidable contract, even if the nonmistaken party knows or has reason to know of the mistake made by the other party.

Contracts IV–Defenses

Contracts>Requirement that no defenses exist (IV.B.2.b)
.

Question 9

What is a ‘unilateral mistake’?

Answer 9

Unilateral mistakes arise most commonly when one party makes a mechanical error in computation.

Contracts IV–Defenses

Contracts>Requirement that no defenses exist (IV.B.2)
.

Question 10

What if only one party was mistaken?

Answer 10

If only one of the parties is mistaken about facts relating to the agreement, the mistake will not prevent formation of a contract. However, if the nonmistaken party knew or had reason to know of the mistake made by the other party, the contract is voidable by the mistaken party.

Contracts IV–Defenses

Contracts>Requirement that no defenses exist (IV.B.2)
.

Question 11

What is a ‘mistake in transmission’?

Answer 11

When there is a mistake in the transmission of an offer or acceptance by an intermediary, the prevailing view is that the message as transmitted is operative unless the other party knew or should have known of the mistake.

Contracts IV–Defenses

Contracts>Requirement that no defenses exist (IV.B.3)
.

Question 12

What if neither party is aware of ambiguity?

Answer 12

If neither party was aware of the ambiguity at the time of contracting, there is no contract unless both parties happened to intend the same meaning.

Contracts IV–Defenses

Contracts>Requirement that no defenses exist (IV.B.4.a)
.

Question 13

What is a ‘misunderstanding’?

Answer 13

Contract language with at least two possible meanings leads to different results depending on the awareness of the parties. Most often there is no contract because there is no meeting of the minds.

Contracts IV–Defenses

Contracts>Requirement that no defenses exist (IV.B.4)
.

Question 14

What is a fraudulent misrepresentation in the context of fraud in the inducement?

Answer 14

A fraudulent misrepresentation is:
(1) a false assertion of fact
(2) offered by one party to induce the other party to enter into a contract, and
(3) the party offering the assertion:
(a) believes it is false, OR
(b) knows that he does not have a basis for what he is stating or implying with the assertion
Fraudulent misrepresentation used to induce a party to enter into a contract is a type of fraud in the inducement.

Contracts IV–Defenses

Contracts>Requirements that no defenses exist>Absence of Mutual Assent>Misrepresentation>Fraudulent misrepresentation (fraud in the Inducement) (IV.B.5.a)
.

Question 15

When is a contract entered into under fraud in the inducement voidable?

Answer 15

Fraud in the inducement occurs if one party induces another to enter into a contract using a fraudulent misrepresentation. The contract is voidable by the innocent party IF she justifiably relied on the fraudulent misrepresentation.

Contracts IV–Defenses

Contracts>Requirements that no defenses exist>Absence of Mutual Assent>Misrepresentation>Fraudulent misrepresentation (fraud in the Inducement) (IV.B.5.a)
.

Question 16

What is fraud in the factum?

Answer 16

Fraud in the factum occurs if one party was:

(1) tricked into giving assent to the agreement
(2) under circumstances that prevented her from appreciating the significance of her action.

Contracts IV–Defenses

Contracts>Requirements that no defenses exist>Absence of Mutual Assent>Misrepresentation>Fraudulent misrepresentation (fraud in the Inducement)>Distinguish – Fraud in the Factum (IV.B.5.a.1)
.

Question 17

Are agreements entered into under fraud in the factum void or voidable?

Answer 17

These agreements cannot be enforced, and, therefore, they are void.

Contracts IV–Defenses

Contracts>Requirements that no defenses exist>Absence of Mutual Assent>Misrepresentation>Fraudulent misrepresentation (fraud in the Inducement)>Distinguish – Fraud in the Factum (IV.B.5.a.1)
.

Question 18

Is there a contract if both parties were aware of ambiguity at the time of contracting?

Answer 18

No contract exists, UNLESS both parties in fact intended the same meaning.

Contracts IV–Defenses

Contracts>Requirements that no defenses exist>Absence of Mutual Assent>Misunderstanding – Ambiguous Contract Language>Both Parties Aware of Ambiguity – No contract (IV.B.4.b)
.

Question 19

Do courts use a ive or objective test in latent ambiguity situations?

Answer 19

Courts look to the ive intentions of the parties because the objective test does not work in this situation.

• The objective manifestations of the parties seem to be clear, but the facts show latent ambiguity.
• Therefore, it is necessary to receive evidence of each party’s ive thoughts at the time of contracting.

Contracts IV–Defenses

Contracts>Requirements that no defenses exist>Absence of Mutual Assent>Misunderstanding – Ambiguous Contract Language>ive intention of parties controls (IV.B.4.d)
.

Question 20

Is there a contract if one party is aware of the ambiguity but the other party is not at the time of contracting?

Answer 20

Yes, there is an enforceable contract. The contract is enforced according to the intentions of the party who was unaware of the ambiguity.

Contracts IV–Defenses

Contracts>Requirements that no defenses exist>Absence of Mutual Assent>Misunderstanding – Ambiguous Contract Language>One Party Aware of Ambiguity – Contract (IV.B.4.c)
.

Question 21

How does absence of consideration affect a contract?

Answer 21

If promises exchanged at the formation stage lack the elements of bargain or legal detriment, no contract exists. In this situation, one of the promises is always illusory.

Contracts IV–Defenses

Contracts>Absence of Consideration (IV.C)
.

Question 22

How do concealment and nondisclosure affect a contract?

Answer 22

Concealment of a fact by a party or acting to frustrate an investigation by the other party meant to reveal pertinent facts can be considered a misrepresentation because an action intended to prevent another from learning a fact is the equivalent of asserting that the fact does not exist.

Nondisclosure without concealment is generally not misrepresentation. A party is not required to tell everything he knows to the other party, but if the nondisclosure is either material or fraudulent, the contract is voidable for misrepresentation.

Contracts IV–Defenses

Contracts>Concealment and Nondisclosure (IV.B.5.c)
.

Question 23

When can a party rescind an agreement due to misrepresentation?

Answer 23

An innocent party may rescind an agreement even if the terms are fair or beneficial to the misled party. The right to void or rescind such a contract may be lost if the innocent party affirms the contract in question despite the misrepresentation.

Contracts IV–Defenses

Contracts>Innocent Party May Rescind Agreement (IV.B.5.e)
.

Question 24

When may a contract be voided due to reliance on a misrepresentation?

Answer 24

A party’s reliance on a misrepresentation must be justified for the contract to be voidable. The mere fact that misrepresentation could have been revealed by the exercise of reasonable care does not mean reliance was unjustified. For example, a party’s failure to read a contract or use care in reading it will not necessary preclude him from voiding the contract.

Contracts IV–Defenses

Contracts>Justified Reliance (IV.B.5.d)
.

Question 25

How does material misrepresentation affect a contract?

Answer 25

A contract is voidable by the innocent party if the innocent party justifiably relied on the misreprsentation and the misrepresentation was material. Material misrepresentation does not need to be fraudulent for a contract arising from the misrepresentation to be voidable.

Contracts IV–Defenses

Contracts>Material Misrepresentation (IV.B.5.b)
.

Question 26

When is misrepresentation material?

Answer 26

Misrepresentation is material if:

(i) It would induce a reasonable person to agree to the contract, OR
(ii) The maker knows that for some special reason it is likely to induce the particular person to agree, even if a reasonable person would not.

Contracts IV–Defenses

Contracts>Material Misrepresentation (IV.B.5.b)
.

Question 27

What remedies are available for fraud?

Answer 27

Remedies for material representation or fraud include recission of the contract as well as all remedies available for breach of contract.

In a contract for the sale of goods, neither recission of the contract nor the return of the goods shall bar a claim for damages or other remedy for fraud. UCC § 2-721.

Contracts IV–Defenses

Contracts>Remedies for Fraud (IV.B.5.f)
.

Question 28

When does the statute of limitations on actions for fraud begin to run?

Answer 28

The time period to bring an action for fraud does not run until the party knows or should have known about the fraud.

Contracts IV–Defenses

Contracts>Remedies for Fraud (IV.B.5.f)
.

Question 29

What makes a contract void?

Answer 29

Illegal consideration or matter renders a contract void and enforceable. In close cases, courts may exercise severability and strike an illegal clause, rather than rendering the entire agreement void.

Contracts IV–Defenses

Contracts>effects of illegality (IV.D.2.a)
.

Question 30

What makes a contract voidable?

Answer 30

If the contract was formed for an illegal purpose but neither the consideration nor the matter is illegal, the contract is only voidable (rather than void).

Contracts IV–Defenses

Contracts>illegal purpose (IV.D.2.3)
.

Question 31

Who can void an illegal purpose contract?

Answer 31

The party who: 1) did not know of the purpose; or 2) knew but did not facilitate the purpose and the purpose does not involve ‘serious moral turpitude.’

Contracts IV–Defenses

Contracts>illegal purpose (IV.D.2.3)
.

Question 32

In these cases, what is the public policy defense?

Answer 32

If either the consideration or the matter of a contract is illegal, this will serve as a defense to enforcement.

Contracts IV–Defenses

Contracts>public policy defenses (IV.D)
.

Question 33

How does timing affect legality/illegality?

Answer 33

1) If matter or consideration was illegal at the time of the offer –> no valid offer. 2) If it became illegal after the offer but before acceptance, the supervening illegality operates to revoke the offer. 3) If it became illegal after a valid contract was formed, the supervening illegality operates to discharge the contract because performance has become impossible.

Contracts IV–Defenses

Contracts>timing of illegality (IV.D.2.b)
.

Question 34

What are the most typical cases of illegality in contracts?

Answer 34

Some of the most common areas in which problems of illegality have arisen are: 1) agreements in restraint of trade; 2) gambling contracts; usurious contracts; 4) agreements obstructing administration of justice; 5) agreements inducing breach of public fiduciary duties; and 6) agreements relating to torts or crimes.

Contracts IV–Defenses

Contracts>Typical illegal Contracts (IV.D.1)
.

Question 35

What makes a contract illegal?

Answer 35

Contracts may be illegal because they are inconsistent with the Constitution, violate a statute, or are against public policy as declared by the courts.

Contracts IV–Defenses

Contracts>When is a contract illegal? (IV.D)
.

Question 36

What happens when the Plaintiff is unaware of illegality?

Answer 36

If the plaintiff contracted without knowledge that the agreement was illegal and the defendant acted with knowledge of the illegality, the innocent plaintiff may recover on the contract.

Contracts IV–Defenses

Contracts>Requirement that no defense exists (IV.D.3.a)
.

Question 37

What happens when parties are not in ‘pari delicto’?

Answer 37

A person may successfully seek relief if he was not as culpable as the other.

Contracts IV–Defenses

Contracts>Requirement that no defense exists (IV.D.3.b)
.

Question 38

What if a contract is illegal solely due to lack of required licensure?

Answer 38

The enforceability of the contract depends on the reason for the license.

If the license is merely to raise revenue, the contract is generally enforceable.

If the license is required to ensure that the licensee meets minimum requirements to protect the public welfare (e.g., a license to practice law, medicine, accounting, etc.), the contract is void. This means that even if the unlicensed party performs perfectly under the contract, the party cannot collect any damages.

Contracts IV–Defenses

Contracts>Requirement that no defense exists (IV.D.3.c)
.

Question 39

Who is an Infant?

Answer 39

Anyone under the age of majority in the respected jurisdiction; some jurisdictions consider married persons as adults as well

Contracts IV–Defenses

Contracts>Contracts of Infants(IV.E.1.a.1)
.

Question 40

When must you assert the defense of legal incapacity?

Answer 40

A promisor must timely assert the defense of legal incapacity to make the contract void; only for the protected class of individuals that are incapable of incurring contractual obligations.

Contracts IV–Defenses

Contracts>Defenses Based on Lack of Capacity (IV.E.1.)
.

Question 41

When may an Infant disaffirm their contract?

Answer 41

An infant may disaffirm a dontract any time before or shortly after they reach the age of majority; the minor must return anything they received under the contract that still remains, but does not have to return anything that has been squandered, wasted, or negligently destroyed.

Contracts IV–Defenses

Contracts>Disaffirmance (IV.E.1.a.3)
.

Question 42

What are the excpetions to infant disaffirmance of contract?

Answer 42

Many states include statutory excpetions to disaffirmance of minor’s contracts; these excpetions may include student loan agreements, insurance contracts, some employer contracts.

Contracts IV–Defenses

Contracts>Disafirmance Exceptions (IV.E.1.a.3.a)
.

Question 43

What is the effect of an Infant’s contract?

Answer 43

A contract entered into between an infant an adult ais voidable by the infant but binding on the adult

Goods include things (cars, horses, hamburgers) but not real estate, services (e.g., club membership), intangibles (e.g., patent) or construction contracts.

Goods associated with real estate (minerals, growing crops and uncut imber, fixtures) may full under Article 2.

Contracts IV–Defenses

Contracts>Effect of Infant’s Contract (IV.E.1.a.2)
.

Question 44

What are contracts for necessaries under disaffirmance?

Answer 44

Necessaries’ generally includes food, shelter, clothing, medical care, medicines, and other items necessary for the minor’s subsistence, health, or education. A minor may disaffirm a contract for necessaries but in most states will be liable in restitution for the value of benefits received.

Contracts IV–Defenses

Contracts>Defenses Based on Lack of Capacity (E.1.a.3.b)
.

Question 45

What is affirmance upon majority?

Answer 45

An infant may affirm, i.e., choose to be bound by his contract, upon reaching majority. He affirms either expressly or by conduct, e.g., failing to disaffirm the contract within a reasonable time after reaching majority.

Contracts IV–Defenses

Contracts>Defenses Based on Lack of Capacity (E.1.a.4)
.

Question 46

What is mental incapacity?

Answer 46

One whose mental capacity is so deficient that he is incapable of understanding the nature and significance of a contract may disaffirm when lucid or by a later appointed legal representative. He may likewise affirm during a lucid interval or upon complete recovery, even without formal restoration by judicial action. In other words, a contract made by a mentally incompetent person is voidable. As in the case of infants, mentally incompetent persons are liable in quasi-contract for necessaries furnished to them.
Note: Once a mentally incompetent person has been adjudicated and placed under
a guardianship, that person no longer has any ability to contract as the guardian has complete control of the incompetent person’s property. Thus any attempted contracts by an incapacitated person who is under a guardianship would be void.

Contracts IV–Defenses

Contracts>Defenses Based on Lack of Capacity (E.1.b)
.

Question 47

What is an intoxicated persons?

Answer 47

One who is so intoxicated that he does not understand the nature and significance of
his promise may be held to have made only a voidable promise if the other party had reason to know of the intoxication. The intoxicated person may affirm the contract upon recovery. Once again, there may be quasi-contractual recovery for necessaries furnished during the period of incapacity.

Contracts IV–Defenses

Contracts>Defenses Based on Lack of Capacity (E.1.c)
.

Question 48

When is economic duress generally not a defense?

Answer 48

Generally, taking advantage of another person’s economic needs is not a defense. However, withholding something someone wants or needs will constitute economic duress if: (i) The party threatens to commit a wrongful act that would seriously threaten the other contracting party’s property or finances; and (ii) There are no adequate means available to prevent the threatened loss.

Contracts IV–Defenses

Contracts>Defenses Based on Lack of Capacity (E.2.a.1)
.

Question 49

What is duress?

Answer 49

There are two types of duress. In the first, a party is physically forced to sign against her will; e.g., a stronger person grabs her hand and signs the contract with the victim’s hand or the victim signs the contract at gunpoint. With this type of physical compulsion duress, the contract is void. The much more common type of duress arises when a party’s assent to a contract is induced by an improper threat by the other party that leaves the victim no reasonable alternative. In these cases, the contract is voidable by the victim. Examples of this type of duress include threats of bodily harm to the victim or her family and threats to bring unfounded criminal or civil charges.

Contracts IV–Defenses

Contracts>Defenses Based on Lack of Capacity (E.2.a)
.

Question 50

How does duress and undue influence affect a contract?

Answer 50

Contracts induced by duress (e.g., ‘sign the contract or I’ll break your legs’) or undue influence are voidable and may be rescinded as long as not affirmed.

Contracts IV–Defenses

Contracts>Defenses Based on Lack of Capacity (E.2)
.

Question 51

Just a heading title in outline.

Answer 51

Just a heading title in outline.

Contracts IV–Defenses

Contracts> STATUTE OF FRAUDS
.

Question 52

What is Undue Influence?

Answer 52

Undue influence is the unfair persuasion of a party who is under the domination of the person exercising the persuasion or who by virtue of the relationship between them isr justified in assuming that that person will not act in a manner inconsisten with their welfare. The elements of undue influeance are often described as undue suceptbility to pressue by one part and excessive pressue by the other. Other factors considerfed are the unfairness of the resulting bartgain and the availability of indepentdent advice.

Contracts IV–Defenses

Contracts>DEFENSES BASED ON LACK OF CAPACITY-Undue Influence
.

Question 53

Does the Statue of Frauds require a formal written contract?

Answer 53

The Statute of Frauds does not require a formal written contract. Among other things, the writing could be a receipt, a letter, a check with details in the memo line, or a written offer that was accepted orally.

Contracts IV–Defenses

Contracts>STATUTE OF FRAUDS - Writing Requirement
.

Question 54

What type of writing requirement does the Statute of Frauds require?

Answer 54

The Statute requires only one or more writings, signed by the party to be charged, that: (i) reasonably identify the matter of the contract, (ii) indicate that a contract has been made between the parties, and (iii) state with reasonable certainty the essential terms of the unperformed promises. [Restatement (Second) of Contracts §131].

Contracts IV–Defenses

Contracts>STATUTE OF FRAUDS - Writing Requirement
.

Question 55

When the Statute of Frauds requires a record to be in writing, will an email satisfy that requirement?

Answer 55

Whenever a law, such as the Statute of Frauds, requires a record to be in writing, an electronic record satisfies that law. [Uniform Electronic Transactions Act (‘UETA’) §7(c)] Thus, the writing requirement may be satisfied by an e-mail.

Contracts IV–Defenses

Contracts>STATUTE OF FRAUDS-Electronic Record Satisfies Writing Requirement
.

Question 56

Under the Statute of Frauds, what aare Essential or Material Terms?

Answer 56

There is no definitive list of essential terms. They vary depending on the situation. What is essential depends on the agreement, its context, and the subsequent conduct of the parties, including the dispute that has arisen. There must be enough in the
writing to enable a court to enforce the contract. If an element is contained in the writing, evidence is admissible to explain the particulars. If, however, a term is missing and cannot be supplied by implication or rule of law, evidence will not be admitted to
add it. The essential terms normally include the identity of the parties, description of the matter, and the terms necessary to make the contract definite (see II.B.2., supra). For example, writings evidencing land sale contracts must contain a
description of the land and the price, and those for employment contracts must state the length of employment. For the sale of goods, the UCC requires only some signed writing indicating that a contract has been made and specifying the quantity term.

Contracts IV–Defenses

Contracts>STATUTE OF FRAUDS-Essential or Material Terms
.

Question 57

If a writing does not contain the essential terms of the agreement, can it still satisfy the Statute of Frauds?

Answer 57

If a writing does not contain the essential terms of the agreement, it does not satisfy the Statute and the contract cannot be enforced.

Contracts IV–Defenses

Contracts>STATUTE OF FRAUDS-Essential or Material Terms
.

Question 58

What must an executor or administrator do when he/she promises to pay the estate’s debts?

Answer 58

A promise by an executor or administrator to pay the estate’s debts out of his own funds must be evidenced by a writing.

Contracts IV–Defenses

Contracts>Requirement that No Defenses Exist>Statute of Frauds>Agreements Covered>Executor or Administrator Promises Personally to Pay Estate Debts (IV. F. 3. a.)
.

Question 59

What is a collateral promise and what does it require?

Answer 59

A promise to answer for the debt or default of another must be evidenced by a writing. The promise to pay may arise as a result of a tort or contract, but it must be collateral to another person’s promise to pay, and not a primary promise to pay.

Example: ‘Give him the goods, and if he does not pay I will.’ This promise is a collateral promise and must be evidenced by a writing. But if the promise is, ‘Give him the goods, and I will pay for them,’ the promise is a primary purpose and need not be evidenced by a writing.

Contracts IV–Defenses

Contracts>Requirement that No Defenses Exist>Statute of Frauds>Agreements Covered>Promises to Pay Debt of Another (Suretyship Promises) (IV. F. 3. b. 1.)
.

Question 60

What can the main promise of a suretyship promise NOT be?

Answer 60

Main promise must not be pecuniary interest of promisor. If the main purpose or leading object of the promisor is to serve a pecuniary interest of his own, the contract is not within the Statute of Frauds even though the effect is still to pay the debt of another

Example: Ernie contracted with ABC Co. to have some machines custom-made for his factory. He promised ABC Co.’s supplier that if it would continue to deliver material to ABC, Ernie would guarantee ABC Co.’s payment to the supplier. This promise need not be in writing because Ernie’s main purpose in guaranteeing payment was to assure that ABC Co. had adequate supplies to build his machines.

Contracts IV–Defenses

Contracts>Requirement that No Defenses Exist>Statute of Frauds>Agreements Covered>Promises to Pay Debt of Another (Suretyship Promises) (IV. F. 3. b. 2.)
.

Question 61

What two required parts of a suretyship promise?

Answer 61

(1) Must be a collateral promise and (2) main purpose must not be pecuinary interest of promisor

Contracts IV–Defenses

Contracts>Requirement that No Defenses Exist>Statute of Frauds>Agreements Covered>Promises to Pay Debt of Another (Suretyship Promises) (IV. F. 3. b.)
.

Question 62

Does an electronic signature satisfy the signature requirement?

Answer 62

It depends. The signature requirement may be satisfied by an electronic signature. [UETA 7(d)]. As with paper signature, whether a recod is ‘signed’ is a question of fact. No specific technology is necessary to create a valid signature. If the requisite intent is present, one’s as part of an e-mail may suffice as a signature, as may the firm on a facsimilie (fax).

Contracts IV–Defenses

Contracts>Requirement that No Defenses Exist>Statute of Frauds>Signature Requirement>Electronic Signature (IV. F. 2. a.)
.

Question 63

Are promises in consideration of marriage covered under the Statute of Frauds?

Answer 63

Yes. A promise in which the consideration is marriage MUST be evidenced by a writing. This applies to promises that induce marriage by offering something of value (other than a returned promise to marry).

Contracts IV–Defenses

Contracts>Agreements Covered Under Statute of Frauds (IV.F.3.c)
.

Question 64

What is an ‘Interest in Land’ covered under the Statute of Frauds?

Answer 64

In addition to the sale of real property; a) leases for more than one year; b) easements of more than one year; c) mortgages and most other security liens; d) fixtures; and d) minerals or structures if they are to be severed by the buyer. If they are to be severed by the seller, they are not an interest in land but rather are goods. If the matter is growing crops, timber to be cut, or other things attached to realty capable of severance without material harm to the realty, it is a contract for the sale of goods [UCC Section 2-107]

Contracts IV–Defenses

Contracts>Agreements Covered Under Statute of Frauds (IV.F.3.d.1)
.

Question 65

What items do NOT create an ‘Interest in Land’ covered under the Statute of Frauds?

Answer 65

Some contracts in which the end result involves land still do NOT come within the ‘Interest in Land’ portion of the Statute of Frauds. Example: a contract to building a building; a contract to buy and sell real estate and split profits

Contracts IV–Defenses

Contracts>Agreements Covered Under Statute of Frauds (IV.F.3.d.2)
.

Question 66

What effect does performance have on contracts covered by the Statute of Frauds?

Answer 66

Full performance by the seller takes a contract out of the Statute of Frauds. Part performance by the buyer may also remove the contract from the Statute.

Contracts IV–Defenses

Contracts>Agreements Covered Under Statute of Frauds (IV.F.3.d.3)
.

Question 67

Are interests in land covered under the Statute of Frauds?

Answer 67

Yes. A promise creating an interest in land MUST be evidenced by a writing. This includes agreements for the sale of real property AND other agreements pertaining to land.

Contracts IV–Defenses

Contracts>Agreements Covered Under Statute of Frauds (IV.F.3.d)
.

Question 68

Is ‘Performance Not Within One Year from Date of Contract’ covered by the Statute of Frauds?

Answer 68

Yes. A promise that by its terms CANNOT be performed within one year is to the Statute of Frauds. In this case, part performance does not satisfy the Statute of Frauds.

Contracts IV–Defenses

Contracts>Agreements Covered Under Statute of Frauds (IV.F.3.e)
.

Question 69

What is considered the ‘effective date’ of an agreement?

Answer 69

The effective date runs from the date of the agreement and not from the date of performance.

Contracts IV–Defenses

Contracts>Statute of Frauds (F.3.e.1)
.

Question 70

If there is a possibility that a contract can be completed within one year, would it fall within the statute of frauds? (True/False)

Answer 70

False.

If the contract is possible to complete complete within one year, it is not within the one-year prong of the Statute of Frauds, even though actual performance may extend beyond the one-year period.

Example: Carlo makes the following oral statement to Nellie: ‘Be my nurse until I recover and I will pay you a small salary now, but leave you a large estate in my will.’ The contract need not be evidenced by a writing because Carlo could recover within one year.

Contracts IV–Defenses

Contracts>Statute of Frauds (F.3.e.2.a)
.

Question 71

Does a contracts with a right to terminate within one year fall within the statute of frauds? (True/False)

Answer 71

Majority View: If a contract that cannot be performed within one year allows both parties the right to terminate within a year, nonperformance is not performance within one year, and so the contract is still within the Statute of Frauds.

Minority View: If a contract that cannot be performed within one year allows both parties the right to terminate within a year, then it is outside the Statute of Frauds.

Contracts IV–Defenses

Contracts>Statute of Frauds (F.3.e.2.b)
.

Question 72

Does a lifetime contract fall within the statute of frauds? (True/ False)

Answer 72

False.

A contract measured by a lifetime is not with the Statute of Frauds because it is capable of performance within a year, since a person can die at any time.

Example: A promise to ‘employ until I die’ or ‘work until I die’

Contracts IV–Defenses

Contracts>Statute of Frauds (F.3.e.2.c)
.

Question 73

Does a contract that is fully performed by one party fall within the statute of frauds?

Answer 73

Even if a contract cannot be performed within one year, if it has been fully performed on one side, most courts will find that it is enforceable even though it is oral. Even if a court were to find that it was not enforceable, the performing party can sue for restitution for the reasonable value of the benefit conferred.

Contracts IV–Defenses

Contracts>Statute of Frauds (F.3.e.2.d)
.

Question 74

Which contracts do not fall within the Statute of Frauds?

Answer 74

The following contracts do not fall within the Statute of Frauds:

a) Possibility of completion within one year
b) Right to terminate within one year
c) Lifetime contracts
d) Performance by one party

Contracts IV–Defenses

Contracts>Statute of Frauds (F.3.e.2)
.

Question 75

If goods are to be specially manufactured for the buyer and are not suitable for sale to others by the seller in the ordinary course of his business, the contract is enforceable if the seller has, under circumstances that reasonably indicate that the goods are for the buyer, made a __________ in their manufacture or ________ for their purchase before notice of repudiation is received.

Answer 75

substantial showing; commitments

Contracts IV–Defenses

Contracts > Goods Priced at $500 or More (IV.F.f.1.a)
.

Question 76

If the party against whom enforcement is sought ____s in pleadings,_____, or otherwise in court that the contract for the sale was made, the contract is enforceable without a writing

Answer 76

admit; testimony

Contracts IV–Defenses

Contracts > Goods Priced at $500 or More (IV.F.f.1.b)
.

Question 77

If goods are either ____ & ____ or ____, the contract for the sale of goods over $500 is enforceable without a writing.

Answer 77

received; accepted; paid for

Contracts IV–Defenses

Contracts > Goods Priced at $500 or More (IV.F.f.1.c)
.

Question 78

In which three circumstances can a contract for the sale of goods of $500 or more be enforceable without a writing?

Answer 78

(1) Specially Manufactured Goods (2) Admissions in Pleadings or Court (3) Payment or Delivery of Goods

Contracts IV–Defenses

contracts > Goods Priced at $500 or More (IV.F.f.1)
.

Question 79

True/False?: A contract for the sale of good for a price of $500 or more is within the Statute of Frauds

Answer 79

TRUE

Contracts IV–Defenses

Contracts > Goods Priced at $500 or More (IV.F.f)
.

Question 80

True/False?: A contract for the sale of good for a price of $500 or more generally must be evidenced by a signed writing to be enforceable

Answer 80

TRUE

Contracts IV–Defenses

contracts > Goods Priced at $500 or More (IV.F.f)
.

Question 81

In contracts between merchants, if one party, within a reasonable time after an ____ agreement has been made, sends to the other party a ____ confirmation of the understanding that is sufficient under the Statute of Frauds to bind the sender, it will also bind the recipient if: (i) __________ and (ii) _________

Answer 81

oral; written; he has reason to know of the confirmation contents; he does not object to it in writing within 10 days of receipt

Contracts IV–Defenses

Contracts > Goods Priced at $500 or More (IV.F.f.2)
.

Question 82

What happens if the Statute of Frauds is violated?

Answer 82

Noncompliance with the Statute of Frauds renders the contract unenforcable at the option of the party against whom enforcement is sought. If the Statute is not raised as a defense, it is waived.

Contracts IV–Defenses

Contracts>Defenses>Statute of Frauds (IV.F.4)
.

Question 83

How may a land sale contract be enforced when the Statute of Frauds defense is overcome?

Answer 83

A purchaser of an interest in land may sue only for specific performance, not damages (or, the purchaser may ‘enforce only in equity’).

Contracts IV–Defenses

Contracts>Defenses>Statute of Frauds (IV.F.5.a.1.a)
.

Question 84

When may a seller enforce a contract for the sale of land if there is no written agreement?

Answer 84

A seller of land may enforce a buyer’s promise to pay after the seller’s full performance (i.e. after the seller has conveyed the land to buyer).

Contracts IV–Defenses

Contracts>Defenses>Statute of Frauds (IV.F.5.a.1)
.

Question 85

When may a buyer enforce a contract for the sale of land if there is no written agreement?

Answer 85

A buyer of land may enforce a land sale contract after part performance that unequivocally indicates the parties contracted for the sale of land.

In most jurisdictions, at least two of the following must occur:

1. Whole or partial payment;
2. Possession; and/or
3. Valuable improvement to the land.

Contracts IV–Defenses

Contracts>Defenses>Statute of Frauds (IV.F.5.a.1)
.

Question 86

When may a contract for the sale of goods be exempt from ordinary Statute of Frauds requirements?

Answer 86

Part performance may take a contract for the sale of goods out of the Statute of Frauds when:

(a) the goods have been specially manufactured; or
(b) the goods have been paid for or accepted. Under this scenario, the contract is only enforceable to the extent that the goods have already been accepted or paid for.

Contracts IV–Defenses

Contracts>Defenses>Statute of Frauds (IV.F.5.a.2)
.

Question 87

When is an oral contract enforceable?

Answer 87

When the contract may not be completed in one year but has been fully performed by one party

Contracts>Requirement that no defense exists>statute of frauds>situations in which the contract is removed from the statute of frauds

Question 88

When is estoppel applied?

Answer 88

When it would be inequitable to allow the statute of Frauds to defeat a credible claim

Contracts>Requirement that no defense exists>statute of frauds>situations in which the contrct is removed from the statute of frauds

Question 89

What actions of the defendant require the court to remove the statute of frauds from the contract?

Answer 89

When the defendant falsely and intentionally tells the plaintiff the contract is not within the statute of frauds; when the defendant states they will reduce the contract into writing; or when the plaintiff is induced by the conduct of the defendant to rely on the oral contract

Contracts>Requirement that no defense exists>statute of frauds>situations in which the contrct is removed from the statute of frauds

”

Question 90

What is judicial admission?

Answer 90

When the party asserting the statute of frauds defense admits in testimony or pleadings that the contract exists; the statute of frauds is then considered satisfied

Contracts>Requirement that no defense exists>statute of frauds>situations in which the contrct is removed from the statute of frauds

”

”

Question 91

What remedies are available for contracts within the statute of frauds but are noncompliant?

Answer 91

A party may sue for reasonable value of the services performed or restitution; under the theory that it would be unjust that one party retained benefits

Contracts>Requirement that no defense exists>statute of frauds>remedies if contract is within statute

Question 92

Does a contract entered in by an agent for their principal need to be in writing?

Answer 92

Some states answer yes and some states answer no; most states answer yes if it is a contract for real property; written authority may be dispensed with the agent if written authority is required

Contracts>Requirement that no defense exists>statute of frauds>contract by agent

”

Question 93

What is Unconscionability?

Answer 93

The concept which allows a court to refuse to enforce a contract provision or the entire contract in order to avoid ‘unfair terms’

Contracts IV–Defenses

Contracts>Unconscionability
.

Question 94

What are inconspicuous risk-shifting provisions?

Answer 94

A material provision that seeks to shift a risk normally borne by one party to the other.

Examples:

(i) Confession of judgment clauses, which are illegal in most states;
(ii) Disclaimer of warranty provisions;
(iii) ‘Add-on’ Clauses that all of the property purchased from a seller to repossession if a newly purchased item is not paid for.

Contracts IV–Defenses

Contracts>Unconscionability > Common Instances of Procedural Unconscionability
.

Question 95

What is a contract of adhesion?

Answer 95

Take it or Leave it’ Contracts in which a buyer has now choice as to the negotiability of the provisions.
Courts will deem a clause unconscionable and unenforceable if the signer is unable to procure necessary goods, such as an automobile, from any seller without agreeing to a similar provision

Contracts IV–Defenses

Contracts>Unconscionability > Contracts of Adhesion
.

Question 96

What is an exculpatory clause?

Answer 96

A clause which releases a contracting party from liability for his own intentional wrongful acts. These types of clauses are generally deemed to be unconscionable because most of these clauses are against public policy in most states

Exculpatory clauses for negligent acts may be found unconscionable if they are inconspicuous, but they are commonly upheld if they are in contracts for activity that are known to be hazardous.

Contracts IV–Defenses

Contracts>Unconscionability > Exculpatory Clauses
.

Question 97

How do courts rule regarding Limitations on Remedies clauses in a contract?

Answer 97

A contractual clause limiting liability for damages to property generally will not be found to be unconscionable unless it is inconspicuous.

However, if a contract limits a party to a certain remedy and that remedy fails of its essential purpose, a court may find the limitation unconscionable and ignore it.

Contracts IV–Defenses

Contracts>Unconscionability > Limitations on Remedies
.

Question 98

How is timing relevant to unconscionability?

Answer 98

Unconscionability is determined by the circumstances as they existed at the time the contract was formed

Contracts IV–Defenses

Contracts>Unconscionability > Timing
.

Question 99

What are the two types of unconscionability?

Answer 99

Substantive unconscionability (unconscionability based on price alone)

Procedural Unconscionability (unconscionability based on unfair surprise or unequal bargaining power)

Contracts IV–Defenses

Contracts>Unconscionability > Types
.

Question 100

What effect does the court’s decision have if they find a contract to be unconscionable?

Answer 100

If a court finds as a matter of law that a contract or any clause of the contract was unconscionable when made, the court may:

(i) refuse to enforce the contract;
(ii) enforce the remainder of the contract without the unconscionable clause;
or (iii) limit the application of any clause so as to avoid an unconscionable result##Contracts IV–Defenses#Contracts>Unconscionability > Unconscionable Contract Found by Court##.