Deck Flashcards
If a court determines a contract has an unconscionable provision, it is empowered to:
UCC § 2–302(1) and Restatement 2d § 208, if a court finds a contract is unconscionable the court may: (1) refuse to enforce the entire contract, (2) enforce the remainder of the contract without the unconscionable clause or clauses, or (3) modify or limit application of any clause to avoid an unjust result. Therefore, (D) is correct.
Note that the unconscionability doctrine is thus an exception to the general rule that courts “interpret” contracts, rather than getting involved in rewriting them. Under the doctrine of unconscionability, a court is authorized to change the parties’ duties and rewrite a contract to remove any unconscionable clauses or alter the effect of any unconscionable clauses.
Note also that unconscionability is a decision for the court, not the jury. A frequent question in this area focuses on who has the power to declare a clause, or an entire contract, unconscionable. The answer is the court only.
To find unconscionability, a court must find that a clause, or the entire contract, contains:
Procedural unconscionability and substantive unconscionability.
Correct. A finding of unconscionability requires that there be both procedural and substantive unconscionability.
Procedural unconscionability is generally defined as the absence of meaningful choice on the part of the aggrieved party. Typically procedural unconscionability is broken into two components: (1) oppression, which is defined as unequal bargaining power; and (2) surprise, which focuses on how “hidden” the unfair clause is in the prolix of the agreement.
Substantive unconscionability occurs when the terms of the agreement are unreasonably favorable to one party.
Note that while both procedural and substantive unconscionability are required for a finding of unconscionability, courts use a “sliding scale” test to determine if unconscionability exists. Under the “sliding scale” test, the greater the presence of one type of unconscionability, the less the presence of the other is necessary before a court will find a contract unconscionable.
When a court examines an agreement for unconscionability it is only concerned with any substantive and procedural unconscionability which exist
at the time the parties enter into the K
Age Capacity
Three ways that a former minor/ new adult can ratify a K
process of “express” ratification. That is, Teresa’s statement, “I will continue to pay for the car,” was an express affirmation of her desire to continue with the contract, and such ratification made the contract enforceable from that point forward.
the process of “implied-in-fact” ratification. If the new adult takes action that indicates he or she wishes to continue with the contract, the agreement is thereby ratified. Here, Teresa’s continuing to use the car and make payments on it for a year after she turns an adult is an example of implied-in-fact ratification.
the most commonly used form of ratification: ratification by silence and inaction. The rule is that a minor is given a reasonable time to disaffirm the contract after reaching the age of majority, and if the contract is not disaffirmed within that reasonable time, ratification will be implied. While facts of a contract are important to determine what is a reasonable time, in general, the more benefits the minor has received under the contract, the less amount of time will be given to disaffirm after obtaining majority.
A party bears the risk of mistake of fact when
(1) the parties agreed in the contract to allocate the risk to that party, (2) a court allocates the risk to that party because it is reasonable under the circumstances, or (3) the party was consciously ignorant of the relevant facts.
Conscious ignorance means that the party is aware, at the time of the contract, that he has only limited knowledge regarding the relevant facts but treats his limited knowledge as sufficient anyway. Restatement (Second) of Contracts § 154 (1981).
“[R]isk allocation is determined by the totality of the circumstances, including the comparative abilities of the parties to make informed judgments as to the extent of the risk; each party’s interest in avoiding the risk; and the extent to which that interest was a factor in the negotiation of the contract.”
The defense of misrepresentation may be asserted by a party whose assent was induced by a misrepresentation, or untrue assertion, that was either fraudulent or material, as long as the party’s reliance on the assertion was justified
A misrepresentation is fraudulent when
intended to induce the party’s assent and made by someone who knows or believes that the assertion is untrue or who is not confident that the assertion is true.
A misrepresentation is material when it is likely to induce a reasonable person’s assent, or when it is known to be likely to induce the party’s assent. Restatement (Second) of Contracts § 162 (1981). Generally, a party’s reliance on an opinion is not justified.
However, a party is justified in relying on the other party’s opinion if one of three circumstances exist: (1) there is a relationship of trust and confidence between the two parties; (2) the relying party reasonably believes that the other party, on whose opinion he is relying, has special skill, judgment, or objectivity with respect to the subject matter; or (3) the party relying on the opinion is particularly susceptible to a misrepresentation of the type involved. Id. at § 169.
a situation in which the agreement which results from the improper threat is not “fair.”
The rules governing this kind of problem are in Restatement 2d § 176(2), which provides that a threat that induces an agreement which is not on fair terms is “improper” if:
the threatened act would harm the recipient and not significantly benefit the party making the threat;
the effectiveness of the threat is significantly increased by prior dealing between the parties; or
what is threatened is a use of power for an illegitimate ends.
Here, David’s threat to expose Phoebe’s extramarital affair would harm Phoebe but would not significantly benefit David. Thus, Phoebe may avoid the agreement. Restatement § 2d 176(2)(a).
Under Restatement 2d § 176(2)(b), if a threat induces agreement to a contract with unfair terms, the threat is deemed “improper” and the agreement is rendered voidable if prior dealing between the parties significantly increases the effectiveness of the threat.
If a party is compelled to enter into a contract by use of physical force, the contract is
void. Restatement 2d § 174. This means there is no agreement and neither party can enforce the terms of the agreement.
It is important to note that with contracts made void by duress by physical compulsion, the threat of physical harm must be imminent to make the contract void.
Voidable K restitution
Under the rules of “mutual restitution” a party seeking restitution must return whatever benefits he or she has received from the other party. Restatement 2d § 384. Contract law colloquially describes this obligation by stating that, “to get restitution a party must do restitution.”
If a victim of a contract entered into under duress avoids the contract, he or she is entitled to restitution.
A contract is voidable if a party’s assent is induced by an untrue assertion that is fraudulent or material, provided that the party’s reliance on the misrepresentation is justified. See Restatement (Second) of Contracts §§ 159-164, 169, with comments. Generally, an opinion regarding a material fact would not support a misrepresentation defense to contract enforcement. However, there are three exceptions to this general rule.
. An opinion regarding a material fact may support a misrepresentation defense if an injured party (1) relied on the opinion of a person with whom the injured party had a relationship of trust and confidence; (2) relied on the opinion of a person whom the injured party reasonably believed had special skill, judgment, or objectivity regarding the subject matter; or (3) was particularly susceptible to the misrepresentation for a particular reason, such as illiteracy or unusual gullibility. See Restatement (Second) of Contracts §§ 168, 169.
The defense of misrepresentation may be asserted by a party whose assent was induced by a misrepresentation, or untrue assertion, that was either fraudulent or material, as long as the party’s reliance on the assertion was justified. A party’s reliance on a fraudulent or material misrepresentation is not justified if the misrepresentation is an opinion or mere puffery. However, a party’s reliance on a statement of opinion is justified if
(1) the party has a relationship of trust and confidence with the person making the statement; (2) the party reasonably believes the person making the statement has special skill, judgment, or objectivity regarding the subject matter; or (3) the party is particularly susceptible to misrepresentation for some special reason, such as illiteracy or gullibility.
