Defenses

Question 1

Incapacity (2 types)

Answer 1

Infancy: minors (under 18) can contract but voidable at minor’s option. If voided, minor obligated to return goods received but not liable for damages or reasonable use value. Can ratify once they reach 18.
Contract for necessaries (food, clothing, shelter, medical) is voidable but merchant has quasi-contract right to recover reasonable value

Mental incompetence: person lacks capacity to contract if mentally incompetent to understand transaction at TIME OF CONTRACTING. If exercised, must return not just goods but is also liable for damages and use value (UNLESS other party was aware of incompetence). Necessaries exception same as for minors, but also includes legal rep in incompetency proceedings

Question 2

Misrepresentation

Answer 2

Fradulent: 4 elements:

• misrep itself (about FACTS)
• state of mind: scienter (knowing or reckless falsehood) AND intent to mislead
• materiality: likely to induce reasonable (objective) or this (subjective) person to contract
• reasonable reliance on the misrep

Negligent/innocent misrep: need steps 1,3,4 from above, plus

• negligent: would have known assertion false if reasonable care taken
• innocent: just untrue

Question 3

Fradulent nondisclosure

Answer 3

3 elements:

• nondisclosure was material
• nondisclosure was reasonably relied on
• DUTY of disclosure was unfulfilled

Generally, NO DUTY of disclosure! For duty, need:

• relationship of trust and confidence
• assertion that was true at the time but has since become untrue
• obligation of good faith would require

Question 4

Duress

Answer 4

3 elements:

• threat
• wrongful in nature: 3 types
  
  • crime or tort
  • criminal prosecution or bad faith civil suit
  • bad faith breach of contract (econ duress)
• no reasonable choice but to succumb

Question 5

Undue influence

Answer 5

2 elements
- unfair persuasion used. multi-factor test:
o Discussion of the transaction at an unusual or inappropriate time;
o Consummation of the transaction at an unusual place;
o Insistent demands that the transaction or business be finished immediately;
o Extreme emphasis on the untoward consequences of delaying the transaction;
o The use of multiple persuaders against the target of persuasion;
o Absence of third-party advisors to the target of persuasion;
o Statements that there is no time to consult financial advisors or attorneys.
- other party was vulnerable to the persuasion
- age/illness
- recent trauma or event
- trust or confidence

Question 6

Unconscionability

Answer 6

2 elements
- procedural unconscionability: bargaining process caused absence of meaningful choice
for aggrieved party
- substantive: terms are unreasonably favorable to one party

Consequences: court can

• refuse to enforce
• excise offending clause
• limit application of offending clause

Question 7

Public policy (3 types)

Answer 7

• subject of contract itself is specifically prohibited - contract for prostitution, gambling, etc
• contract formed for purpose of committing a crime or tort - assassin
• performance would violate values/freedoms designated by state - prohibition on marrying, organ sales, restraint of trade, etc