Defenses Flashcards
What is the legal effect of different types of defenses?
- defect in capacity - makes obligations voidable by the incapacitated party
- defense re formation of K - entire K is invalid, unenforceable
- negation of formation of K (offer/assent/consideration) - no K to begin with
- defense re certain terms - makes certain terms unenforceable
What defenses of incapacity may allow parties to invalidate a K? What is the legal effect?
- legal incapacity to contract: minors, mental incapacity, intoxication)
- duress and undue influence
Legal effect is it allows the incapacitated party to void the K.
How may a minor disaffirm/affirm a K?
- Minor (“infant”) may disaffirm anytime before or short after turning 18, must disaffirm K as a whole and if so return things recieved from K.
- Minor may affirm K upon turning 18 - either expressly or implicity by, e.g., not disaffirming within a reasonable time
- when a minor disaffirms a K for “necessaries”, i.e. food, shelter, clothing, medical care - then they will be liable in restitution for value of benefits received
When may a person with deficient mental capacity disaffirm a K?
When lucid or by later appointing a legal rep. Like minors, will still be liable in restitution for necessaries received.
If incapacitated person is under guardianship, any K’s attempted by them are void.
When may a person void a K made when they were intoxicated?
When the other party had reason to know of the intoxication. Person may also affirm K upon recovery. Will be liable in restitution for necessaries.
What is duress? What is undue influence? What is the legal effect of each?
A k made when a party was under duress or under influence is voidable by that party unless they affirmed later.
Duress = e.g. improper threat or economic duress, which is (1) party threatens to commit a wrongful act that would seriously threaten the other’s property or financing and (2) there are no adequate means available to prevent the loss
Undue influence = (1) undue susceptibility to pressure and (2) excessive pressure on that person
What situations may lead to an absence of mutual assent that thus allows a party to void the K?
- misunderstanding (ambiguous language) (typically no K to begin with)
- mutual mistake as to existing facts
- unilateral mistake
- misrepresentation (fraudulent or material)
- justified reliance
What happens when there is an ambiguous (2+ meaning) term in the K?
- if neither party is aware of the ambiguity, then no K unless they intended same meaning
- if both parties are aware of the ambiguity, then no K unless they intended same meaning
- only one party is aware of the ambiguity, then there is a K, meaning reasonably believed by ignorant party controls
When does mutual mistake of facts allow a party to void a K?
When both parties are mistaken about a fact existing at the time the K was made, K may be voided if:
(1) the mistake concerns a basic assumption on which the K was made
(2) the mistake has a material effect on the exchange
(3) AND, party seeking the void K did NOT assume the risk of the mistake
Note: mistaken assumptions re value generally not sufficient
When is unilateral mistake sufficient to allow party to void K?
Generally not unless the other party knew or had reason to know of the mistake. (+ req’s of mutual mistake, i.e. basic assumption, material effect, did not bear the risk)
Note: when there is a mistake in transmission, the transmitted message governs, unless transmitting party knew of/should have known of the mistake (then voidable).
When may a misrepresentation make a K voidable?
When:
(a) fraudulent misrepresentation: party induces the other to K by asserting info they know is false + other party justifiably relied on info
(b) material misrepresentation: party justifiably relied on a misrepresentation (fraudulent or not) + the misrepresentation was material, i.e. (i) it would induce a reasonable person to agree OR (ii) the speaker knows it would make the person agree for more subjective reason
Note: nondisclosure is not a misrepresentation unless material or fraudulent, but conduct such as concealing facts, frustrating investigation, denying knowledge can be considered misrepresentation
When does illegality make a K void?
When subject matter or consideration is illegal, EXCEPT for when:
(1) the P is unaware of the illegality and D is aware
(2) parties are not equally culpable, OR
(3) illegality is failure to obtain a license when license is req’d for revenue-raising purposes, i.e. not protection of public
When the purpose behind a K is illegal, then K is voidable by party who (a) was unaware of the purpose or (b) was aware but did not facilitate the purpose and purpose does not involve serious moral turpitude
When may a court refuse to enforce K or terms of K due to unconscionability?
Typically, is cases of Procedural Unconscionability (i.e. unfairness in bargaining process)
- inconspicuous risk-shifting provisions
- contracts of adhesion (basically forced to accept terms)
- exculpatory clauses (releasing party from intentional wrong acts)
- limitation on remedies (remedies available fail essential purpose)
Note: unconscionability determined at time of K formation,
What may a court do once it finds a clause in a K unconscionable?
- refuse to enforce entire K
- refuse to enforce one provision
- limit application of the provision to avoid unconscionable result
What is the statute of frauds? What types of K’s does it cover?
Statute of frauds requires that K be evidenced by signed writing.
Contracts that fall under this are:
- where consideration is marriage
- a promise that cannot be performed within one year from date of agreement (but doesn’t include lifetime K’s - e.g. employment)
- K creating interest in land
- executor/administrator promise to personally pay estate debts
- goods for $500 or more
- promise to pay debt for another (surety) (unless main purpose is to serve own pecuniary interest)
- any K that, as modified, falls under the SoF (so the modification must comply with SoF)
mnemonic: MY LEGS
