Defenses Flashcards
Defenses Based on Lack of Capacity
Legal Incapacity to Contract
- Contracts of Infants (Minors)
- Mental Incapacity
- Intoxicated Persons
Lack of Capacity
Contracts of Infants (Minors) - Disaffirmance
a Minor may choose to disaffirm a contract any time before (or shortly after) reaching the age of majority. The contract msut be disaffirmed as a whole; it can’t be affirmed in part and disaffirmed in part.
If a minor chooses to disaffirm, they must return anything that they received under the contract that still remains at the time of disaffirmance.
However, there is no obligation to reutnr any part of the consideration that has been squandered, wasted, or negligently destroyed.
Contracts of Infants (Minors) -
Necessaries
NEcessaries are items necessary for subsistence, health, or education (including food, shelter, clothing, and medical care).
A minor may disaffirm a contract for necessaries but will be liable in restitution for the value of benefits received (fair market value).
Contracts of Infants (Minors) -
Affirmance upon Attaining Majority
A minor may affirm upon reaching majority. A minor affirms either expressly or by conduct, such as by failing to disaffirm the contract within a reasonable time after reaching majority.
Duress and Undue Influence
Contracts induced by duress or undue influence are voidable and may be rescinded as long a they are not affirmed.
Duress
1. Assent procurred by improper threat
2. economic duress
Undue Influence
* often arises when the dominant party is in a confidential or caregiver relationship with the influenced party.
Absence of Mutual Assent
Misunderstanding - Ambiguous Contract
If the contract includes a term with at least two possible meanings, the result depends on teh parties’ awareness of the ambiguity:
Neither party aware - no contract
Both parties aware - no contract unless both parties inteded same meaning
One party aware - contract based on ignorant party understanding.
Absence of Mutual Assent
Mutual Mistake as to Existing Facts
if both parties entering into a contract are mistaken about existing facts, teh contract may be voidable by the adversely affected party if:
- the mistake concerns a basic assumption on which the contract is made
- the mistake has a material effect on teh agreed-upon exchange; and
- teh party seeking avoidance did not assume the risk of the mistake.
This is not a defense if the party bore the risk. Mistake in value is generally nto a defense
Absence of Mutual Assent
Unilateral Mistake
If only one of the parties is mistaken about facts relating to the agreement, the mistake will not prevent formation of a contract. But, 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.
As with mutual mistake, the mistake must have amaterial effect on the agreed-upon exchange, and the mistaken party must not have borne th erisk of the mistake.
Absence of Mutual Assent
Misrepresentation
Fraud in the Inducement
If a party induces another to enter into a contract by using fraudulent misrepresentation, the contract is voidable by the innocent party if they justifiably relied on teh fraudulent misrepresentation. This is fraud in the inducement
Absence of Mutual Assent
Material Misrepresentation
Whether or not a misrepresentation is fraudulent, the contract is voidable by the innocent party if the innocent party justifiably relied on the misrepresentation and the misrepresentaion was material.
It is material if:
1. it would induce a reasonable person to agree, or
2. 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.
Absence of Mutual Assent
Misrepresentaiton - Justified Reliance
A party is not entitled to relief if the reliance was unreasonable under the circumstances. However, just becuase a misrepresentation could have been revealed by the exercise of reasonable care does not mean that reliance was unjustified.
Failure to read a contract or use care in reading it does not necessarily preclude a party from avoiding a contract for misrepresentation.
Absence of Mutual Assent
Misrepresentation - Innocent Party
Innocent party may rescind the agreement and recover damages.
the innocent party does nto have to wait until they’re sued on teh contract but may take affirmantive action in equity to rescind the agreement. Additionally, they may pursue all remedies avialble for breach of contract.
Absence of Consideration
If the promises exchanged. atthe formation stage lack the elements of bargain or legal detriment, no contract exists. In this situation, one of the promises is always illusory.
Public Policy Defenses
Illegality
If the consideration or subject matter of ac ontract is illegal, the contract is void.
Exceptions:
1. P is unaware of th eillegality while the D knows of it.
2. the parties are nto in pari delicto, or
3. the illegality is the failure to obtain a license when the license is for revenue-raising purposes rather than for protection of the public.
Unconscionability
CL and Art 2 Defense
* Allows a court to modify or refuse to enforce an entire contract or a provision in it to avoid “unfair” terms, usually due to some unfairness in teh bargaining process.
* Unfair price alone is not a ground for unconscionability
* Unconscionability is determined at the time the contract was formed
Effect if court finds Unconscionable Clause
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:
1. refuse to enforce the contract
2. enforce the remainder fo the contract without the unconscionable clause; or
3. limit teh applicaiton of any clause so as to avoid an unconscionable result
Statute of Frauds
MY LEGS
* Marriage
* Year
* Land Sales
* Executors
* Goods for $500+
* Sureties
SOF
Promises in Consideration of Marriage
A promise in consideration of marriage must be evidenced by a writing. This applies to promises that induce marriage by offering something of value (if you marry, i will give you ‘x’)
SOF
Performance Not within one year from date of contract
Contracts that cannot be completed within a year must be in writing. the contract terms must be over a year.
SOF
Interests in Land
A promise creating an interest in land must be evidenced by a writing. This includes:
* Agreements for the sale of real property
* leases for more than a year
* easements of more than one year
* mortgages
* fixtures
* minerals (or the like) or structures if they are to be severed byt eh buyer
SOF
Executors
A promise by an executor or administrator to pay the estate’s debts out of their own funds must be evidenced by a writing.
SOF
Goods
Goods priced at $500 or more must be evidenced by a signed writing to be enforceable.
SOF
Surtyship Promises
A promise to answer for the debt or default of antoher must be evidenced by a writing.
Removing Contract from SOF
Contract Modifications
A written contract can be modified orally, but the modification must be in writing if the contract as modified falls within teh SOF.
CL - even if there is an express provision in teh contract saying that it can only be modified by writing, parties can orally modify the contract.
UCC - If a contract explicitly provides that it may not be modified or rescinded except by a signed writing, that provision is given effect. If the contract is between merchant and nonmerchant, this provision requires teh nonmerchant’s separate signature.
Removing Contract from SOF
Contract Modification - Waiver
If the parties attempt to orally modify a contract that requires written modification, it is technically ineffective as a modification but can operate as a waiver.
A waiver will be found whenever the other party has changed position in reliance on teh oral modification. However, a party who makes a waiver affectuing an executory protion of the contract may retract the waiver if they notify the other party that strict performance of the waived terms is required. The wiaver may nto be retracted if the other party detrimentally relied on it.
Removing Contract from SOF
Performance - Land Sale Contracts
IF a seller conveys property to the buyer, the seller can enforce the buyer’s oral promise to pay. Likewise, the buyer may seek to specifically enforce an oral land sale contract under the doctrine of part performance.
Part performance that unequivocally indicates taht hte parties have contracted for the sale of land takes the contract out of the SOF. Most jx’s require at least two of teh following: payment (in whole or in party), possession, and/or valuable improvements.
Removing Contract from SOF
Service Contracts
Full performance required
An oral contract that cannot be compelted within one year but has been fully performed by one party is enforceable.
Removing Contracts from SOF
Sale of Goods Contracts
Part performance takes a sale of goods contract out of hte STatute of Frauds when:
1. the goods have been specially manufactured, or
2. the goods have been either paid for or accepted.
Removing Contract from SOF
When Writing not Required
There are three situations in which contracts are neforeceable without the writing:
1. Specially Manufactured Goods
2. Admissions in Pleadings or Court
3. Merchants - Confirmatory Memo Rule
When Writing Not Requied SOF
Specially Manufactured Goods
If goods are to be specially manufactured for the buyer and are nto suitable for sale to others by the seller in the oridinary course of their business, the contract is enforceable if the seller has, under circumstances that reasonably indiciate that the goods are for the buyer, made a substantial beginning in their manufacture or commitments for their purchase before notice of repudiation is received.
Admission in Pleadings or Court
If the party against whom enforcement is sought admits in pleadings, testimony, or otherwise in court that the contract for sale was made, the contract is enforceable without a writing (but in such a case the contract is not enforced beyond th equantity of goods admitted).
Merchants - Confirmatory Memo Rule
Merchant to Merchant Rule
In k’s between merchants, if one party, within a reasonable time after an oral agreement has been made, sends to the other party a written confirmation of the understanding that is sufficient under teh SOFs to bind the sender, it will also bind the recipient if:
1. they have reason to know of the confirmation’s contents; and
2. they do not object to it in writing within 10 days
Equitable and Promissory Estoppel
EStoppel may be applied if it would be inequitable to allow the Statue to defeat a meritorious claim.
Examples include situations where the D falsely and intentionally tells the plaintff that the contract is not within the SOF or induces the P to change position in reliance on an oral agreement.
No Writing Required
Judicial Admission
If a party admits in pleadings or testimony taht there is an agreement, it’s treated the same as though the party signed a writing.
Writing Requirement
SOF doesn’t require a formal written contract. Among other things, the writing can be a receipt, a letter, a check with details in teh memo line, or a writtenoffer that was accepted orally.
SOF requires only one or more writings that:
1. reasonably identify the subject matter of hte contract,
2. indicate that a contract has been made between teh parties, and
3. state with reaosnble certainty the essential terms.
Writing Requirement
Essential Material Terms
Writing Requirement Art 2 (UCC)
* Quantity term
* D’s Signature
CL Writing Requirements
* All Material Terms
* D’s Signature
Writings evidencing land sale contracts must contain a description of the land and the price
Writings for employment contracts must state the length of employment
Writings evidencing sales of goods contracts (UCC) must indiciate that a contract has been made and specifiy the quantity term
The Writing
Signature Requirement
The signature requirement is liberally construed by most courts.
A signature can be any mark of symbol made with the intention to authenticate the writing as that of the signer.
It can be printed ro typed. Under UCC, a party’s intials or letterhead may also be sufficient. An electronic signature is also sufficient.
Remedies if Contract is within Statute
If a contract violates teh SOF, in almost all cases a party can sue for the reasonable value of the services or part performance rendered, or the restitutionof any other benefit that has been conferred.
