Defenses

Question 1

Incapacity by Infancy:

Answer 1

The modern rule is that minor may enter into a K, but the K is voidable at the option of the minor.

Question 2

Misrepresentation:

Answer 2

Fraudulent misrepresentations are untrue statements or assertions that relate to a material, existing fact.

Question 3

Public policy - covenants not to compete:

Answer 3

Non-competes are generally enforceable so long as they are reasonable.
But, if the covenant is contrary to the public health, safety, or welfare; the injunction enforces an unreasonable covenant not to compete; or there is no showing of irreparable harm, it will not be enforced.

Question 4

Incapacity by Infancy - exception for necessaries:

Answer 4

When a minor makes a contract for necessaries (food, clothing, shelter, medical care, etc), the K is voidable but the merchant has a quasi-K right to recover of reasonable value of the goods or services.

Question 5

Incapacity by mental incompetence - requirements:

Answer 5

1) A party who is adjudicated incompetent and a guardian appointed - that will be sufficient to establish mental incompetence for K cases
2) W/o adjudication of incompetence, look for cognitive defects (person unable to understand in reasonable manner the nature and consequences of the transaction) or volitional defects (person unable to act in a reasonable manner in relation to transaction and the other party has reason to know of this)

Question 6

If a person has been adjudicated mentally incompetent, the K is:

Answer 6

altogether void.

Question 7

If there has not been adjudication of mental incompetence but rather mental incompetence proved through other methods, the K is:

Answer 7

voidable at option of the incompetent party.

Question 8

Can a person who was mentally incompetent at the time of the K ratify the contract?

Answer 8

Yes, he may ratify if he is no longer incompetent.

Question 9

If a mentally incompetent person exercises his power of avoidance of the K, he is required to pay:

Answer 9

the reasonable value of the goods or services rendered

*unless the other side takes unfair advantage of the party.

Question 10

Elements of Duress:

Answer 10

1) A threat
2) Wrongful in nature
3) Leaving the person no reasonable choice but to succumb to the threat

Question 11

Examples of duress in economic situations:

Answer 11

1) No adequate and reasonably priced substitutes for the goods/services threatened to be withheld
2) Threatened breach would cause aggrieved party to breach his own K
3) Alternative to acquiescing to the threat and then suing for damages is inadequate to address the harm caused

Question 12

Legal Consequences for duress:

Answer 12

1) Ks made under physical compulsion are absolutely void. All others are voidable.
2) Aggrieved party is entitled to restitution of any benefit conferred as long as he returns any benefit he received.

Question 13

Elements of undue influence:

Answer 13

1) Unfair persuasion used

2) Other party vulnerable to persuasion

Question 14

Factors for determining unfair persuasion:

Answer 14

1) Discussion of transaction at an unusual or inappropriate time
2) Consummation of the K at unusual place
3) Insistent demands that transaction be finished immediately
4) Extreme emphasis on untoward consequences of delaying transaction
5) Use of multiple persuaders
6) Statements that there is no time to seek 3d party advice

Question 15

When will a party be vulnerable to persuasion?

Answer 15

1) Mental infirmity due to age or illness;
2) Vulnerability due to recent trauma or event; or
3) Relationship of trust or confidence

Question 16

Legal Consequences of Undue Influence:

Answer 16

1) Voidable at option of aggrieved party
2) Aggrieved party entitled to restitution of any benefits conferred, so long as he likewise returns any benefit received

Question 17

Elements of Unconscionability:

Answer 17

1) Procedural Unconscionability

2) Substantive Unconscionability

Question 18

What is procedural unconscionability?

Answer 18

Bargaining process created an absence of meaningful choice by the aggrieved party

Different circumstances:

1) Where a person cannot understand the terms of the K (due to age or language barriers, etc); or
2) Absence of bargaining power (adhesion Ks, party weakened by poverty or language barriers); or
3) Small print/hidden terms

Question 19

What is substantive unconscionability?

Answer 19

K terms are unreasonably favorable to one party.

Different circumstances:

1) Grossly excessive price; or
2) Grossly disproportionate consequences for a minor breach
3) Provisions binding on one party but not the other; or
4) Grossly unfair provisions

Question 20

Legal consequences of a finding of unconscionability

Answer 20

The court may:

1) Refuse to enforce the K
2) Excise offending clause and enforce remainder
3) Limit application of offending clause so as to avoid any unconscionable result

Question 21

Types of public policy violations for Ks that provide a defense:

Answer 21

1) Subject of K itself is illegal
2) K formed for purpose of committing a crime
3) K performance would constitute a tort
4) K performance would violate freedoms and values of the state

Question 22

What happens when a defendant successfully asserts the defense of violation of public policy?

Answer 22

Defendant wins, irrespective of whether he was the party who promised to perform the violation or the party paying for it.

The reason is that courts will play no role in enforcing these Ks and will the parties as is.

The only exception is in pari delicto - one party is much more egregiously in the wrong, thus it may be possible for the more innocent party to secure restitution of benefits conferred

Question 23

Elements of Fraudulent Misrepresentation:

Answer 23

1) Misrepresentation (Defendant made assertion inconsistent with existing facts)
2) with scienter (knowing it to be false or knowing he had no idea if it was true or false)
3) materiality
4) plaintiff reasonably relied on the misrepresentation

Question 24

Elements of Non-Fraudulent Misrepresentation - Negligent:

Answer 24

1) Misrepresentation
2) Materiality
3) Reasonable reliance on misrepresentation
4) No scienter required - Defendant would have known the representation was false if he had exercised reasonable care

Question 25

Elements of Non-Fraudulent Misrepresentation - Innocent

Answer 25

1) Misrepresentation
2) Materiaility
3) Reasonable reliance on misrepresentation
4) No scienter required - Defendant made an assertion that was not in accordance with existing facts

Question 26

What is fraudulent non-disclosure?

Answer 26

When defendant remained silent when he had a duty to disclose

Question 27

Three elements of fraudulent non-disclosure:

Answer 27

1) Non-disclosure was material to the K
2) Reasonable reliance on non-disclosure
3) Duty of disclosure and a failure to fulfill it

Question 28

Remedies for misrepresentation:

Answer 28

1) Avoid the K

2) Bring a tort action for rescission of the K and damages

Question 29

What remedy is available for fraudulent and non-fraudulent misrepresentation but not for fraudulent non-disclosure?

Answer 29

Live with the K and sue for the benefit of the bargain

Question 30

In a fraudulent misrepresentation case, a person can:

Answer 30

seek punitive damages because it is an intentional tort