Defenses Flashcards
Incapacity by Infancy:
The modern rule is that minor may enter into a K, but the K is voidable at the option of the minor.
Misrepresentation:
Fraudulent misrepresentations are untrue statements or assertions that relate to a material, existing fact.
Public policy - covenants not to compete:
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.
Incapacity by Infancy - exception for necessaries:
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.
Incapacity by mental incompetence - requirements:
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)
If a person has been adjudicated mentally incompetent, the K is:
altogether void.
If there has not been adjudication of mental incompetence but rather mental incompetence proved through other methods, the K is:
voidable at option of the incompetent party.
Can a person who was mentally incompetent at the time of the K ratify the contract?
Yes, he may ratify if he is no longer incompetent.
If a mentally incompetent person exercises his power of avoidance of the K, he is required to pay:
the reasonable value of the goods or services rendered
*unless the other side takes unfair advantage of the party.
Elements of Duress:
1) A threat
2) Wrongful in nature
3) Leaving the person no reasonable choice but to succumb to the threat
Examples of duress in economic situations:
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
Legal Consequences for duress:
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.
Elements of undue influence:
1) Unfair persuasion used
2) Other party vulnerable to persuasion
Factors for determining unfair persuasion:
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
When will a party be vulnerable to persuasion?
1) Mental infirmity due to age or illness;
2) Vulnerability due to recent trauma or event; or
3) Relationship of trust or confidence
Legal Consequences of Undue Influence:
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
Elements of Unconscionability:
1) Procedural Unconscionability
2) Substantive Unconscionability
What is procedural unconscionability?
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
What is substantive unconscionability?
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
Legal consequences of a finding of unconscionability
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
Types of public policy violations for Ks that provide a defense:
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
What happens when a defendant successfully asserts the defense of violation of public policy?
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
Elements of Fraudulent Misrepresentation:
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
Elements of Non-Fraudulent Misrepresentation - Negligent:
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
Elements of Non-Fraudulent Misrepresentation - Innocent
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
What is fraudulent non-disclosure?
When defendant remained silent when he had a duty to disclose
Three elements of fraudulent non-disclosure:
1) Non-disclosure was material to the K
2) Reasonable reliance on non-disclosure
3) Duty of disclosure and a failure to fulfill it
Remedies for misrepresentation:
1) Avoid the K
2) Bring a tort action for rescission of the K and damages
What remedy is available for fraudulent and non-fraudulent misrepresentation but not for fraudulent non-disclosure?
Live with the K and sue for the benefit of the bargain
In a fraudulent misrepresentation case, a person can:
seek punitive damages because it is an intentional tort
