DEFENSES Flashcards
Statute of Frauds
Applies to Real Property Ks, Services Ks not capable of being performed in a year, Executor, Gurantee, Marriage, UCC $500 or more sale of goods. Must be a SIGNED WRITING by the PARTY WHO IS TO BE CHARGED to be VALID.
SOF Exceptions: Merchants Confirmation 2-201
Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within 10 days after it is received.
SOF Exceptions: Types of Goods
A contract which does not satisfy the requirements of subsection (1) but which is valid in other respects is enforceable
(a) if the goods are to be specially manufactured for the buyer and are not suitable for sale to others in the ordinary course of the seller's business and the seller, before notice of repudiation is received and under circumstances which reasonably indicate that the goods are for the buyer, has made either a substantial beginning of their manufacture or commitments for their procurement; or (b) if the party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a contract for sale was made, but the contract is not enforceable under this provision beyond the quantity of goods admitted; or (c) with respect to goods for which payment has been made and accepted or which have been received and accepted (Sec. 2-606).
SOF Exceptions: Estoppel Rest. 139
A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce the action or forbearance is enforceable notwithstanding the Statute of Frauds if injustice can be avoided only by enforcement of the promise. The remedy granted for breach is to be limited as justice requires.
(2) In determining whether injustice can be avoided only by enforcement of the promise, the following circumstances are significant: (a) the availability and adequacy of other remedies, particularly cancellation and restitution; (b) the definite and substantial character of the action or forbearance in relation to the remedy sought; (c) the extent to which the action or forbearance corroborates evidence of the making and terms of the promise, or the making and terms are otherwise established by clear and convincing evidence; (d) the reasonableness of the action or forbearance; (e) the extent to which the action or forbearance was foreseeable by the promisor.
Fraud/Misrepresentation/Non-disclosure
□ Where a party is induced to enter into a transaction with another party . . . by means of the latter’s fraud or material misrepresentation, the transaction is voidable by the latter.” (see also Rest. 2d 164).
○ Misrep – statement not in accord with the facts
○ Material – likely to affect the conduct of a reasonable person
A person’s non-disclosure of a fact known to him is equivalent to an assertion that the fact does not exist in the following cases only:
(a) where he knows that disclosure of the fact is necessary to prevent some previous assertion from being a misrepresentation or from being fraudulent or material.
(b) where he knows that disclosure of the fact would correct a mistake of the other party as to a basic assumption on which that party is making the contract and if non-disclosure of the fact amounts to a failure to act in good faith and in accordance with reasonable standards of fair dealing.
(c) where he knows that disclosure of the fact would correct a mistake of the other party as to the contents or effect of a writing, evidencing or embodying an agreement in whole or in part.
(d) where the other person is entitled to know the fact because of a relation of trust and confidence between them.
Capacity
□ Minors/Infants
○ The general rule is that the contract of a minor, other than for necessaries, is either void or voidable at his option.
○ how to disaffirm: any act which clearly shows such intent
○ misrepresenting age: not an exception in majority of states (and proving independent tort is often problematic)
○ Ratification Can be done expressly, impliedly, or through inaction after reasonable time beyond majority
□ Mentally Ill
□ Intoxication
Undue Influence
Undue influence involves the use of (1)excessive pressure (objective) to persuade (2) one vulnerable to such pressure (subjective).”
○ Patterns of pressure/ overpersuasion
Discussion of the transaction at an unusual place
® Consummation of transaction at an unusual place
® Insistent demand that the business be finished at once
® Extreme emphasis on untoward consequences of delay
® The use of multiple persuaders by the dominant side against a single servient party
® Absence of third party advisers to the servient party
® Statements that there is no time to consult financial advisers or attorneys
Duress
A contract is voidable on the ground of duress when it is established that the party making the claim was forced to agree to it by means of a (1) wrongful threat (2) precluding the exercise of his free will (i.e., no reasonable choice).”
□ Rule for Economic Duress
○ (p. 422) threat to breach a contract where “the threatened party could not obtain the goods [or service] from another source of supply and . . . the ordinary remedy of an action for breach of contract would not be adequate” (note: most courts add requirement that threat be in “bad faith”)
Illegality and Public Policy
□ Rest. 178:
• A promise or other term of an agreement is unenforceable on grounds of public policy if legislation provides it is unenforceable or the interest in its enforcement is clearly outweighed in the circumstances by a public policy against the enforcement of such terms.
○ Contract to commit crime or tort
○ Certain banned deals (prostitution, bribery, usury)
○ Other scenarios (e.g., surrogacy Ks, K to sell organs)
□ Rest. 181: Effect of Failure to Comply with Licensing or Similar Requirement
• If a party is prohibited from doing an act because of his failure to comply with a licensing, registration or similar requirement, a promise in consideration of his doing that act or of his promise to do it is unenforceable on grounds of public policy if:
a) the requirement has a regulatory purpose, and
the interest in the enforcement is clearly outweighed by the public policy behind the requirement
□ Covenant Not to Compete
• “A restriction [in a covenant not to compete] is unreasonable and thus will not be enforced:
a) if the restraint is greater than necessary [i.e., time, space, activity] to protect the employer’s legitimate interest; or
b) if that interest is outweighed by the hardship to the employee and the likely injury to the public [i.e., medical relationships]
Unconscionability
□ Unconscionability has generally been recognized to include (1) an absence of meaningful choice on the part of one of the parties together with (2) contract terms which are unreasonably favorable to the other party.
- Gross inequality bargaining power - Manner in which K is issued - Reasonable opportunity to understand the K - Important terms hidden in fine print - Important terms minimized by deceptive sales practices
UCC 2-302
• For a contract to be unconscionable, it must be both: (1) substantively and (2) procedurally unconscionable.”
• Seven factors that are relevant in determining whether a contract is unconscionable:
1) a standardized agreement executed by parties of unequal bargaining power;
2) lack of opportunity to read or become familiar with the document before signing it;
3) use of fine print in the portion of the contract containing the provision;
4) absence of evidence that the provision was commercially reasonable;
5) the terms of the contract;
6) the relationship of the parties, including factors of assent, unfair surprise, and notice; and
7) all the circumstances surrounding the formation of the contract.
Mistake
□ Rest. 152 (Mutual Mistake): “Where a mistake of both parties [i.e., mutual] at the time a contract was made as to a basic assumption on which the contract was made has a material effect on the agreed exchange of performances, the contract is voidable by the adversely affected party unless he bears the risk of the mistake under the rule stated in § 154.”
□ Rest 154. “A party bears the risk of a mistake when
a) the risk is allocated to him by agreement of the parties, or
b) he is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient [i.e., “conscious ignorance], or
c) the risk is allocated to him by the court on the ground that it is reasonable in the circumstances to do so.”
Unilateral Mistake
Rest. 153 (Unilateral Mistake): “Where a mistake of one party [i.e., unilateral] at the time a contract was made as to a basic assumption on which he made the contract has a material effect on the agreed exchange of performances that is adverse to him, the contract is voidable by him if he does not bear the risk of the mistake under the rule stated in § 154, and
(a) the effect of the mistake is such that enforcement of the contract would be unconscionable, or
(b) the other party had reason to know of the mistake or his fault caused the mistake.
