Defenses

Question 1

What are the general defenses to contract formation?

Answer 1

duress, lack of capacity, illegality, unconsionability, and misrepresentation

Question 2

What is duress?

Answer 2

when assent was induced by improper threat that left no reasonable alternative

Question 3

What are the three types of “lack of capacity”?

Answer 3

infancy, mental illness or defect, intoxication

Question 4

When is infancy a lack of capacity for defense against enforceability?

Answer 4

until the day before the parties’ 18th birthday

Question 5

What is mental illness or defect under lack of capacity as a defense?

Answer 5

(a) unreasonably able to understand or (b) unable to reasonably act and other party should reasonably know

Question 6

A defense of lack of capacity of intoxication is effective when:

Answer 6

other party knows they are intoxicated and knows that they are unable to reasonably understand/act because of intoxication

Question 7

What falls under illegality as a defense?

Answer 7

violates public policy, serious crime or tort, endangers public welfare

Question 8

What are the two types of unconscioinability as a defense?

Answer 8

procedurally unconscionable and substantively unconscionable

Question 9

What is procedurally unconscionable?

Answer 9

significant inequality of bargaining power; standard forms or buried terms

Question 10

A minor may generally disaffirm a contract until

Answer 10

a reasonable time after she reaches the age of majority or choose to ratify the contract

Question 11

A minor must generally _________ of the agreement (or what is left of it) if she elects to disaffirm

Answer 11

return the subject matter

Question 12

What are exceptions to the defense of lack of capacity due to infancy (being a minor)?

Answer 12

contracts for food, shelter, and medical care

Question 13

If the party who asserts mental illness or defect as a defense regains capacity, she may elect to

Answer 13

ratify or disaffirm the contract

Question 14

A person lacks capacity due to _______ when unable to reasonably understand the nature and consequences of the transaction or unable to reasonably act in relation to the transaction

Answer 14

intoxication (other party must have reason to know of the person’s intoxication in order for intoxication to be a valid defense)

Question 15

If the other party doesn’t have reason to know of a person’s intoxication when entering into a contract, the intoxicated person may not

Answer 15

avoid the contract

Question 16

A purely economic or pecuniary threat, without some wrongful act, generally will not give rise to a defense of

Answer 16

duress

Question 17

A party may asset the defense of undue influence if assent is induced by _________

Answer 17

unfair persuasion

Question 18

In undue influence, the party may be under the ________ of the persuader or in a ___________ that justifies a belief that the persuader will not act inconsistently with the party’s welfare

Answer 18

dominion; relationship

Question 19

A party may asset the defense of _______ if the bargaining process and/or terms of the contract are unfair

Answer 19

unconscionability

Question 20

A contract is ________ ________ if a significant inequality in bargaining power prevents one of the parties from having a meaningful choice or real alternative in setting the terms of the agreement or the contract involves some aspect of unfair surprise

Answer 20

procedurally unconscionable

Question 21

_______ _________ often exists in standard form contracts where one party cannot negotiate or modify the terms, as well as contracts with buried terms that have been purposely hidden by the other party

Answer 21

procedural unsconscionability

Question 22

A contract is ___ ____ where the terms are overly harsh or one-sided against a party

Answer 22

substantively unconscionable

Question 23

A party may assert the defense of ______ if assent is induced by an untrue assertion that is fraudulent or material

Answer 23

misrepresentation (the party’s reliance on the misrepresentation must also be justified)

Question 24

An untrue assertion under the defense of misrepresentation generally takes the form of

Answer 24

a statement that is not in accordance with the facts OR
an act of concealment that prevents a party from discovering the facts OR
a nondisclosure that either fails to correct a mistake or violates a relationship of trust and confidence

Question 25

A misrepresentation is fraudulent if

Answer 25

(1) it is intended to induce a party’s assent and (2) the party making the misrepresentation knows it is false is is not certain that it is true

Question 26

A misrepresentation is material if

Answer 26

it is likely to induce a reasonable person’s assent or the party making the misrepresentation knows it will likely induce the particular party’s assent (even if a reasonable person would not be so induced)

Question 27

A party justifiably relies on a misrepresentation if

Answer 27

the untrue assertion is presented as a fact

Question 28

An opinion or mere puffery only justifies reliance under three circumstances:

Answer 28

relationship-there is a relationship of trust and confidence between the party and the maker of the opinion
special skill-party reasonably believes that the maker of the opinion has special skill, judgment, or objectivity regarding the subject matter
susceptibility-party is particularly susceptible for a special reason, such as illiteracy, unusual gullibility, or lack of intelligence