Defenses Flashcards
What are the general defenses to contract formation?
duress, lack of capacity, illegality, unconsionability, and misrepresentation
What is duress?
when assent was induced by improper threat that left no reasonable alternative
What are the three types of “lack of capacity”?
infancy, mental illness or defect, intoxication
When is infancy a lack of capacity for defense against enforceability?
until the day before the parties’ 18th birthday
What is mental illness or defect under lack of capacity as a defense?
(a) unreasonably able to understand or (b) unable to reasonably act and other party should reasonably know
A defense of lack of capacity of intoxication is effective when:
other party knows they are intoxicated and knows that they are unable to reasonably understand/act because of intoxication
What falls under illegality as a defense?
violates public policy, serious crime or tort, endangers public welfare
What are the two types of unconscioinability as a defense?
procedurally unconscionable and substantively unconscionable
What is procedurally unconscionable?
significant inequality of bargaining power; standard forms or buried terms
A minor may generally disaffirm a contract until
a reasonable time after she reaches the age of majority or choose to ratify the contract
A minor must generally _________ of the agreement (or what is left of it) if she elects to disaffirm
return the subject matter
What are exceptions to the defense of lack of capacity due to infancy (being a minor)?
contracts for food, shelter, and medical care
If the party who asserts mental illness or defect as a defense regains capacity, she may elect to
ratify or disaffirm the contract
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
intoxication (other party must have reason to know of the person’s intoxication in order for intoxication to be a valid defense)
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
avoid the contract
A purely economic or pecuniary threat, without some wrongful act, generally will not give rise to a defense of
duress
A party may asset the defense of undue influence if assent is induced by _________
unfair persuasion
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
dominion; relationship
A party may asset the defense of _______ if the bargaining process and/or terms of the contract are unfair
unconscionability
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
procedurally unconscionable
_______ _________ 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
procedural unsconscionability
A contract is ___ ____ where the terms are overly harsh or one-sided against a party
substantively unconscionable
A party may assert the defense of ______ if assent is induced by an untrue assertion that is fraudulent or material
misrepresentation (the party’s reliance on the misrepresentation must also be justified)
An untrue assertion under the defense of misrepresentation generally takes the form of
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
A misrepresentation is fraudulent if
(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
A misrepresentation is material if
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)
A party justifiably relies on a misrepresentation if
the untrue assertion is presented as a fact
An opinion or mere puffery only justifies reliance under three circumstances:
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
