Defenses Flashcards
Infancy
Minor can enter into a K, but the contract is VOIDABLE at the option of the minor.
In certain circumstances the K can be RATIFIED (upon reaching the age of majority, making any manifestation to the other party of an intention to be bound b original K - silence is not enough to ratify unless minor continues to take advantage of services/goods from K), or alternately, the minor may still be liable for benefits received.
Upon exercising the right to disaffirm a K, minor is obligated to return to other party any goods received under the K. However, minor is not liable for damage, wear and tear, or other depreciation in value of goods.
Minority of jxs deprive married or emancipated minors of the power of avoidance so all K’s the enter are enforceable against them.
Minor’s K for NECESSARIES is voidable. However, the other party has a right in quasi-contract to recover for the reasonable value of the goods/services provided.
Minority of jxs, if a minor has MISREPRESENTED age in order to obtain goods/services of K, he may be equitably estopped from proving real age in court.
Mental Incompetency
Key question is whether the person was incompetent AT THE TIME OF CONTRACTING?
If a party is adjudicated incompetent and a guardian is appointed, this adjudication will be sufficient to establish mental incompetence for K cases.
If no adjudication, party may still be declared mentally incompetent for purposes of K under following circumstances:
+ COGNITIVE DEFECTS: Unable to understand in a reasonable manner the nature and consequences of the transaction.
+VOLITIONAL DEFECTS: A person is unable to act in a reasonable manner in relation to the transaction AND the other party has reason to know of this condition.
In most jxs, K entered into by incompetent person is voidable.
Rules regarding ratification and power of avoidance after becoming competent are the same as infancy
Other party is entitled only to a return of “as is” of any goods, and will have no right of recovery for goods or services already consumed.
Same rules for necessaries as for minors. Reasonable value of goods and services owed to other party.
Misrepresentation
Types:
+Fraudulent Misrepresentation
+Non-Fraudulent Misrepresentation
+Fraudulent Nondisclosure
Materiality to K can be shown by an objective OR subjective standard.
Fraudulent Misrepresentation
Assertion inconsistent with existing facts that are material to the K, with both scienter and intent to mislead, and the other party relies on the misrepresentation.
Fraudulent concealment (active efforts to “cover up” the truth) are also considered misrepresentations.
Aggrieved party’s reliance on the defendant’s misrepresentation is reasonable if, under all the circumstances, a reasonable person would have relied on the assertion.
Non-Fraudulent Misrepresentation
Assertion inconsistent with existing facts that are material to the K, and the other party relies on the misrepresentation.
Same remedies available to victim of either negligent or innocent misrepresentation, no real difference.
+ Negligent misrepresentation - aggrieved party must show that perpetrator would have known the assertion was false had he exercised reasonable care.
+ Innocent misrepresentation - aggrieved party need only show the perpetrator made an assertion not in accord with existing fact.
Fraudulent Nondisclosure
Defendant is silent about facts that he knows that are material to the K and the other party reasonably relies on that.
Generally no duty of disclosure to trading partners, but if a party is aware of material facts that are unlikely to be discovered by the other party in the exercise of ordinary care and diligence, then there will be a duty to disclose that information in these circumstances:
(1) where the parties enjoy a relationship of trust and confidence;
(2) if a party has made an assertion that was true at the time but has been rendered untrue by intervening events; OR
(3) if the obligation of good faith would require that the party disclose the info.
Remedies for victims of misrepresentation
Victims of fraudulent misrepresentation, non-fraudulent misrepresentation, and fraudulent nondisclosure may use those claims in 2 ways:
(1) avoidance; OR
(2) rescission and reliance damages.
Victims of fraudulent and non-fraudulent misrepresentation may also live with the K and sue for the benefit of the bargain.
Fraudulent misrepresentation is an intentional tort. Aggrieved party may secure punitive damages against the defendant to penalize the defendant on the basis of the fraudulent intention.
Duress
3 elements:
(1) a threat (a manifestation of intent to inflict harm on the other person, made in words or by conduct);
(2) that is wrongful in nature; AND
(3) that leaves the aggrieved party with no reasonable choice but to succumb to the threat.
Threat is wrongful in nature if it involves criminal or tortious conduct.
Threat to bring civil action is wrongful only if made in bad faith (perpetrator does not honestly and reasonably believe that the target has civil liability).
A threat of a bad faith breach of contract is sufficient to constitute ECONOMIC DURESS.
Third-Party Duress
If wrongful threat is made by a third party, rather than the other party to the K, the aggrieved party will still have a valid claim of duress, UNLESS:
(1) the other party gives value or relies materially on the transaction; AND
(2) the other party is proceeding in good faith without reason to know of the duress.
Remedies for duress
K’s made under physical compulsion are VOID.
K’s entered into under other forms of duress are VOIDABLE at the option of the aggrieved party. The aggrieved party is:
(1) entitled to restitution of any benefits conferred under duress; AND
(2) required to return excess value of benefits to the perpetrator.
Undue Influence
Vulnerable, but not incapacitated, party who succumbs to untoward bargaining tactics and pressures from the other party, where those pressures or tactics fall short of fraud or duress.
2 elements:
(1) unfair persuasion was used; AND
(2) other party was vulnerable to such persuasion.
Common indicia courts look at (among all the circumstances):
(1) discussion of transaction at unusual/inappropriate time
(2) consummation of transaction at unusual place
(3) insistent demands that transaction/business be finished immediately
(4) extreme emphasis on the untoward consequences of delaying transaction
(5) use of multiple persuaders against the target of persuasion
(6) absence of third-party advisers to the target of persuasion
(7) statements that there is no time to consult financial advisers or attorneys
Remedies for undue influence
Contractual obligations assumed under undue influence are VOIDABLE at the option of the aggrieved party.
Aggrieved party is entitled to restitution of any benefits conferred on the other party, but must return the value in excess of those benefits to the other party.
Where the vulnerable party suffers undue influence at hands of a third party rather than other party to the K, the aggrieved party has the power to avoid the K at his option, unless two conditions are met:
(1) the other party gives value or relies materially on the transaction; AND
(2) the other party is proceeding in good faith without reason to know of the undue influence.
Unconscionability
May be available when a party uses inappropriate bargaining tactics to take unfair advantage of a vulnerable party. Focuses not only on the unfair process but also on unfair RESULTS.
2 elements:
(1) Procedural unconscionability (bargaining process created an absence of meaningful choice for aggrieved party); and
(2) substantive unconscionability (K terms are unreasonably unfavorable to the aggrieved party).
Determined by the circumstances existing at the time of K formation, not the time the dispute arose.
Most jxs require BOTH elements to be proved. However, when there’s an extremely strong showing of one, party may be bale to succeed despite a weaker showing of the other.
Remedies for unconscionability
Court may:
(1) refuse to enforce K
(2) excise the offending clause and enforce remainder of K; OR
(3) limit the application of the offending clause as to avoid any unconscionable result.
Public Policy defense to contracts
Claim that costs should not enforce a K because doing so would violate or undermine some important public policy.
May be raised as a defense to the enforcement of a K in the following 4 contexts:
(1) where subject matter of the K itself is specifically prohibited by law;
(2) where a K is formed for the purpose of committing a crime or violating a legal regulation;
(3) where the K performance would not constitute a crime, but would constitute a tort; OR
(4) where the K performance would violate certain values and freedoms designated by the state or jx.
