Defenses - All Others

Question 1

Infancy - general rules

Answer 1

a) Contract between adult and minor is voidable by minor, but binding on adult
b) Minor may disaffirm during minority or upon reaching age of majority
c) Minor may affirm contract upon reaching age of majority
(1) Affirms either expressly or by conduct (e.g., failing to disaffirm the K w/in a reasonable time after reaching majority.)
d) Minor can get restitution of payments from seller, but must return goods.

Question 2

Infancy - exceptions

Answer 2

Necessities – minor must pay reasonable value

Question 3

Mental incapacity/intoxication

Answer 3

1. Incapable of understanding the nature and significance of a contract.
2. Voidable.
3. May disaffirm or affirm during lucid period.
4. Exception for necessities

Question 4

Duress/Coercion/Undue Influence

Answer 4

1. Voidable by victim, unless affirmed
2. Denied to one who yields too easily
3. Threat of lawful action is not wrongful, unless there is no basis for the underlying claim.

Question 5

Misrepresentation and concealment

Answer 5

1. Misrepresentation or concealment of a material fact with intent that other party rely, and justifiable reliance
2. Generally, misrepresentation must be of fact and not opinion, unless:
   a) Fiduciary relationship, trick, parties do not in general deal at arm’s length, or where representee doesn’t have equal opportunity to become apprised of truth or falsity of the fact represented.
3. Generally, no duty to speak unless superior knowledge, fiduciary relationship, or statute requiring disclosure.
   a) Don’t need to speak, but if you speak, must disclose everything.

Question 6

Adhesion contract

Answer 6

a) Definition
(1) Standardized contract which is imposed and drafted by a party of superior bargaining strength and relegates to the subscribing party only the opportunity to adhere to the contract or reject it.
b) Contract is in pre-packaged terms; can’t negotiate it.
c) Will be one-sided but they are permissible
(1) However, if they are so one-sided that they result in unconscionability, they may be used as a defense

Question 7

Unconscionabilty - definition

Answer 7

An absence of a meaningful choice by one of the parties, together with contract terms which are unreasonably favorable to the other party

Question 8

Unconscionability - Three-pronged test

Answer 8

Doesn’t apply to UCC

(1) Must be adhesive (but these alone are permissible)
(2) Must be procedurally unfair (unequal bargaining power)
(3) Must be substantively unfair (an oppressive term)

Question 9

Unconscionability - UCC 2-302

Answer 9

(1) The basic test is whether in light of the general commercial background and commercial needs of the particular trade or case, the clauses involved are so one-sided as to be unconscionable under the circumstances existing at the time of the making of the contract

Question 10

Unconscionability - general

Answer 10

d) Usually takes the form of adhesion contracts, but doesn’t have to.
e) Disparity of bargaining power by one party in which one party imposes a disparity of terms on the other party.
f) Sometimes takes the form of a gross inequality of exchange.
g) Must view contract prospectively, not retrospectively.

Question 11

Illegal contracts

Answer 11

1. If purpose, consideration, or subject matter is illegal, this is a defense to enforcement.
2. Generally K is void.
3. Timing
   a) If subject matter or consideration is illegal at time of offer, then no valid offer.
   b) If became illegal after offer but before acceptance, offer is revoked.
   c) If became illegal after valid K formed, discharge K
4. If K formed for illegal purpose, but neither consideration nor subject matter is illegal.
   a) K is voidable by party who either (1) did not know of purpose or (2) knew but did not facilitate purpose and purpose does not involve serious moral turpitude.
   b) If both parties knew of illegal purpose, facilitated it, or knew and purpose involves serious moral turpitude, K is void and unenforceable.

Question 12

Unilateral mistake

Answer 12

a) General Rule
(1) Voidable by mistaken party if non-mistaken party knew or should’ve known of the other party’s mistake
(2) If non-mistaken party unaware, then K is binding.
b) Modern Trend
(1) If mistaken party notifies other party before non-mistaken party changes position in reliance, mistaken party can rescind

Question 13

Mutual Mistake

Answer 13

a) Where parties enter into a K under a mutual mistake concerning a basic assumption of fact on which the K was made, K is voidable by adversely affected party if:
(1) Mistake has material effect on agreed exchange, and
(2) Adversely affected party did not bear risk that assumption was mistaken