Defenses and S/F Flashcards
defenses to contract formation
capacity
- infancy
- mental capacity
- intoxication
assent
- duress
- undue influence
- misrepresentation
- mistake
- unconscionability
public policy
S/F
capacity
one must have capacity to incur at least voidable obligations to be bound by a contract
one who manifests assent to contract has full capacity, unless he is:
- an infant
- mentally ill
- intoxicated
infancy
voidable duties if contract before turning 18
may ratify/affirm after 18th, can disaffirm before 18th and within a reasonable time thereafter
if infant disaffirms, must return any property/proceeds in their possession, but not obligated to pay for any loss in value to the property. other party must returned what they received as well
may not be available if:
- contracted for necessaries
- infant is emancipated
mental capacity
two tests: cognitive and motivational
cognitive test –> unable to understand in a reasonable manner the nature and consequences of the transaction
motivational test –> unable to act in a reasonable manner in relation to the transaction, AND the other party has reason to know of his condition
intoxication
voidable if:
other party had reason to know that by reason of intoxication,
- he was unable to understand in a reasonable manner the nature and consequences of the trx, OR
- he was unable to act in a reasonable manner in relation to the transaction
mistake
belief that that is not in accord with the facts
mutual mistake
motivation - where a mistake of both parties at the time a contract was made as to a basic assumption on which the contract was made has had 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
impact - in determining whether the mistake has a material effect on the agreed exchange of performances, account is taken of any relief by way of reformation, restitution, or otherwise
unilateral mistake
where a mistake of one party at the time the 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 averse 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
- effect of mistake is such that enforcement of the contract would be unconscionable, or
- the other party had reason to know of the mistake or his fault caused the mistake
bearing risk under 154
- contract allocates risk
- aware, but in disregard, of limited knowledge
- risk allocated by the court (reasonable to do so in the circumstances)
misrepresentation
three flavors:
(1) affirmative misrepresentation - a misrepresentation is an assertion that is not in accord with the facts; deliberate lie
(2) concealment - hiding by affirmative act
(3) nondisclosure - silence when there’s a relationship of trust/failure to act in good faith/disclosure is necessary to prevent previous assertion from being fraudulent/material
fraudulent misrepresentation
(1) maker intends his assertion to induce a party to manifest his assent AND
(2) maker
(a) knows/believes that assertion is not in accord w facts OR
(b) does not have the confidence that he states/implies in the truth of the assertion OR
(c) knows that he does not have the basis that he states or implies for the assertion
material misrepresentation
if it would be likely to induce a reasonable person to manifest his assent, or if the maker knows that it would be likely to induce the recipient to do so
when misrepresentation makes a contract voidable
- misrepresentation
- either fraudulent OR material
- induces other party to assent, AND
- other party justified in relying on misrepresentation reliance reasonable
duress
- physical compulsion –> no MOA –> void
- improper threat with no reasonable alternative –> voidable
a threat to sue is not an improper threat (suing is a legal right)
undue influence
unfair persuasion of a party who is under the domination of the person exercising the persuasion or who by virtue of the relation between them is justified in assuming that the person will not act in a manner inconsistent with his welfare
if induced by other party –> voidable by victim
if induced by TP –> voidable by victim UNLESS TP acted in good faith and without reason to know of undue influence
unconscionability
contract is so unjust/one-sided toward one party
may be procedural or substantive
court may:
- refuse to enforce
- strike unconscionable clause
- limit application of any unconscionable term as to avoid any unconscionable result
procedural unconscionability
bargaining process that occurred before the contract was finalized
substantive unconscionability
terms/content of contract
public policy
promise/terms unenforceable on grounds of PP if legislation provides so or if the interest in its enforcement is clearly outweighed in the circumstances by a PP against the enforcement of such terms
statute of frauds
a set of statutes that specify which contracts must be evidenced by some kind of writing
classes of contracts covered by the S/F
MYLEGS
consideration of Marriage
cannot be fully performed in one Year
sale of Land and Long-term leases
estate Executor promises to pay estate debt from own funds
sale of Goods for $500 or more
Suretyship/guaranty
writing requirements for S/F
- essential terms
- signed by party to be charged
- language states with reasonable certainty the essential terms
- language is sufficient to indicate that a K has been made between parties or offered by the signer to the other party
exceptions to S/F (R2K)
- seller transfers deed to buyer, who has accepted deed but has not yet paid
- part performance - acts in performance serve as compelling evidence of the existence of the contract
- estoppel - reasonable reliance on representation AND enforcing is nevessary to avoid injustice
exceptions to S/F (UCC)
- merchants should read their mail
- specially manufactured goods
- litigation admission
- part performance; seller accepts buyer’s payment OR buyer accepts goods delivered by seller
course of performance
conduct between the parties occurring after a particular K has been formed
applicable if:
- agreement of parties WRT trx involves repeated occasion for performance by a party
- other party (w/knowledge of nature of performance and opportunity for objection to it) accepts performance or acquiesces to it without objection
course of dealing
conduct between parties concerning previous trx (occurs before K in question)
establishes a common basis of understanding for interpreting their expressions and other conduct
usage of trade
any practice/method of dealing having such regularity of observance in a place/vocation/trade as to justify an expectation that it will be observed in this particular trx
existence/scope of language must be proven as fact
