Defenses and S/F

Question 1

defenses to contract formation

Answer 1

capacity
- infancy
- mental capacity
- intoxication

assent
- duress
- undue influence
- misrepresentation
- mistake
- unconscionability

public policy

S/F

Question 2

capacity

Answer 2

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

Question 3

infancy

Answer 3

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

Question 4

mental capacity

Answer 4

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

Question 5

intoxication

Answer 5

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

Question 6

mistake

Answer 6

belief that that is not in accord with the facts

Question 7

mutual mistake

Answer 7

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

Question 8

unilateral mistake

Answer 8

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

Question 9

bearing risk under 154

Answer 9

1. contract allocates risk
2. aware, but in disregard, of limited knowledge
3. risk allocated by the court (reasonable to do so in the circumstances)

Question 10

misrepresentation

Answer 10

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

Question 11

fraudulent misrepresentation

Answer 11

(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

Question 12

material misrepresentation

Answer 12

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

Question 13

when misrepresentation makes a contract voidable

Answer 13

1. misrepresentation
2. either fraudulent OR material
3. induces other party to assent, AND
4. other party justified in relying on misrepresentation reliance reasonable

Question 14

duress

Answer 14

1. physical compulsion –> no MOA –> void
2. improper threat with no reasonable alternative –> voidable

a threat to sue is not an improper threat (suing is a legal right)

Question 15

undue influence

Answer 15

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

Question 16

unconscionability

Answer 16

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

Question 17

procedural unconscionability

Answer 17

bargaining process that occurred before the contract was finalized

Question 18

substantive unconscionability

Answer 18

terms/content of contract

Question 19

public policy

Answer 19

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

Question 20

statute of frauds

Answer 20

a set of statutes that specify which contracts must be evidenced by some kind of writing

Question 21

classes of contracts covered by the S/F

Answer 21

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

Question 22

writing requirements for S/F

Answer 22

• 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

Question 23

exceptions to S/F (R2K)

Answer 23

• 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

Question 24

exceptions to S/F (UCC)

Answer 24

• merchants should read their mail
• specially manufactured goods
• litigation admission
• part performance; seller accepts buyer’s payment OR buyer accepts goods delivered by seller

Question 25

course of performance

Answer 25

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

Question 26

course of dealing

Answer 26

conduct between parties concerning previous trx (occurs before K in question)

establishes a common basis of understanding for interpreting their expressions and other conduct

Question 27

usage of trade

Answer 27

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