Defenses supp

Question 1

If minor exercises right to disaffirm K:

 Minor is obligated to

Answer 1

 Minor is obligated to return any goods received but not liable for any damages or reasonable value for use of any goods or services

Question 2

Minors (under 18) may enter into a K, but it is voidable at minor’s option
 Majority of jurisdictions - neither of the following affect minor’s avoidance rights:

Answer 2

• Marriage or emancipation

* Misrepresenting the minor’s age

Question 3

Once minors turn 18, they may expressly or impliedly _______ Ks entered during minority and bind themselves to obligations they might otherwise have _______.

Answer 3

ratify

disaffirmed

Question 4

o Necessaries Exception: A minor’s K for necessaries (food, clothing, shelter, medical care) is voidable, but merchant has quasi K right to recover

Answer 4

reasonable value of goods or services

Question 5

o Under modern rules, a person lacks capacity to contract if mentally incompetent (i.e., to reasonably understand the transaction) at time of contracting.

o Power of Avoidance (or Disaffirmation):

o Ratification: a party who was mentally incompetent at the time of contracting may expressly or impliedly ratify the K if?

Answer 5

Power of Avoidance=(unlike minors) the mentally incompetent person is obligated to not only return any goods received but IS also liable for any damages or reasonable value for use of any goods or services (unless other party was aware of incompetence then mentally incompetent parties are treated just like minors)

if he becomes competent at a later time.

Question 6

 The mentally incompetent party can disaffirm the K but the provider of the necessaries can recover in quasi-contract for the reasonable value of the goods/services
 Additional necessary-

Answer 6

 Additional necessary – legal representation in connection with incompetency proceedings

Question 7

what are the two forms of non-fraudulent misrepresentation?

Answer 7

Negligent and Innocent misrepresentation

Question 8

What are the elements of negligent and innocent misrepresentation?

Answer 8

o Element #1: A misrepresentation
o Element #2: Materiality of the misrepresentation
o Element #3: Reasonable reliance on the misrepresentation
o But #4 is different: we don’t need scienter/intent to mislead, but rather:
 For Negligent misrepresentation: the defendant would have known the assertion was false had he exercised reasonable care
 For Innocent misrepresentation: the defendant made an assertion not in accord with existing facts

Question 9

What are the elements of fraudulent non-disclosure?

Answer 9

• Fraudulent Nondisclosure: The fraud consists of defendant’s silence when duty to disclose
o Element #1: the nondisclosure was material to the K;
o Element #2: reasonable reliance on nondisclosure;
o Element #3: a duty of disclosure and failure to fulfill it

Question 10

 Although there is generally no duty of disclosure to trading partners, 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:

Answer 10

• Parties enjoy relationship of trust and confidence (e.g., familial relationships or the relationship between a professional and client)
• Party has made an assertion that was true at the time but has been rendered untrue by intervening events
• If obligation of good faith would require that the party disclose the information (e.g., real estate transaction where one party knows of a termite infestation)

Question 11

What are the three elements required for a duress defense?

Answer 11

• Element #1: A threat:
• Element #2: that is wrongful in nature= o 3 types or circumstances:
 What is threatened is a crime or tort
 What is threatened is a criminal prosecution or bad faith civil process
 What is threatened is a bad faith breach of K (aka economic duress)
• NOTE: economic duress is the most common circumstance tested
EXAMPLE: Sailors on a fishing voyage cease their work midway through the voyage and refuse to resume their duties unless the captain agrees to give them a raise.

• Element #3: No reasonable choice but to succumb to the threat:

Question 12

what are three types of situations that may constitute economic duress.

Answer 12

 Situation #1: no adequate and reasonably priced substitutes for the services/goods that are threatened to be withheld
EXAMPLE: The ship’s captain is not in a position to find replacement sailors when already at sea, so no adequate substitutes would be available.
 Situation #2: the threatened breach would cause aggrieved party to break his own K’s (i.e. a threatened breach of a subcontractor that may force the general contractor to breach his own Ks)
EXAMPLE: A purchaser of upsidaisium bearings used in the manufacture of turbo-jet engines would, on account of the breach, be forced to breach its contract with an aircraft manufacturer.
 Situation #3: When the alternative of acquiescing to the threat and then suing for damages is inadequate to address the harm caused
EXAMPLE: Where the threatened breach would cause the aggrieved party to renege on its own commitments and thus harm its reputation and opportunities for future business, damages would be inadequate as a remedy.

Question 13

What are the required elements of undue influence as a defense?

Answer 13

• Element #1: Unfair persuasion used (multi-factor test for this element)
• Element #2: Other party was vulnerable to such persuasion

Question 14

What are the multiple factors a court considers to determine whether there was unfair persuasion used (element 1 of undue influence)

Answer 14

• Element #1: Unfair persuasion used (multi-factor test for this element)
o Discussion of the transaction at an unusual or inappropriate time
o Consummation of the transaction at an unusual place
o Insistent demands that the transaction or business be finished immediately
o Extreme emphasis on the untoward consequences of delaying the transaction
o The use of multiple persuaders against the target of persuasion
o Absence of third-party advisors to the target of persuasion
o Statements that there is no time to consult financial advisors or attorneys

Question 15

For element 2 of undue influence (vulnerability to persuasion) o A vulnerable party can be established if one of the following exists:

Answer 15

 Circumstance #1: mental infirmity is due to age or illness
 Circumstance #2: vulnerability is due to recent trauma or event
 Circumstance #3: there is a relationship of trust or confidence

Question 16

what are the 2 elements of unconscionability?

Answer 16

• Element #1: Procedural Unconscionability: Bargaining process created an absence of meaningful choice for aggrieved party
• Element #2: Substantive Unconscionability: K terms are unreasonably favorable to one party to the K (ex: excessive price, extreme consequences for breach, or grossly unfair provisions)
EXAMPLE: Where a pay-over-time plan requires the consumer to pay a total sum that is many times the value of the purchased goods; or where a bank charges an overdraft fee that is many times the bank’s actual processing costs.
EXAMPLE: An add-on clause, pursuant to which a merchant is entitled to repossess multiple household items, including furniture, bedding, and a stereo, when a consumer missed a payment, despite the fact that the consumer had already paid nearly 80% of the monies owed for the various purchases.

Question 17

• Legal Consequences – Upon a finding of unconscionability, court may:

Answer 17

o Refuse to enforce K;
o Excise the offending clause and enforce remainder;
o Limit application of offending clause to avoid unconscionable result

Question 18

public policy may be raised in three contexts

Answer 18

6) Public Policy (can be raised in 3 contexts)
• Context #1: Subject of K itself is specifically prohibited by law
EXAMPLE: In most jurisdictions, a contract for prostitution, gambling, or bribery is illegal under the law and accordingly unenforceable in court.
• Context #2: K formed for purpose of committing a crime or tort
EXAMPLE: A contract between an employer and a hired assassin would be a contract for the commission of a crime.
• Context #3: K performance would violate certain values/freedoms designated by the state
EXAMPLE: A contract that prohibits one party from marrying for an extended period of time would violate the public policy of promoting free and consent-based marriages.