Defenses to Contract Formation

Question 1

What are 6 possible defenses to an otherwise valid K?

Answer 1

1. incapacity
2. statute of frauds
3. illegality
4. misreprentation/fraud
5. duress
6. unconscionability

Question 2

Who lacks capacity to contract?

Answer 2

infants and mentally incompetent persons

Question 3

What about intoxication?

Answer 3

Intoxicated persons may lack capacity to contract if the other party has reason to know of intoxication

Question 4

What are the legal consequences of incapacity?

Answer 4

1. right to disaffirm

2. implied affirmation (ratification)

Question 5

What is the right to disaffirm?

Answer 5

person who lacked capacity to contract (i.e. infant) may disaffirm the K, which renders it void

Question 6

What is implied affirmation or ratification?

Answer 6

A K can be enforced against an infant at the time of K formation if she has since gained capacity and retained the benefits of the K

• Look for:
  1) agr entered into before capacity
  2) capacity has since been gained
  3) benefits have been retained

Question 7

What are infants obligated to pay for?

Answer 7

Necessities. Food, clothes, medical care; but note, liability is based on quasi-K, so infant can’t be sued for breach

Question 8

What contracts fall within the SOF?

Answer 8

1. marriage
2. service K incapable of being performed w/n a year
3. land-related K (transfers of property interests, including leases for terms greater than 1 year)
4. executor promises
5. guarantees (promises to pay the debts of another)
6. sales of goods of $500 or more

Question 9

Under the UCC, a signed writing is not required if:

Answer 9

a. both parties are merchants, AND
b. the party asserting SoF defense received a signed writing memorializing the agr and failed to respond within 10 days of receipt

Question 10

Under a service contract, performance may satisfy the SOF only if:

Answer 10

it is full performance

Question 11

In a sale of goods K, what satisfies the SOF?

Answer 11

Delivery of the goods. Note: if it’s a custom good, the SOF is satisfied once seller makes a substantial beginning towards the performance

Question 12

In real estate, part performance by the buyer satisfies SOF if buyer has done 2/3:

Answer 12

1. full or part payment
2. possession of property
3. improvements to property

Question 13

If the K contains illegal subject matter, the K is

Answer 13

unenforceable.

Question 14

If the K contains legal subject matter but for an illegal purpose, the K is only enforceable against

Answer 14

the one who did not know about its illegal purpose

Question 15

A K will be void for misrepresentation if

Answer 15

A induces B into a K by misrepresentation and B relies on the misrepresentation.

Question 16

Ks induced by physical duress are

Answer 16

void.

Question 17

K induced by non-physical coercion or threats are

Answer 17

voidable.

Question 18

When does unconscionability arise?

Answer 18

Ks of adhesion, exculpatory clauses fo intentional acts,etc.

Question 19

What is a misunderstanding in a K?

Answer 19

Ambiguity concerning terms of K.

Question 20

If neither party was aware of the ambiguity then…

Answer 20

No K formed unless both parties intended the same meaning

Question 21

If one party was aware of the ambiguity then…

Answer 21

K formed.

K enforced according to the intention of the party unaware of the ambiguity

Question 22

If both parties were aware of the ambiguity then

Answer 22

no K formed unless both parties intended the same thing

Question 23

What is a mutual mistake of fact?

Answer 23

Both parties are mistaken about an underlying factual assumption at the time of K formation.

Question 24

A K is voidable by an adversely affected party if:

Answer 24

1. both parties are mistaken
2. mistake concerns a basic assumption of fact
3. mistake materially affects the agreed-upon exchange
4. adversely affected party did not assume the risk of mistake

Question 25

If there is a unilateral mistake concerning the facts of an agr

Answer 25

Unilateral mistake will not prevent K form

Question 26

When can a unilateral mistake make an agr voidable?

Answer 26

when the mistake is material and the non-mistaken party knew/should have known of mistkae