Defenses to Formation

Question 1

Is a contract with an infant binding?

Answer 1

A promise made by an infant is voidable. A promise made by an adult to an infant is enforceable.

Question 2

When may a minor disaffirm a contract?

Answer 2

A minor may disaffirm a contract and time before and within a reasonable time after reaching the age of majority.

Question 3

Can a minor disaffirm a contract in part?

Answer 3

No. A minor must disaffirm a contract in full.

Question 4

Must an infant return consideration for a disaffirmed contract?

Answer 4

An infant must return anything that still remains. The infant is not obligated to return anything squandered, wasted, or negligently destroyed.

Question 5

What are necessaries?

Answer 5

Necessaries are items necessary for subsistence, health, or education.

Question 6

May a minor disaffirm a contract for necessaries?

Answer 6

Yes, but the minor will be liable in restitution for the value of the benefits received.

Question 7

May a mentally incompetent person enter a contract?

Answer 7

Yes, but the contract is voidable. However, once a guardian is appointed they cannot contract.

Question 8

Is intoxication a defense to contract formation?

Answer 8

A person who was so intoxicated that they did not understand the nature and significance of their promise may disaffirm the contract.

Question 9

What is economic duress?

Answer 9

Economic duress occurs when (1) the party threatens to commit a wrongful act that would seriously threaten the other person’s property or finances, and (2) there are no adequate means available to prevent the threatened loss.

Question 10

What are the elements of undue influence as a defense to contract formation?

Answer 10

(1) undue susceptibility to pressure by one party,
(2) excessive pressure by the other party

Question 11

What is an ambiguous term?

Answer 11

An ambiguous term as at lease two possible meanings.

Question 12

How does ambiguity work as a defense to contract formation?

Answer 12

(1) if neither party was aware of the ambiguity, no contract was formed unless the parties intended the same meaning.
(2) if both parties were aware, no contract was formed unless both parties intended the same meaning
(3) if only one party was aware, the contract is binding based on the innocent party’s reasonable interpretation

Question 13

When is mutual mistake of fact a defense to contract formation?

Answer 13

A contract may be voidable by the adversely affected party if
(1) the mistake concerns a basic assumption on which the contract is made
(2) the mistake has a material effect on the agreed-upon exchange, and
(3) the party seeking avoidance did not assume the risk

Question 14

Is mistake in value a defense?

Answer 14

No because both parties assume the risk that their valuation is wrong.

Question 15

Will unilateral mistake allow a party to avoid a contract?

Answer 15

In general, unilateral mistake of fact is not a defense. However, if the nonmistaken party knew or had reason to know of the mistake, the contract is voidable by the mistaken party if the mistake is material and the mistaken party did not bear the risk.

Question 16

What is the defense of fraudulent misrepresentation?

Answer 16

If one party induces another to enter a contract by using a fraudulent misrepresentation, the contract is voidable by the innocent party if they justifiably relied on the fraudulent misrepresentation.

Question 17

What is the defense of material misrepresentation?

Answer 17

The contract is voidable by the innocent party if they justifiably relied on the misrepresentation and the misrepresentation was material.

Question 18

When is a misrepresentation material?

Answer 18

A misrepresentation is material if (1) it would induce a reasonable person to agree or (2) the maker knows of some special reason it is likely to induce the particular person to agree.

Question 19

Does failure to read a contract preclude misrepresentation defenses?

Answer 19

Not necessarily, if the reliance on the misrepresentation was justified

Question 20

What is the defense to contract formation of illegality?

Answer 20

If the consideration or subject matter of a contract is illegal, the contract is void.

If only the purpose is illegal, the contract is voidable by a party who was (1) unaware of the purpose or (2) aware but did not facilitate the purpose and the purpose does not involve serious moral turpitude.

Question 21

What are the exceptions to illegality voiding a contract?

Answer 21

(1) one party was unaware of the illegality while the other knew of it,
(2) the parties are not in pari delicto (just as culpable as the other)
(3) the illegality if failure to obtain a license where the license is only for revenue-raising purposes

Question 22

What is unconscionability?

Answer 22

A court may modify or refuse to enforce a contract or provision to avoid unfair terms (unfair surprise or oppressive terms at the time contract formed).

Question 23

What is the statute of frauds?

Answer 23

Certain agreements, by statute, must be evidenced in a writing signed by the party sought to be bound.

Question 24

What agreements are covered by the statute of frauds?

Answer 24

Marriage is consideration
Years (more than 1)
Land
Executor/Administrator
Goods > $500
Surety

Question 25

Must a contract lasting “until I die” be evidenced in writing?

Answer 25

No. A person could die anytime, so this contract could be performed within a year.

Question 26

Must a lease be evidenced in writing?

Answer 26

Yes, if the lease lasts longer than a year.

Question 27

Do construction contracts need to be evidenced in writing?

Answer 27

No. They don’t create an interest in land.

Question 28

When is a suretyship or guarantee not within the statute of frauds?

Answer 28

The statute of frauds does not apply when the main purpose of the promisor is to serve a pecuniary interest of his own.