Defenses To Formation

Question 0

What is the effect of an illegal covenant in a contract?

Answer 0

The court can declare the covenant void

The court can interpret the covenant in order to have it fall within the law

Question 1

When can a covenant not to compete be enforced?

Answer 1

When it is:
Part of a contract
Necessary to protect one party, such as the buyer of a business
Reasonable on geographic time and scope

Question 2

Describe the differences between fraud and misrepresentation

Answer 2

1. Fraud always have malicious intent, misrepresentation may not have malicious intent to deceive if it happens negligently through a misstatement and or omission of facts
2. Fraud is a civil wrong which entitles a party to claim damages in addition to the right to rescind the contract. Parties to a contract claiming misrepresentation only have the right to rescind the contract and there can be no suit for damages

Question 3

List the remedies for lack of mutual assent

Answer 3

1. Rescission
2. Damages
3. Modification

Question 4

Define “undue influence”

Answer 4

Occurrence in which one party induces another party to enter into a contract by overcoming his or her free will through an abuse of a position of confidence

Question 5

When do bilateral mistakes create a binding contract?

Answer 5

When mistake is due to

1. Value or
2. Quality

Question 6

List the two types of contractual mistakes that can occur

Answer 6

1. Mutual (bilateral) mistake

2. Unilateral mistake (not always a defense)

Question 7

List the types of assent defenses that can be used to invalidate the formation of a contract

Answer 7

1. Mistake
2. Misrepresentation
3. Fraud
4. Duress
5. Undue influence

Question 8

Describe a formation mistake

Answer 8

When mistake is a clerical/ computation error so large that other party should have known

Question 9

Define duress

Answer 9

A forcing of a party to enter into a contract under the fear or threat of violence to that party or member of his or her family, or use of economic pressure to overcome the party’s free will

Question 10

What types of contracts are enforced against minors?

Answer 10

1. Contracts for necessaries or necessities

2. Contracts that they ratify after reaching the age of majority

Question 11

List the elements that constitute a fraud

Answer 11

1. Intentional deceit ( or negligent misrepresentation)
2. Deceit of a material fact
3. Reliance of the party deceived

Question 12

Under what circumstances can a unilateral mistake become a defense?

Answer 12

When other party knew or should have known of a mistake

Question 13

List the elements for misrepresentation or fraud

Answer 13

1. Misrepresentation of statement of fact
2. Intent to deceive
3. Reliance on the misrepresentation

Question 14

What is the effect of illegal subject matter on a contract?

Answer 14

It makes the contract void