Defenses to Formation Flashcards
On May 25, Fresno sold Bronson, a minor, a used computer. On June 1, Bronson reached the age of majority. On June 10, Fresno wanted to rescind the sale. Fresno offered to return Bronson’s money and demanded that Bronson return the computer. Bronson refused, claiming that a binding contract existed. Bronson’s refusal is:
A. Not justified because Fresno is not bound by the contract unless Bronson specifically ratifies the contract after reaching the age of majority.
B. Not justified, because Fresno does not have to perform under the contract if Bronson has a right to disaffirm the contract.
C. Justified, because Bronson and Fresno are bound by the contract as of the date Bronson reached the age of majority.
D. Justified, because Fresno must perform under the contract regardless of Bronson’s minority.
D. Justified, because Fresno must perform under the contract regardless of Bronson’s minority.
Fresno, as an adult, is bound to a valid contract and must perform even though Bronson as a minor had the right to disaffirm the contract.
Wrong answer selected
C. Justified, because Bronson and Fresno are bound by the contract as of the date Bronson reached the age of majority.
Bronson has for a reasonable period of time after reaching majority the right to disaffirm the contract. Thus, the answer is incorrect because Bronson was not bound as of the date Bronson reached the age of majority.
Maco, Inc. and Kent contracted for Kent to provide Maco certain consulting services at an hourly rate of $20. Kent’s normal hourly rate was $90 per hour, the fair market value of the services. Kent agreed to the $20 because Kent was having serious financial problems. At the time the agreement was negotiated, Maco was aware of Kent’s financial condition and refused to pay more than $20 per hour for Kent’s services. Kent has now sued to rescind the contract with Maco, claiming duress by Maco during the negotiations. Under the circumstances, Kent will
A. Win, because Maco refused to pay the fair market value of Kent’s services.
B. Win, because Maco was aware of Kent’s serious financial problems.
C. Lose, because Maco’s actions did not constitute duress.
D. Lose, because Maco cannot prove that Kent, at the time, had no other offers to provide consulting services.
C. Lose, because Maco’s actions did not constitute duress.
This answer is correct because for duress to be proved Kent would have to show that Maco’s actions were threats that overcame Kent’s free will forcing Kent into a contract at the $20 rate. Kent needed money and willingly agreed to the $20 rate. Although Maco benefited from the contract rate, it did not force Kent to enter into the $20 rate contract.
Wrong answer that I selected
B. Win, because Maco was aware of Kent’s serious financial problems.
This answer is incorrect because the mere fact that Maco was aware of Kent’s serious financial problems is immaterial in the absence of economic duress. Economic duress would require Maco’s overcoming Kent’s free will resulting in a contract. Here Kent willingly agreed to the $20 rate, and thus there is no duress.
On reaching majority, a minor may ratify a contract in any of the following ways except by
A. Failing to disaffirm within a reasonable time after reaching majority.
B. Orally ratifying the entire contract.
C. Acting in a manner that amounts to ratification.
D. Affirming, in writing, some of the terms of the contract.
D. Affirming, in writing, some of the terms of the contract.
A minor, upon turning 18, may expressly ratify a contract by specifically promising to be bound by the entire contract. This new promise may be written or oral – it is binding either way. However, it is not a ratification if only some of the contract’s terms are affirmed. It is an all-or-nothing process, and the new adult must affirm all terms of the contract to ratify it.
Wrong answer that I selected is
A. Failing to disaffirm within a reasonable time after reaching majority.
This is the “negative” way to ratify a contract. It requires no action, but rather a lack of action.
If a minor turns 18, and then does not disaffirm a contract for a “reasonable” length of time, the contract is impliedly ratified.
All of the following are effective methods of ratifying a contract entered into by a minor except
A. Expressly ratifying the contract after reaching the age of majority.
B. Failing to disaffirm the contract within a reasonable time after reaching the age of majority.
C. Ratifying the contract before reaching the age of majority.
D. Impliedly ratifying the contract after reaching the age of majority.
C. Ratifying the contract before reaching the age of majority.
If someone enters into an agreement before reaching the age of majority, the contract is voidable. After reaching the age of majority, however, the person may ratify, or agree to be bound by, the contract either expressly or impliedly. This makes the contract fully valid and enforceable. Ratification cannot take place while the individual is still a minor.
Wrong answer that I selected was
B. Failing to disaffirm the contract within a reasonable time after reaching the age of majority.
If someone enters into an agreement before the age of majority, the contract is usually voidable. After reaching the age of majority, however, the person may ratify, or agree to be bound by, the contract either expressly or impliedly. This makes the contract fully valid and enforceable. Ratification may not take place until after the minor reaches the age of majority. A contract is impliedly ratified when a minor reaches the age of majority and does not then disaffirm the contract within a reasonable time.
What type of conduct generally will make a contract voidable?
A. Fraud in the execution.
B. Fraud in the inducement.
C. Physical coercion.
D. Contracting with a person under guardianship.
B. Fraud in the inducement.
This creates a voidable contract. If someone misrepresents information about the contract subject matter, you are free to go ahead with the contract or rescind it—it is voidable.
Wrong Answer that I selected
C. Physical coercion.
This type of conduct creates contracts that are void.
Which of the following types of conduct renders a contract void?
A. Mutual mistake as to facts forming the basis of the contract.
A mutual mistake does not make the contract void (the contract is not illegal). A mutual mistake simply means the parties can rescind the agreement—they have a defense.
B. Undue influence by a dominant party in a confidential relationship.
C. Duress through physical compulsion.
D. Duress through improper threats.
C. Duress through physical compulsion.
Physical threats do render a contract void.
Wrong answer that I selected was
A. Mutual mistake as to facts forming the basis of the contract.
A mutual mistake does not make the contract void (the contract is not illegal). A mutual mistake simply means the parties can rescind the agreement—they have a defense.
