Defenses to Formation / Enforceability Flashcards
incapacity
must have capacity to enter into a K
- K is voidable by the person who lacked capacity
lack of capacity: either
1. lack of mental capacity
2. minor
lack of mental capacity
person CANNOT understand the k’s meaning & effect
- Intoxication: may be deemed a lack of capacity ONLY if other person has reason to know of intoxication
minors
persons under 18 years old
- Exception 1: necessities - minors are bound on Ks for necessities (food, shelter, clothing, medical care)
- Exception 2: implied affirmation - contract can be enforced if minor:
1. lacked capacity @ time of K,
2. gains capacity later, AND
3. retains benefit of K w/out complaint
duress
is a wrongful act or threat that overcomes the free will of a person
- Physical Compulsion: K is VOID - occurs if a person phsyically compels another person to agree to a K (eg, by gun-point)
non-physical / economic duress
K is VOIDABLE by V. Occurs when:
1. an improper threat is made,
2. that induces a party,
3. who has NO reasonable alternative,
4. to enter into a K
NOTE: a mere threat to breach a K (without more) is generally NOT sufficient
undue influence
K is VOIDABLE by V. Requires:
1. unfair persuasion of a person (eg, overbearing pressure), AND
2. who is either:
- under the domination of the person exercising influence, OR
- in a sufficiently close relationship to justify believing that the other person will act in their interest or welfare (eg, family, fiduciary relationship)
mistake
2 types:
1. mutual mistake
2. unilateral mistake
mutual mistake
K is VOIDABLE if:
1. both parties are mistaken,
2. as to a basic assumption of fact,
3. the mistake is material, AND
4. the person asserting the mistake did NOT bear the risk of the mistake
NOTE: a mistake as to price/value is NOT considered material
unilateral mistake
generally NOT a valid defense. occurs when:
1. a mistake by one party,
2. that is unknown to the other party,
3. concerning a basic assumption,
4. has a material effect
BUT: a K is VOIDABLE by mistaken party if:
1. one party knew or had reason to believe of the other’s mistake, OR
2. the mistake makes the K unconscionable
Eg, construction bid
misunderstanding (ambiguity as to K term)
a K is NOT formed when:
1. a K term is material & ambiguous,
2. the parties have different subjective meanings of a K term, AND
3. neither party is aware of the ambiguity
- If one party is aware of meaning understood by other party –> K is formed according to the understanding of the unaware party
- if parties have same incorrect subjective meaning –> a K is formed according to that meaning
no meeting of the minds
fraudulent misrepresentation
K is VOIDABLE by injured party. Occurs when:
1. D knowingly,
2. made a false representation,
3. of material fact, AND
4. the other party reasonably relies on the misrepresentation to their detriment
non-fraudelent misrepresentation
K is VOIDABLE by injured party. Occurs when:
1. a party/agent,
2. makes a mistake of material fact,
3. that is false (no wrongdoing required)
4. inducing a K, AND
5. the other party reasonably relied on the misrepresentation to their detriment
non-disclosure
there is no duty to disclose UNLESS:
1. active concealment occurs,
2. a fiduciary relationship exists,
3. it’s necessary to correct an earlier mistake, OR
4. failure to correct a past statement from being misleading
NOTE: failure to disclose when required is deemed a misrepresentation
concealment
an affirmative act intended to keep another person from learning a fact
- concealment is deemed a misrepresentation
illegality
courts will NOT enforce illegal Ks
- Illegal subject matter: K is VOID
- Illegal purpose: K is VOIDABLE by the party who did NOT know of the illegal purpose
NOTE: performance is discharged if the K subsequently became illegal