Defenses to K formation Flashcards
General Rule for incapacity:
An incapacitated D has the RIGHT to disaffirm a K. Includes minors, intoxicated, and mentally incompetent individuals.
Minors:
Persons under 18 can disaffirms Ks any time before (or shortly after) reaching age of majority. K must be disaffirmed in whole. Upon reaching the age of majority, a minor may affirm the K either (1) expressly or (2) by failing to disaffirm it w/in reasonable time. Exceptions: (1) Necessaries (minor liable in restitution in most states), and (2) Reaching age of majority (minor can affirm)
Mental incapacity:
One whose mental capacity is so deficient that he is incapable of understanding the nature/significance of the K may disaffirm when lucid or by a later appointed legal rep. He may also affirm while lucid.
Exception: May be liable for necessaries in quasi-K
Intoxicated individuals
An intoxicated individual may void a K if (1) he’s so intoxicated he didn’t understand the nature/significance of his promise, and (2) the other party had reason to know of the intoxication. Intoxicated person can affirm upon recover. May be liable in quasi-K for necessaries.
Ambiguity/misunderstanding
Where BOTH parties or neither party is aware of the ambiguity = no K. If one party is aware of the ambiguity = K.
Mutual mistake
If both parties are mistaken about an existing fact to the K, K may be voidable by the adversely affected if (1) mistake has a material effect the agreed-upon SM, and (2) the party seeking avoidance did not assume the risk of the mistake.
Unilateral mistake
If one party is mistaken about facts relating to the K, it’s generally not voidable unless the non-mistaken party knew or had reason to know of the mistake. Mistake must materially effect the SM.
Fraud and misrepresentation
Fraudulent misrep: If a party fraudulently induces another to enter a K, the K is voidable by the innocent party if she justifiably relied on the misrep. This include concealment and nondisclosure. The misrep generally must be material.
Illegality (+ illegal purpose, pari delictor, failure to get a license)
If the consideration or SM of the K is illegal, the K is void.
If the purpose of the K is illegal, K is voidable by a party who (1) was unaware of the purpose or (2) was aware but did not facilitate the purpose and the purpose does not involve serious moral turpitude.
Parties not in pari delictor: a party not as culpable as the other may recover.
If illegality is failure to get a license: if license is for protecting the public, the K is unenforceable. If license is for revenue-raising purposes, K is enforceable.
Duress and undue influence (physical, improper threat, economic duress)
Ks induced by duress or undue influence are voidable and may be rescinded if not affirmed.
If physical: K is void
Improper threat: K is voidable by victim if he didn’t have any reasonable alternative.
Economic: Generally, taking advantage of one’s economic needs is not duress; but withholding something someone wants/needs is duress if (1) the party threatens to commit a wrongful act that would seriously threaten the other contracting party’s property/finances, and (2) there are no adequate means available to prevent the threatened loss.
Undue influence: requires (1) undue susceptibility to pressure by one party, and (2) excessive pressure by the other.
Unconscionability
Enables a court to refuse to enforce all or part of a K. 2 basic tests: (1) Unfair surprise, and (2) oppressive terms tested at the time the K was formed (e.g. Ks of adhesion, take it or leave it).
Statute of Frauds: General Rule
Oral Ks are generally valid. However, certain Ks, by statute, must be evidenced in writing, signed by the party to be bound (MYLEGS).
Writing requirement: CL
Writing must (1) be signed by the party to bound, (2) indicate that a K has been made between the parties, and (3) state with reasonable certainty the essential terms. Writing and signature are liberally construed.
Marriage: promises in consideration of marriage
Ks in consideration of marriage are subject to the SOF (not promises TO marry), e.g. If you marry my son, I’ll buy you a house.
Year-long Ks
Ks that cannot possibly be completed in 1 year are subject to the SOF. The date runs from the date of the K, not from the date of performance.
Notes: Full performance will remove K from SOF. Lifetime Ks need not be in writing bc the person could die tomorrow.