Defenses to K Formation

Question 1

Consideration

Answer 1

A bargained-for exchange between the parties; and that which she bargained for must be a legal benefit to promisor or detriment to promisee

Question 2

Past or Moral Consideration

Answer 2

Promise given in exchange for something already done. is NOT bargained for

Exception: in emergency situations, if promisor requested promisee to act knowing that promisee would expect pay, a subsequent promise will be enforceable

Question 3

legal benefit and detriment

Answer 3

Legal detriment results if promisee does something he is not legally obligated to do or refrains from doing something he has a legal right to do

Legal benefit is forbearance or performance of an act that promisor was not legally entitled to demand or expect

Question 4

Promise as consideration

Answer 4

promise can be consideration for another promise in bilateral contracts

Question 5

Illusory promise

Answer 5

When only one party is bound to perform, the promise is illusory and will not enforced. Common examples are: requirements and output contracts (want/want to sell me vs. require/produce); conditional promises where promisor can back out; contracts where party has right to cancel at anytime

Question 6

Pre-existing legal duty

Answer 6

Common law: Generally INSUFFICIENT consideration. Doing what you are already legally obligated to do is not new consideration for a new promise to pay you more to do the same job.

Exceptions: (1) addition to or change in performance (even the slightest change); (2) unforeseen difficulty so severe as to excuse performance; (3) New third person promisor

UCC: no pre-existing legal duty rule. New consideration is NOT required to modify sale of goods contract so long as change is made iN GOOD FAITH.

Question 7

Part Payment for Release of Debt

Answer 7

If debt is due and undisputed, part payment is NOT consideration for release of the debt

However, any small change will constitute new consideration (payment earlier than required, payment in stock instead of cash) and acceptable consideration to discharge debt

Question 8

Promissory Estoppel

Answer 8

Consideration substitute. (1) promisor reasonably expects to induce action or forbearance; (2) such action or forbearance is in fact induced that is detrimental; and (3) enforcement is necessary to avoid injustice.

Question 9

Lack of Capacity

Answer 9

Following DEFENDANTS lack capacity and thus their promise may not be enforced: (1) under 18, (2) mental incapacity (incapable of understanding the nature and significance of the contract); or (3) intoxicated persons if other party had reason to know of the intoxication

NOTE: infant may affirm upon reaching 18 years old expressly or by conduct (failing to disaffirm within reasonable time)

Question 10

Statute of Frauds (what falls within scope)

Answer 10

(1) promises to answer for the debts of another
(2) Service contracts not capable of being performed within a year (basically a specific time period that is more than a year; specific time more than a year away)
(3) transfers of interest in real estate (exception of leases for YEAR or less)
(4) Sale of goods for $500 or MORE

Question 11

Surety SoF requiement

Answer 11

Very narrow and almost never right answer on MBE

“answer for” is a promise to pay for another’s debts ONLY IF that person does not pay herself. Look for a GUARANTEE.

Main purpose exception: if main purpose of obligation is to benefit the grantor, then not within SoF

Question 12

Statute of Frauds Requirements

Answer 12

A writing that: (1) reasonably identifies the subject matter of the K, (2) indicates that a K has been made between the parties, and (3) states with reasonably certainty the essential terms

Really could be any writing. Electronic record will suffice.

Question 13

Part Performance on Land Sale contract

Answer 13

Enforceable despite SoF defense

Requires two of three of (i) improvements to land; (ii) payment; and (iii) possession

Question 14

Performance in Service Contracts

Answer 14

(1) Full performance by either party satisfies SOF. Will get day in court.
(2) Part performance in service contract DOES NOT satisfy SoF. Quasi-K though

Question 15

Performance in Sales of Goods Contracts

Answer 15

(1) seller’s part performance – part performance of a K for the sale of goods satisfies statute of frauds, but only to the extent of the part performance. Undelivered goods still give rise to SoF Defense by seller.
(2) Specially manufactured goods – If K is for Sale of Goods that are specially manufactured, SoF is satisfied AS SOON AS THE SELLE RMAKES A SUBSTANTIAL BEGINNING

Question 16

MYLEGS

Answer 16

marriage, year (within one), land, executor (or administrator), goods (for $500 or more), surety

Question 17

Article 2 SoF

Answer 17

Common law requires material terms. Article 2 merely requires the QUANTITY and generally must be SIGNED BY D

Exception: delay in responding. K between MERCHANTS, if one party after oral agreement sends to the other a WRITTEN confirmation of the understanding that would bind sender, will also bind recipient if (1) he has reason to know of the confirmation’s contents; and (2) he does not object to it in writing within 10 days of receipt

Question 18

Judicial Admission

Answer 18

D asserting statute of frauds defense admits in a pleading or testimony that had entered into an agreement with the P, no Sof Defense is allowed

Question 19

Estoppel

Answer 19

Plaintiff’s reliance on D’s oral promise top ut the agreement in writing can estop the D from asserting a statute of Frauds defense

Question 20

SWAP

Answer 20

mnemonic for when SoF is satisfied even w/o a writing w/ regards to goods: Specially made goods, Written confirmation by a merchant, Admission in court, or Performance

Question 21

Contracting for Someone else

Answer 21

authorization must be in WRITING only if the K to be signed is within the SoF – authorization is in “Equal dignity” with the K

Question 22

Modification and SoF

Answer 22

If the deal with the alleged change would be within SoF, then alleged modification agreement MUST be in writing as well

If modification takes it out of SoF (shortening lease to one year), then modification does NOT need to be in writing

Question 23

Contract Provisions requiring Written modification

Answer 23

Common law: NOT EFFECTVE. ignore contract language if it requires modifications to be in writing

UCC: Effective, unless waived

Question 24

Illegality

Answer 24

Another defense to contract enforcement

Illegal subject matter will void a contract. HOWEVER, if subject matter is legal, agreement is enforceable if P did not know of D’s illegal PURPOSE!

Question 25

Duress and Undue Influence

Answer 25

Defense to contract formation. Physical duress or economic duress will suffice. Look for a bad guy who is threatening to breach existing contract (not deliver) and vulnerable guy that has no rasonable alternatives

Undue Influence: (1) special relationship between the parties, and (2) improper persuasion of the weaker by the stronger

Question 26

Misrepresentation

Answer 26

(1) statement of fact before the K,
(2) made by one of the contracting parties or her agent
(3) that is false, (honest belief in truth does not matter!)
(4) that is material and fraudulent, and (5) induces the contract

Will nullify the K

Question 27

Unconscionability

Answer 27

Procedural (unfairness in the bargaining process) or substantive (oppressive terms). Look for great difference in power between the parties. Not a great MBE answer.

Tested at the TIME the agreement was made

ALWAYS decided by a judge and tough to win on

If successful, court may (1) refuse to enforce the K, (2) enforce the K w/o unconscionable clause, or (3) limit the application of any clause to avoid unconscionable results

Question 28

Ambiguity

Answer 28

Defense exists to enforcement if: (1) parties use a MATERIAL term that is open to at least TWO reasonable interpretations; (2) each party attaches a DIFFERENT meaning to the term, and (3) neither party knows or has reason to know the term is open to at least two reasonable interpretations

If one party knows or has reason to know, K terms will be as understood by the other party that had no reason to know

Question 29

Mistake

Answer 29

Mutual Mistake: if (1) both parties are mistaken about a MATERIAL EXISTING FACT (not something that may happen); and (2) the person seeking relief DOES NOT BEAR THE RISK OF MISTAKE, K will be null.

Unilateral mistake: Relief only if other party had reason to know of the mistake (a “palpable mistake”). Look for clerical errors that make bids way lower than should be.