Defenses to K formation Flashcards
Mutual Mistake
- The mistake must concern a BASIC ASSUMPTION on which the K was made.
- Does it have MATERIAL EFFECT on the exchange?
- The effect of the mistake is such that enforcement of the contract would be unconscionable.
Damage: Rescing Contract
Unilateral Mistake
voidable IF
Where a mistake of one party at the time of a contract was made as to a basic assumption on which he made the contract has a material effect on the agreed exchange of performances that is adverse to him, the contract is voidable by him if he does not bear the risk of the mistake. (The effect of the mistake is such that enforcement of the contract would be unconscionable, The other party had reason to know of the mistake or his fault caused the mistake.)
When a party bears the Risk of a mistake for both Mutual and Unilateral Mistakes
A party may bear the risk of mistake when:
- The risk is allocated to him by agreement of the parties or
- He is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient,
- The risk is allocated to him by the court on the ground that it is reasonable in the circumstances to do so.
Misrepresentation Types
“Assertion not in accord with the facts” or concealment
- Affirmative or Concealment
- Passive
- Negligent Mispresentation
- Innocent Misrepresentation
Passive Non Disclosure
- Knows disclosure of fact is necessary to prevent assertion from being a misrepresentation or fraud.
- Disclosure of a fact needed to correct a mistake of other party’s basic assumption is making K. Fails to act in good faith with reasonable standard of fair dealings.
- Knows that disclosure of a facr would correct a mistake of the other party as to the contents or efffect of a writing embodying the K as a whole or in part.
- entitled to facts based on relationship of trust between the parties.
Negligent Misrepresentation
A misrepresentation of a past or existing fact without reasonable grounds for believing its true with the intent to induce another’s reliance in which the other party had reasonable reliance upon that fact and causes damages.
Undue Influence Test
- Discussion of the transaction at an unusual place or inappropriate time.
- Consummation of the transaction in an unusual place.
- Insistent demand that the business be finished at once.
- Extreme emphasis on untoward consequences of delay.
- Multiple persuaders on the dominant side against a single servient party.
- Absence of third-party advisers to the servient party.
- Statements that there is no time to consult financial advisors or attorneys.
Negligent Misrepresentation
A misrepresentation of a past or existing fact without reasonable grounds for believing its true with the intent to induce another’s reliance in which the other party had reasonable reliance upon that fact and causes damages.
Innocent Misrepresentation
Untrue assertion of fact.
It is material to the contract
Reasonable Reliance
Justifiable of Reliance (More material more justifiable)
Detriment
Fraud
The misrepresting party makes an assertion to induce a party to assent to a K. The asserting party must:
(1) Know or believe assertion does not accord with the facts.
(2) Does not have cofidence that they state or imply the truth
(3) Knows they do not have the basis that they state or implies for the assertion.
Duress
- By physical compulsion (Force)
- Improper threat (No reasonable alternative) Ex. Threatens crime, criminal persecution, breach of the duty of good faith and fair dealing.
Not voidable if the the improper threat is by a a 3rd party not subject to K formation and the asserting party has no knowledge of them.
Economic Duress
Modification of existing duties or just captilism test.
- 1 Party involuntarily accepts the terms of the other
- No alternative based on the circumstances
- The circumstances were the result of the other parties coerecion.
Contract is voidable
Unconscionability
Must be Procedual (unfair bargining practice) and Substantive (unfairness in bargining outcome)
Adhesion Contract
A standard form contract drafted by one party and signed by the weaker party (who had no power to negogiate or modify the terms of the contract, and must adhere to the contract
Unconscionale Contract or Clause UCC
At the time of making the contract, any clause or contract found to be unconscionable by a court may refuse to enforce partially or full contract AND the parties will be allowed to present reasonable opportunity to provide evidence to aid in the court making that determination.
Unconscionable Contract or Clause Restatement
If a contract is unscionable at the time the contract is made, the court may refuse to partially or fully enforce the remainder of the contract if it is uncsionable because absence of meaningful choice, terms substantially favorable to one party, no meaningful relationship between the parties.
Capacity definition
No one can be bound by a contract who has no legal capacity to incur at least voidable contractual duty. A person can manfest assention to a contract unless they are, under guardianship, infancy, mentally ill or defective, or intoxicated.
Infants
Unless statute provides otherwise, a natural person has the capacity to incur only voidable contractual duties until the beginning of the day before their 18th birthday unless the contractual duties arose from necessary things such as clothing, medicalm home, food. A minor may furthermore avoid contractual duties for a reasonable time after attaining age 18.
Intoxication
A person incurs only voidable contractual duties by entering into a transaction if the other party had reason to know that by reason of intoxication he is unable to understand in a reasonable manner the nature and consequence of the transaction OR he is unable to act in a reasonable manner in relation to the transacton.
Contract Terms against Public Policy
A promise or other term of an agreement is unenforceable on grounds of public policy if leglislation provides that it is uneforceable or the interest in its enforcement is clearly outweighed in the circumstances by a public policy against the enforcement of such terms.
