Formation Defenses Flashcards

1
Q

Misrepresentation/Fraud

A

Person must prove a 1) statement of fact that 2) was untrue 3) D knew it was untrue 4) and the untrue statement was the reason he entered the contract and 5) he lost money as a result.

a. silence is not fraud, no duty to disclose information
b. Puffery is not fraud, sales pitch is not a statement of fact

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2
Q

Mutual Mistake

A

If at the time of formation, both sides are making the same material adverse mistake, the contract is void.
Exceptions: Assumption of Risk, Mistake in Judgement/Value, Unilateral Mistake

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3
Q

Assumption of Risk

A

No defense if one party assumed risk of mistake

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4
Q

Mistake in Judgment/Value

A

No defense if mistake concerns prediction or judgment (usually misjudgment about value - parties assume risk of determining value, unless both relied on 3rd party advice)

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5
Q

Unilateral Mistake

A

Generally not a defense, unless the non-mistaken party knew or should have known of the mistake prior to acceptance the contract is void

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6
Q

Transmission MIstake

A

Mistake is attributed to the party who hired the intermediary transmitter, unless mistake was obvious to one/both sides

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7
Q

Ambiguity

A

Both sides agree to the same term but attach a different meaning to that term
a. UCC: not defense for latent ambiguity - ability to look at other factors

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8
Q

Indefiniteness

A

Contract is missing key terms that cannot be implied by the court. Modernly courts are more willing to supply reasonable terms if parties clearly intended to make a contract.
Exceptions:
a. Contract that would otherwise be void due to indefiniteness is made valid if parties begin performance or have detrimental reliance
b. Real estate: Identification of land and price required
c. Employment Contract: Duration must be specified. If not specified, usual rule is that contract is terminable at will be either party.
d. Sale of Goods: Quantity must be certain or a seller’s output or a buyer’s requirement. (“all the widgets I require” vs. “all the widgets I want”)

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9
Q

Infancy

A

Persons under age 18 lack capacity to contract. Binding on adult but not infant. Entitled to recover economic loss.

Exception: If contract is for a necessity of life (food/shelter/medical/transport/etc) the D is entitled to “wholesale value” of what they provided.

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10
Q

Incapacity

A

High standard - person must not even know they are entering into a contract. (simply being slow is not enough)

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11
Q

Intoxication

A

High standard - facts showing a person is so intoxicated they did not know what they were doing (simply being drunk is not enough)

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12
Q

Illegality

A

If the consideration or subject matter is illegal, contract is void

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13
Q

Duress

A

Physical force or threat causing one person to enter a contract he would not otherwise do (more than taking economic advantage of another)

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14
Q

Economic Duress

A

When one party seriously threatens the other parties’ finances and there is no adequate alternative to avoid the threat

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