Formation: Defenses to Enforcement

Question 1

Illegality: When is K Unenforceable?

Answer 1

If consideration/performance under K is illegal.

Question 2

Illegality: When is K Void?

Answer 2

If it contemplates illegal conduct.

Question 3

Illegality: When is the Duty to Perform Discharged?

Answer 3

If K becomes illegal after formation.

Question 4

True or False: A party does not need to be justifiably ignorant of facts making the K illegal or lack illegal purpose in order to recover.

Answer 4

False.

Question 5

Five Exceptions to Illegality

Answer 5

1. Ignorance of Illegality
2. Lack of Illegal Purpose
3. Divisible Ks
4. Licensing Violation
5. Restitution

Question 6

Definition: Ignorance of Illegality

Answer 6

A party may recover if the party is justifiably ignorant of the facts making K illegal and the other party had knowledge of the illegality.

Question 7

Lack of Illegal Purpose: A party who has substantially performed may recover if… (2)

Answer 7

1. K does not involve illegal consideration/performance–the party is unaware of the other party’s illegal purpose.
2. The party knows of the other party’s illegal use–unless the party furthered the illegal use or the use involves grave social harm.

Question 8

Definition: Divisible Ks

Answer 8

If K can easily be divided into legal and illegal parts, a party may recover on the legal part(s).

Question 9

Definition: Licensing Violation

Answer 9

Depends on the purpose of the licensing requirement.

Question 10

Licensing Violation: Regulatory Purpose

Answer 10

The party who fails to comply cannot enforce the K.

Question 11

Licensing Violation: Raise Revenue

Answer 11

The party who fails to comply can enforce the K.

Question 12

Two Types of Restitution

Answer 12

1. Not “in pari delicto”

2. Withdrawal

Question 13

Restitution: Not “in pari delicto”

Answer 13

When parties are not equally at fault, the less guilty party may recover under restitution.

Question 14

Restitution: Withdrawal

Answer 14

A party who withdraws from an illegal K before the improper purpose has been achieved may recover under restitution when the party has not engaged in serious misconduct.

Question 15

Definition: Unconscionability

Answer 15

K is unconscionable when it is so unfair to one party that no reasonable person in the position of the parties would agree to it (e.g., hidden, complex boilerplate language, adhesion Ks).

Question 16

Definition: Public Policy

Answer 16

K may be unenforceable if it violates significant public policy.