Formation - Defenses to Formation

Question 1

Defenses to formations - definitions

Answer 1

No “meeting of the minds” due to

1. Mistake
2. Misunderstanding
3. Misrepresentation
4. Fraud
5. Undue influence
6. Duress
7. Lack of capacity

Question 2

Mutual mistake - definition

Answer 2

Both parties mistaken as to essential element

Question 3

Are K based on mutual mistake void or voidable?

Answer 3

Generally voidable by party ADVERSELY affected if certain conditions are met UNLESS reformation available to cure mistake

Question 4

Contracts based on mutual mistake are voidable IF:

Answer 4

1. Mistake existed when K was formed
2. Mistake relates to basic assumption of K
3. Mistake has material impact that n transaction AND
4. Adversely affected party did not assume the risk of mistake

Question 5

Unilateral mistake definition

Answer 5

One part is mistaken as to essential elements of K, BUT either party can enforce K on its terms

Question 6

Is a K based unilateral mistake void or voidable?

Answer 6

Mistaken party CAN void K IF

1. they didn’t bear risk or mistake AND
   a. Mistake would make enforcement officials K unconscionable OR
   b. Non-mistaken party caused the mistake, had duty to disclose or failed to disclose mistake, or knew or should have know the other petty was mistaken

Question 7

Requirement to rescind a K based on unilateral mistake?

Answer 7

Has to be an absence or serious prejudice to the other party

Question 8

What is reformation?

Answer 8

Court can reform writing EXCEPT to extent that rights of third parties who relied on K would be unfairly affected

Question 9

Reformation is a remedy for K based on unilateral mistake, T/F?

Answer 9

F, remedy for K based on mutual mistake

Question 10

Misunderstanding - definition

Answer 10

both parties believe they are agreeing to same meterial terms, BUT they in fact agree to different terms

Question 11

K?

Neither party knows or has reason to know

Answer 11

No K, IF material terms involved

Question 12

K?

One party knows or has reason to know

Answer 12

K formed based upon the meaning of material terms as understood by UNKNOWING party

Question 13

K?

Both parties know terms ambiguous at the time of K formation

Answer 13

No K, UNLESS both parties intended the same meaning

Question 14

How does waiver work with misunderstanding?

Answer 14

One party can choose to enforce K according to OTHER party’s understanding

Question 15

Evaluate misunderstanding based on a subjective or objective standard?

Answer 15

Subjective

Misunderstanding is determined by each party’s knowledge or reason to know

Question 16

Misrepresentation - definition

Answer 16

an untrue assertion of fact

Question 17

What does fraudulent misrepresentation require?

Answer 17

Requires:

1. knowing or reckless false assertion of fact
2. with intent to mislead
3. misrepresentation induced asset to K AND
4. justifiable reliance on the misrepresentation by the adversely affected party

Question 18

What is nondisclosure?

Answer 18

conduct to conceal a fact OR nondisclusoure of a known fact

tantamout ot an assertion tha t th efact does not exist

Question 19

Fraud in the factum

Answer 19

Execution

FM prevents party from knowing charcter of the transaction

Question 20

Fraud in the Inducement

Answer 20

FM is used to induce another to enter in a K

Question 21

Effect of fraud in the indcuement

Answer 21

K is voidable by adversely affected party IF she justifiably relied on the misrepresentation

Question 22

Effect of fraud in the factum

Answer 22

No K is formed

Apparent K is VOID, unless reasonable diligence would have revealed K’s true terms