Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Contracts & Sales > Formation of Contracts - Defenses to Contract Formation > Flashcards

Formation of Contracts - Defenses to Contract Formation Flashcards

1
Q

What are the Defenses to Formation?

A
  1. Mistake
  2. Misunderstanding
  3. Misrepresentation
  4. Undue Influence
  5. Duress
  6. Capacity to K
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

When is there a defense to formation?

A

A person who is said to be in breach of K can defend the action by showing:

  • There was no meeting of the minds
  • Due to mistake or misunderstanding, misrep. or fraud, undue influence or duress, or party’s own lack of capacity
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is a Mistake

A

A belief that is not in accord with the facts as to a basic assumption on which the contract was made that materially affects performance

  • Mistake must be w/ regard to a belief about an existing fact
    • NOT something that will happen in the future
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is a Unilateral Mistake ?

A

One party is mistaken as to essential element of the K

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

When is there a Mutual Mistake ?

A
  • Both parties are mistaken as to an essential element of the K
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

When does a party bear the risk of mistake?

A

Conscious Ignorance - When she is aware at the time of the K that she has only limited knowledge of the facts to which the mistake relates

  • AND accepts her limited knowledge as sufficient
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Define Reformation for Mutual Mistake ?

A

When writing fails to express the agreement b/c of mistake of both parties, the writing can be reformed to express the agreement.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Misunderstanding

A

Both parties believe they are agreeing to the same material terms, bu they in fact agree to different terms

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Misunderstanding - Neither party knows or should know of the misunderstanding

A

If a material term is involved, there is a misunderstanding

  • Effect - No contract
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Misrepresentation - One party knows or should know of the misunderstanding

A

K formed based on the meaning of the material term as understood by the unknowing party

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Misrepresentation - Both parties know terms ambiguous at the time of K formation

A

No contract

  • unless both parties intended the same meaning
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Waiver of Misrepresentation

A

If there is misunderstanding 1 party can waive the misunderstanding & choose to enforce the K according to the other party’s understanding

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Misrepresentation

A

An untrue assertion of fact that can make a contract void or voidable

  • NOT law or opinion
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What proof does Fraudulent Misrepresentation require?

A

Requires proof of:

  1. The misrepresentation is fraudulent
    • A false assertion of fact made knowingly, or recklessly w/out knowledge of its truth, AND
    • With intent to mislead the other party
  2. The misrepresentation induced assent to the K, AND
  3. The adversely affected party justifiably relied on the misrep.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Misrepresentation - Nondisclosure

A

Affirmative conduct to conceal a fact is = to an assertion that the fact doesn’t exist, if party not disclosing knows:

  1. Disclosure
    1. is nec. to prevent a prev. assertion from being fraudulent or a misrepresentation
    2. would correct a mistake of the other party as to a basic assumption, and failure to disclose would be a lack of good faith & fair dealing
    3. would correct mistake of other party as to the contents or effect of writing evidencing their agreement, OR
    4. Other party is entitled to know the fact b/c of a confidential or fid. rel.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Define Fraud in the Factum

A

Means fraud in the execution

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What is Fraud in the Inducement & what is its effect?

A

Occurs when a fraudulent misrep.is used to induce the another to enter into a K

  • Effect:
    • K is voidable by the adversely affected party if she justifiably relied on the misrep. in entering the agreement
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Nonfraudulent Misrepresentation

A

can be innocent or negligent - can still make the K voidable by the adversely affected party if:

  1. The misrep. is material
  2. The misrep induced assent to the K, and
  3. The adversely affected party justifiably relied on the misrep.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Cure of Misrepresentation

A

K is not voidable if facts cured b/f the deceived party has avoided the K

20
Q

What may the adversely affected party do if the other party misrepresented the content or legal effect of a writing?

A
  1. Avoid the contract OR
  2. elect to reform it to express what had been represented
21
Q

Undue Influence

A

The unfair persuasion of a party ot assent to a K, can occur by:

  • Relationship b/w the parties due to lack of expertise or experience or diminished mental capacity
  • AND the unfair persuassion of one party seriously impairs the free & competent judgment of the other party
22
Q

Undue Influence - Confidential Relationship - Fairness & Disclosure

A
  • Burden of proving the K is fair is on the dominant party
  • Dom. party may also be held to a higher std. of disclosure than she would be in K b/w arms-length parties
23
Q

Undue Influence - Third Party Undue Influence

A

If undue influence is caused by party who’s not a party of K

  • Vic can void K
    • Unless, nonvictim party gave value or materially relied on the K while acting in GF & w/out knowledge of the undue influence
24
Q

Undue Influence Damages

A

Restitution Damages

25
Q

What is Duress ?

A

An improper threat that deprives a party meaningful choice

26
Q

Duress - Improper Threat

A
  1. Threats of criminal Prosecution, OR
    • Doesn’t matter that the pers. making the threat honestly believes the pers. is guilty
    • Doesn’t matter that the pers. threatened is in fact guilty of the crime
  2. Threats of civil action made in bad faith OR
    • Must be pursued in bad faith to be improper
  3. Threats to breach K if it would violate the duty of good faith & fair dealing
27
Q

Duress - Deprivation of Meaningful Choice

A

When pers. has no reas. alternative such that the threat induces his assent

  • Subjective test - did the threat induce the person’s assent ?
28
Q

What is the effect of Duress on a contract?

A

If agreement to enter into K is:

  1. Physically Compelled by Duress - K is Void
  2. Other Instances of Duress - K is Voidable
29
Q

What are the damages available for Duress?

A

Restitution Damages

30
Q

Capacity to Contract

A

Parties to K must be competent at the time of contracting, incompetency arises because of:

  1. Infancy,
  2. Mental Illness or defect
  3. Guardianship
  4. Intoxication
  5. Corporate Incapacity
31
Q

Capacity - Infancy

A

Under 18 - no capacity to K

  • If k is made by an infant, it’s voidable by them but not by the other party
    • Can disaffirm (void) K & avoid liability OR
    • Choose to hold the adult party to the K
32
Q

Disaffirmance by Infant

A

Disaffirmance must occur b/f the infant reaches the age of majority OR w/in reasonable time afterwards

  • If not w/in reas. time, infant will be held to have ratified the K as an adult & restore any benefits received under the K
33
Q

What happens if a minor avoids a Contract? What if there is damage to property that was part of the contract ?

A
  • Minor must retrun the goods if they are in poss. when he disaffirms the K
  • Not liable for damage, wear & tear, or any depreciation in value
34
Q

What is the exception to the Infancy Rule?

A

When the K is based on necessities

  • Infant must pay for them
    • Includes food, shelter, clothing, medical care
  • BUT only the reas. value of the services or goods
    • Not the agreed upon price
    • Recovery is under a theory of quasi-contract
35
Q

Capacity - Mental Illness

A
  • If pers. is adjudicated mentally incompetent - K is void
  • If no adjudication - K is voidable and may be disaffirmed if the indiv. is unable to:
    1. Understand the nature & conseq. of the trans. OR
    2. Act in reasonable manner with regard to the transaction AND the other party has reason to know of this fact
36
Q

Capacity - Mental Illness - Lucid Period

A

If K is made during a lucid pd. - Fully Enforceable

  • Unless, adjudicated incompetent
37
Q

Capacity - Guardianship

A

If a pers. prop. is under guardianship by reason of adjudication - pers. has no capacity to K so the K is void

38
Q

Capacity - Intoxication

A

K is voidable by an intoxicated person if she was unable to understand the nature or consequences of the K AND the other party knew of the intoxication

39
Q
A
40
Q

What is the effect of a Unilateral Mistake?

A

either party can enforce K on its terms

  • BUT Mistaken party can void the K if he didn’t bear the risk of mistake & either:
    1. Mistake would make enforcement of K unconscionable or
    2. Non-mistaken party:
      • caused the mistake,
      • had duty to disclose, or
      • failed to disclose the mistake or
      • Knew or should have known the other party was mistaken
41
Q

When can recission occur due to Unilateral Mistake ?

A

There must be absence of serious prejudice to the other party to rescind the K

42
Q

What is the effect of a Mutual Mistake ?

A

K may be voidable by the adversely affected party if:

  1. Mistake of fact existing at the time the K was formed
  2. The mistake relates to a basic assumption of the K
  3. The mistake has a material impact on the trans. AND
  4. The adversely affected party did not assume the risk of the mistake
43
Q

When can a contract with Mutual Mistake not be avoided?

A

Neither party can avoid K if reformation is available to cure the mistake

44
Q

When is reformation available when there is a Mutual Mistake?

A

Reformation is available if:

  1. There was a prior agreement (written or oral) b/w the parties
  2. There was an agreement by the parties to put the prior agreement into writing, AND
  3. As a result of a mistake, there is a dffierence b/w the prior agreement and the writing
45
Q

When does Fraud in the Factum occur?

A

occurs when the fraudulent misrep. prevents a party from knowing the char. or essential terms of the trans.

46
Q

What is the effect of Fraud in the Factum ?

A

Effect

  • No contract is formed &
  • the apparent K is void unless reas. diligence would have revealed the K’s true terms

Contracts & Sales (18 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions