Legal Relation, Capacity, Legality, Void and Voidable Contract Flashcards
Intention to create legal relations: Contract specifications
In order to have contract, has to be legal intention on the part of both parties to be legally enforceable agreement
Intention to create legal relations: Plaintiff (offeror) and defendant roles (offeree) during trial
It is assumed by offeror or plaintiff, defendant or offeree must rebut its existence
Example with Mom and Son having dinner and legal considerations.
Mom invites son over for dinner and promises to make meal. Son accepts but now can’t come fore dinner. Mother sues the son as there was an offer, acceptance and consideration of her making the meal. Up to son to rebut presumption of intention to create legal consequences
Example with Mom and Son and loan agreement
Son borrows money from mom, in 20 years mom retires and needs money. Son can say it was a gift as around his birthday.
If you are borrower , keep situation informal
Capactity
ability of parties to bind themselves in contract
What is required when binding a contract of an individual and what do you assess?
mental competency, assess consequences of making a contract promise and enforceable rights and obligations created with it
What if there is no capacity in the contract?
Contract is void
Types if incapacity - No Capacity
no ability at all to assess contract, vegetative state
Types if incapacity - States of diminished (limited) Capacity x2
Minors
Lunatics and Drunkards
Types if incapacity - States of diminished (limited) Capacity - Minors
contract unenforceable/voidable against minor, minor can run away
Quantum Meriut Bases
Reasonable Price
How can minors be accepted into contract (2)
pay reasonable price for necessary purchases, not contract price. Beneficial contract services like work or with parent/guardian consent
Types if incapacity - States of diminished (limited) Capacity - Lunatics and Drunkards -> how is it voidable
Party of drunkard can prove the other party was aware of their condition when signing the contract. Can accept with sober or decline
When are Lunatics and drunkards are liable.
They buy for reasonable price, necessary goods. it is unnecessary goods that are voidable
Legality of contract
object of contract must be legal
Essence of legality of contract
Contract/activities cannot offend offend public policy or violate the law
What is the presumption of contact and what if it is wrong?
Presumption is that contract is legal with no violations. If wrong, it was never formed at all
Courts:; What if contract is VOID?
court assists parties to prior conditions
Courts: What if contract VOID and illegal?
court refuses any assistant to parties with recovery of peroperty
Restraint of Trade - Free Open Market and courts preference
Optimal situation of economy so courts don’t like to enforce as diminishes competition
Restraint of Trade - Non Competition Clause and examples of competition behaviour
Does not allow employee who leaves a company to create a business that can be direct competitor
Ex: contact previous employees, clients, release private info
Impugning a contract
assault, impeach, attack its integrity
Plaintiff and defendant roles with Impugning a contract
Plaintiff does nothing, it is defendant who want to impugn the contact as they need to avoid something
If contract is valid then ______ is successful
Defendant is successful if they can prove contract is either (3)
Plaintiff
void, voidable or unenforceable
Void contract definition
never in law formed at all i.e no contract formed or established
Void contract consequence with two parties and title or ownership
Title or ownership doesn’t pass under void contract. Party of void contract (A) can apply to court for return of property transferred under agreement to rogue thief (B).
Void contract consequence with three parties and title or ownership
Title or ownership doesn’t pass under void contract and original holder could recover from innocent third party (C) if got transferred from B
What is the innocent 3 party?
1. acronym
2. Name
ISTP4V
Innocent Subsequent Third Party for Value
What was flawed about Void Contracts with A and ISTP4V
A always gets it back, C can sue B but would rather have the good so A and C competing over only thing that has value
What did the equity courts create in regards to this Voidable contract dilemma with Party A, Party B (Rogue thief) and Party C (ISTP4V)
Voidable Contract
What happens to the property under courts of Equity and voidable contract? Party C and Clause of Party A
Party C the ISTP4V would end up with property. A can get property by rescinding the contract to make it void before it reaches C (ISTP4V)
How to get contract rescinded and made voidable?
informally by communicating that contract is rescinded and sending notice to court. As soon as it is received, it is void.
What is the distinction between void and voidable contracts
When an innocent subsequent third party for value is involved (ISRP4V)
Void Agreements ABC
no title passes and consequently ISTP4V cannot obtain a good title from a person that obtained the goods under void contract
Voidable Contracts ABC
enforced until declared void through rescission. Title can pass through parties. Recipient can transfer to ISTP4V who then obtains the title/ownership even if intermediary acquired by rendering it voidable.
A can prevent property title from transferring if they rescind it BEFORE ISTP4V obtains it
How can contract be void? (4)
Missing element or uncertain
Non est factum (not my mark)
Mistakes
Error in reading contract/transcript
void contract - Missing element or uncertain
offer is too vague in description
void contract - non est factum “not my doing or mark”
individuals fooled into enter written contracts when not literate or misled to nature of document
void contract - mistakes (2)
error in identity or subject
void contract - mistake of identity
thinking you sold to someone else (identity fraud)
void contract - mistake of subject matter
You sell something but the party buying thinks what you are selling is different
void contract: 3 elements meeting rectification by courts
- complete agreement between parties and free from ambiguity, and not conditional
- Parties had no further negotiations to amend contract
- Change in written document appears to be error in recording and easily explained
How can contract be voidable? (4)
Misrepresentation
Undue Influence
Duress
Diminished Capacity
Voidable - Misrepresentation manifested contained in the contract
also what do purchaser and vendor prefer with the terms
Party misrepresents what contract says. Ex buy a car it has 100,000 miles but u find out it has 200,000 miles
Purchaser = any terms recited
Vendor= minimal contract with few terms
Voidable - Misrepresentation manifested outside the contract
Misstatement that influence decision of party in favour entering contract
Example: Negotiations
remedies available depend on types of misrepresentation and description (3)
Innocent misrepresentation: party believed information was true it is rescinded
Negligent: rescission rewarded with damages
Fraudulent misrepresentation: party deliberately attempts to deceive the other party - damages for deceit and rescission
Misrepresentation vs statements
false assertion relating to statements of facts and afford remedy
VS
opinionated statement, no remedy
Caveat Emptor
1. Also called
2. How does it work for Buyer
3. How does it work for Purchaser
- (buyer take care)
- buyer of goods must take them with their defects unless some fact about their quality has been misrepresented
- Purchaser investigate and find out more abut product
Contracts of utmost good faith (uberimma fides)
1. What is it?
2. What is it the reverse of ?
3. 2 Examples
- duty for one to give full details about a purchase
- reverse of caveat emptor
- Insurance and Securities contract
Doctrine of merger and how do we correct it?
warrants cease to exist after closing so we must create a clause to correct this
Voidable contract - Undue Influence
domination of one part over the mind of others to deprive the latter of making independent decision. Contract formed by undue influence is voidable at option of victim
Voidable contract - Undue Influence
2 elements
- prove there is a special relationship between victim and dominator
- circumstances were such that domination was possible
Proving undue influence not responsible of dominant party in order to salvage contract the court looks at (3)
- degree of domination plausible
- extent of benefit
- is there independent legal advice
Voidable Contract - Duress and examples
illegitimate pressure: threatening physical force or exertion of physical force, economic duress
