Module 11 Flashcards
How does the law treat fractions of a day?
Disregards them, so infancy ends at the very first moment of the day preceding the minor’s 18th birthday
What is an infant in the law?
Minors, anyone under 18
Almost all contracts entered into by an infant are what?
Voidable, not avoid
Who has the power of avoidance when it comes to infants?
Only the infants or their heirs, administrators, executors
Can an adult party to the transaction with a minor avoid the contract on the grounds of the other’s infancy
No, only the minor can avoid it
Once an infant has exercises power to avoid a contract, the transaction is treated like what?
Like it was void from the beginning
What does the common-law say happens when an infant disaffirmance a conveyance?
The infant can reclaim real property from a subsequent purchaser who purchased in good faith and without notice that it infant had preceded to vendor in the chain of title
What does UCC say about infant disaffirming a conveyance?
An infant’s power of disaffirmance has no effect on a subsequent bona fide purchaser to obtain tickets for value
Doesn’t infant have power to grant an irrevocable discharge?
No, if an insurance company paid an infant beneficiary of a life insurance policy, endorsed it to her father, the company had to pay her again when she reached majority
What are transactions an infant cannot avoid?
- if you contract to support a child out of wedlock
- liable for the necessities of life supply to their children
- liable for their bail bonds
- sometimes liable if they received benefits under a contract
- exceptions like insurance, banking, educational loans, military investments, etc.
What does the uniform transfer to minors act do?
Facilitates gifts to minors and permits a custodian of property given to the minor to sell the infants real/personal property and to reinvest the proceeds with great freedom without the possibility of disaffirmance
What is disaffirmance?
The power of avoidance by a minor. And infant can disaffirm anytime before ratification. Conveyances of real property cannot be made during infancy. No specific language or conduct is necessary. It can be oral, manifested for the first time babe leave infancy as a defense, or by commencing in action to set aside the transaction. The entire contract must be avoided, the event cannot enforce some portions and disaffirm others
Can an infant disaffirm a conveyance of real property?
No disaffirmance is can only happen after majority (although a minority of courts allow it)
What is ratification?
The effective surrender of the power of avoidance. This cannot take place prior to reaching majority. No consideration is required to create an effective ratification
What are the three ways ratification can happen?
- failure to make a timely disaffirmance
- Express ratification
- conduct manifesting intent to ratify
How is a ratification made by a minor that fails to make a timely disaffirmance?
An infant condition from contracts until a reasonable time after reaching majority, and if he doesn’t, that is a ratification
What Is the difference between an executory contract and an executed contract when it comes to minors?
- executory: not binding unless ratified by words or conduct after majority
- executive: automatically ratified and binding if not disaffirm within a reasonable time after majority
How does an express ratification work when it comes to minors?
Contract can be expressly ratified, and unless otherwise stated, that can be oral. Ratifications depend on intent so mere acknowledgment of the contract isn’t enough, nothing less than a promise will suffice to express the ratify the contract.
- sometimes a jury will find that a promise can be reasonably implied from the language/circumstances
How does conduct manifesting intent to ratify ratify contract and it comes to minors?
- can happen by failing to make a timely disaffirmance if inaction is considered conduct
- retention and enjoyment of the property pursuant to contract or more than a reasonable time after attaining majority
- receipt of performance from the other party after attaining majority
- part payment or other performance by the infant without more, is not usually a ratification
Does ignorance of the law or fact effect gratification for a minor!
Ratification is ineffective unless the infant knows the facts upon which liability depends
- majority: everyone is presumes to know the law and lack of knowledge of the law is immaterial
- minority: there is no ratification without full knowledge of the legal consequences
What are The obligations of an infant to make restitution upon disaffirmance if he is the defendant?
A. If the infant is the defendant: consider the risks foreseeable to the parties
- sellers on credit assume legal/practical risks of nonpayment, but if an infant buy something on credit, make some payments, then disaffirmance, the infant must return the thing if he wants to avoid payment
- if you no longer possesses the consideration, he is under no obligation to return it
- services can’t be returned, so there’s no obligation to do so
- exception: if the minor exchanged or sold property and still possesses that he got in exchange, he is liable for that portion of it
What are The obligations of an infant to make restitution upon disaffirmance if he is the p?
A seller for cash would not expect to give restoration without the goods being returned
Ie) infant buys a car for cash and destroys it, then disaffirmance and wants to recover the purchase price
- traditional view: the infant only needs to account for the part of the consideration still retained cup and can get full recovery of the money upon returning the wrecked car
- many courts: infants ‘recovery is offset by the value of the use of the car/amount of depreciation in the value, so the infant can only recover for the value of the wreck
Infants are liable for their torts, what are the three problems that arise?
- torts stemming from contracts
- false representations by the infant
- torts and agency relationships
How do torts stemming from Contacts affect infants?
You can’t sue an infant for tort if the tort is really a breach of contract
How do false rePresentations by an infant connects with torts?
Infants that willfully misrepresent their ages can still exercise their powers of avoidance
- although the infants fraud about age/material facts allows the other party to avoid the contract on grounds of fraud
How does respondeat superior your relate to principals with regard to minors?
Principals are liable for the torts committed by their agents within the scope of their employment
- infants can avoid their liabilities for the torts of their agents
How is an infant liable for necessities?
He is liable in quasi contract for necessities given him, but he can disaffirm an executory contract for them
- not liable for the contract price of necessities, but for the reasonable value of them
What are necessities?
Food, shelter, clothing, medical services, legal services, education
If an infant borrows money to buy necessities, what is he liable for?
The value of the necessities
What is undue influence?
Any improper a wrongful constraint, machination, or urgency of persuasion with the will of a person is overpowered, and he’s induced to do/forebear and accurate she wouldn’t do, or would do if left to act freely
** grounds for setting aside a transaction that a dominant party has imposed on the subservient one
What are the two broad classes of undue influence?
- Nonattorney cases
2. Attorney-client cases
What are the two subsections of nonattorney cases regarding undue influence?
A. One party uses a dominant psychological position in an unfair way to induce the subservient party to consent to an agreement they otherwise wouldn’t (no need for threats or deception)
B. One party uses a position of trust and confidence to unfairly persuade the other (unnatural transaction that results in the enrichment of one of the parties at the expense of the other)
**. Proof Can be made by circumstantial evidence
What is circumstantial evidence that could prove undue influence when someone uses a position of trust and confidence?
- susceptibility of the influence party
- evidence of opportunity to exercise undue influence
- existence of a confidential relationship (husband/wife)
- evidence of a disposition to exercise undue influence
- whether the influenced party had reasonable access to independent advice
- if the nature of the transaction was unnatural
- *** burden of proof on the party benefited to Show that the transaction wasn’t procured by undue influence and must be shown by clear and convincing evidence
How do attorney-client cases work with undue influence?
A lawyer can contract with the client about things not related to legal services, and the client can terminate this type of agreement without cause
- not advisable because of the fiduciary relationship
If an attorney-client and do influence transaction is called into question, the lawyer must show what?
- The transaction was fairly equitably conducted
- lawyer fully informed the client of the nature/consequences of it
- lawyer fully revealed his own interest in the matter
- lawyer made sure the client got independent advice or gave the client independent advice
What do some courts do when it comes to an undue influence case involving a lawyer?
Say that if the lawyer got the better end of the bargain it will be invalidated unless you can show the client was fully aware of the consequences and there is no exploitation
Undue influence be found when no confidential relationship exists?
Yes
What is the criteria the court came up with for distinguishing between legitimate persuasion and excessive pressure?
- discussion of the transaction at an unusual/inappropriate time
- consummation of the transaction in an unusual place
- insistent demand that the business be finished at once
- Extreme emphasis on untoward consequences of delay
- use of multiple persuaders against a single party
- absence of third-party advisors to the subservient party
- statements that there is no time to consult financial advisor/lawyers
- *** if many of these are present together, persuasion is excessive
What are remedies for undue influence??
Cancellation of the contract, avoidance of the transaction, restoration of the status quo, specific performance
Undue influence renders the transaction what?
Voidable, so ratification becomes an issue
Once a party that has the power to avoid the transaction knows the essential facts and is away from the other’s influence, they can do what?
Ratify the transaction. Power to disaffirm may be lost by an implicit ratification
What does misrepresentation do to a transaction?
Can render it voidable
If the misrepresentation is intentional, what can happen?
It can be addressed as a tort and punitive damages can be sought, but it must be shown that the deceiving party made the representation with the knowledge of its falsity, with intent to deceive, and that the misrepresentation be acted on in a certain way (a.k.a. scienter)
What happens if an unintentional misrepresentation is made?
Avoidance can only be found if it was material through an objective standard
The misrepresentation was intentional what can happen?
Avoidance is available even if the fact represented is immaterial according to a subjective standard
How Do you determine materiality when misrepresentation is involved?
If the misrepresentation would likely affect the conduct of a reasonable person, or if the liar knows that the recipient will regard the information as important, even though reasonable person wouldn’t
How do you cover for deception and reliance ?
Deceived party must show that they were in fact deceived, had a right to rely, and did rely on the deception. If they didn’t believe the lie, they don’t have grounds for an avoidance
*** The law will afford relief even to the simple and credulous been duped by art/falsehood
Does there have to be an injury to avoid a contract?
No, it is not relevant weather damage was caused
What are the three categories of injury?
A. Defrauded party gets what is bargained for that because of misrepresentation is worth less than they had reason to expect
B. Defrauded party get something substantially different than they had reason to expect
C. Defrauded party gets what is bargained for and it is as valuable as they expected (most courts will set this type aside even if a fair exchange was agreed upon)
What is a misrepresentation of fact?
An opinion is it open to question and makes a contract voidable
What is an erroneous statement of opinion?
Does not make contract voidable, there’s no relief for reliance on an opinion. Cannot rely on seller’s puff or trade talk
What are the exceptions to the general rule that there’s no relief for reliance on an opinion?
- situations where there is a relationship of trust and confidence between the parties
- when the representer is or claims to be an expert
- when the representor has superior Access to knowledge of facts making the opinion false
- when the opinion is stated by a third person posing as a disinterested person
- in the opinion intentionally very so far from reality no reasonable person in the representative position could have such an opinion
What are the two contradictory rationales for the rule that Misrepresentations of law do not render a contract voidable?
- Everyone is presumed to know the law
- A statement of the law governing a given set of facts is merely the expression of an opinion (shouldn’t rely on it without further research)
Is it important and material to state why you’re buying something?
Generally no so misrepresentation about that is immaterial
If you make an promise with the intent to not perform, is that a misrepresentation of fact?
Yes
There’s generally no duty to disclose information in a bargaining transaction except when?
- statue/regulation requires disclosure
- if your concealing information meant to hide the truth or stymied the other parties investigation = misfeasance can be grounds for avoidance
- partial disclosure is made, lack of full disclosure can be a misrepresentation
- if a party makes a true statement in good faith, but supervening events make it no longer true, once the party knows the new info, they have a duty to disclose it to anyone relying on it
- UCC says a purchaser has grounds for relief for defects in goods whether the seller new or didn’t
How does the relationship of the parties affect duty of disclosure?
Fiduciary or confidential relation requires a duty of disclosure of material facts. Medical malpractice must have informed consent, government agencies must disclose info to bidders
Even if a contract has a merger clause how is parol evidence admissible?
To demonstrate the agreement is void or voidable or to prove an action for deceit
What is fraud in the performance?
If a party dishonestly performs by presenting falls information. The party has an action for breach of contract because the covenant of good faith and fair dealing has been violated
What is fraud in the inducement?
And actionable misrepresentation that renders a contract voidable, not void.
*** defrauded party normally has the burden of proof on avoidance, and the party seeking to enforce the contract has the burden of establishing the existence of a contract
What Are the two criteria for misrepresentation to render transaction void?
A. The party asserting the contract is void must’ve signed an instrument radically different from what they were led to believe
B. Party must’ve acted without negligence (reasonable person would have signed it under the circumstances)
How does the UCC say misrepresentation can render a transaction void?
It is void if it is corrupted by fraud that induced the obligor to sign it without knowledge are opportunities to get knowledge of its character or essential terms
What are remedies for fraud?
Defrauded party can choose to stand on the transaction, keep what was received, and sue for damages, or the victim can choose to avoid the transaction and claim restitution
What are the UCC remedies for damages?
Defrauded party can pursue and get remedies as long as items of recovery are not duplicated. Only requisite is that reliance is required
What is an express warranty?
Absolute undertaking that the representation is true
What Is election?
The defrauded party may indicate that it will not continue with the execution of the transaction, and it has a right to elect between an action for deceit and action for restitution. Must be a prompt and irrevocable election if the remedy sought is restitution and the other party would be prejudiced by delay
What Is ratification/affirmance?
When a party discovers it is been induced by fraud to enter a contract, it may buy words or conduct indicate that it will proceed with the transaction despite the frost
What is quasi contract?
Restitution based on the promise to refund what was obtained by fraud
Generally a defrauded party must offer to return what they got under contract, and the failure to do so can be grounds for dismissal, except?
- when the defrauded party is a governmental unit and what was received was worthless/has become worthless because of the fault of the other party
- offer to restores unnecessary where it would be useless or unfair to insist on it
- if On discovering the truth the aggrieved party fails to act with reasonable promptness to avoid the contract, it will be deemed a ratification and destroy the power of avoidance
What is restitution?
The disgorging of something which is been taken, or compensation for injury done.
If the fraudulent party’s gains have increased in value, what is the most appropriate remedy?
Constructive trust that permits the defrauded party to recover the enhanced value
Explain how misrepresentation can give rise to estoppel?
It would prevent the party that made the representation from denying it’s truth, and this can be raised affirmatively
If the contract is voidable, can the aggrieved party affirm the contract?
Yes and that would ratify it, can be express occur by actions
What is mutual mistake?
Can render transaction voidable when both parties share a common assumption about a vital existing fact on which they based their bargain, and that assumption is false
If parties are mistaken about the identity of the subject matter, what can happen?
The contract can be avoided
What does the UCC say about when a seller describes something they’re selling wrong?
They have made an express warranty, and the risk is on the seller that his description is accurate
What happened in the case where two parties found a pretty stone but were ignorant about what it was, and it turned out to be a diamond. Why did the court refused to allow avoidance?
Because there is no mistake about the nature of the stone, both parties are consciously uncertain, so each pretty took the risk there was something more or less valuable in the agreed price
What is conscious uncertainty?
An assumption of the risk that the resolution may be unfavorable
If the party has made a mistake in acreage in a contract to convey land, what can happen?
If the mistake is materially different than the truth, the aggrieved party can avoid the contract
How does avoidance work for unilateral mistakes?
It is not available unless the mistake was palpable
Many cases have allowed avoidance when only one party was mistaken, so long as what two conditions concur?
A) enforcement of the contract against the mistaken party would be oppressive, result in unconscionably an equal exchange of values
B) avoiding would impose no substantial hardship on the other, besides a loss of bargain
What situations do you usually see a unilateral mistake?
Construction cases where a computational error has occurred in an invitation to bid
What is the test is substantiality for mistake cases?
Met if the mistake swallows the allocation made in the bid for profit
Is avoidance allowed for mistake in judgment?
No
Unilateral mistake is grounds for avoidance by what party?
Only the mistaken party
If one party pays money to the other in the mistaken belief that is required by the contract, can that payment be recovered?
Yes, and the same is true for excess payments, or something other than money
What Is voluntary payment doctrine?
Money voluntarily paid in the face of recognized uncertainty about the existence or extent of the payor’s obligation to the recipient cannot be recovered on mistake ground
If a party takes advantage of the fact that the other has forgotten, overlooked, or is mistaken about material provisions of the contract, what is that?
Breach of the obligation of good faith and fair dealing, and the consequences are not avoidance for restitution remedies for breach
What are the three exceptions to mistake in performance?
- if there was a moral obligation to pay, restitution isn’t available
- if the obligation is unforeseeable under the statute of limitations, barred by another legal rule, restitution isn’t allowed
- if a payment is made to the third person that the creditor is indebted to, the receiver of the funds is a bona fide purchaser for value
What is reformation?
The remedy by which records are rectified to conform to the actual agreement of the parties.
Reformation primarily refers to what?
Correction of typographical inadvertent errors, mistakes, misunderstandings, misrepresentation, and duress
What is the standard of proof for reformation?
Clear and convincing evidence
Is parol evidence applicable in reformation cases?
No
What are the three requisites for reformation on grounds of mistake ?
- there must have been an agreement between the parties
- there must’ve been an agreement to put the agreement into a record
- A variance between the prior agreement and the record exists and mistake must be mutual
If parties knowingly don’t include an agreed term in the record, what is the danger?
That the court will find a total integration that will bar extrinsic evidence of the terms
Parole evidence of defense for intentional omissions and misstatements?
No because reformation is not allowed for intentional omissions since there was no agreement to put the term into the record
If a record fails to actually show the agreement of the parties because of mistake, what is often the only remedy?
Reformation
If a record is inaccurate because of misrepresentation, what are the two available remedies?
Reformation and avoidance, as long as a misrepresentation relates to the content or legal effect of the record, misrepresentations about the qualities of the subject matter are not grounds for reformation
How is nondisclosure treated?
The same as misrepresentation where one party knows that the record doesn’t express the intention of the other and knows the other’s intentions
Duress is grounds for what?
Setting aside a contract
What are some defenses to Reformation?
- courts won’t grant reformation if the effect would curtail the rights of a bona fide purchaser for value or others who’ve relied on the record
- reformation will also not be given against the donor of a gratuitous conveyance or gift
- negligence doesn’t bar reformation as long as the requisites are met and the negligence hasn’t in someway harmed the other nonnegligent party
- ratification can terminate the right to Reformation
- SOF doesn’t apply to Reformation
What are the defenses to formation?
- writing (SOF and PER)
- public-policy
- fraud/mistake
- capacity
What are the different types of contracts that must be in writing in order for statute of frauds to say they’re enforceable?
- contracts that, by its terms, cannot be completed within a year
- contracts for the sale of any interest in land
- contracts for the sale of goods over $500
- suretyships (contracts guaranteeing the debt of another?
What does the common-law and the UCC consider to be a sufficient writing?
CL: signed by defendant, contains all essential terms
UCC: signs, if it’s between merchants can be signed only by sender, and has the quantity term
What are the four exceptions that say a contract doesn’t have to be in writing to be enforceable?
A) goods: merchants confirming memo
B) lands: part performance (money plus improvements or money plus possession)
C) year: detrimental reliance exception
D) suretyship: main purpose rule
What is the Corbin approach versus the Williston approach to total integration?
Corbin: surrounding circumstances. Court will admit evidence to determine whether the writing is total
Williston: four corners rule. Take the document as a whole, does it appear on its face to be total?
What are the three exceptions to the parol evidence rule?
- collateral agreements
- consistent additional terms
- explain the meaning of the terms
