Part D--Defenses, Remedies, Equity

Question 1

Affirmative Defenses

Answer 1

1) Statute of Frauds
2) Capacity (Infancy and Incapacity)
3) Duress
4) Misrepresentation
5) Unconscionability
6) Public Policy

Question 2

Infancy

Answer 2

Time period before person reaches age of majority (18)

Question 3

Overall rule re: minors

Answer 3

Contracts between minors and adults are voidable before or w/in “reasonable time” after reaching majority

Exception: contracts for necessaries

Question 4

Power of Avoidance

Answer 4

Ability of minor to void contract
Only applicable re: minor–if multiple parties, non-minor parties still liable

Question 5

Power of avoidance and emancipation/marriage

Answer 5

Generally/Majority–minors still have power of avoidance if married or emancipated

Question 6

Majority Rule re: Minors

Answer 6

Infancy is both sword and shield
Can use as defense v. enforcement AND can use to recover consideration, even if parties can’t be restored to original condition–adult bears risks

Question 7

Obligations upon nullification by minor

Answer 7

Return any goods received under contract–but not liable for damage to goods

Question 8

Minority Rule re: Minors

Answer 8

Usually used when minor did something wrong–still voidable, but not returning minor to original position
Benefit Rule–deduction for use (ex. “buy” car for prom, try to return–deduct rental price)
Depreciation Rule–charged for depreciation of value (ex. prom “purchase,” car now used car, w/ lower value)

Question 9

Necessaries Exception

Answer 9

Exception to rule that contracts with minors and incompetent parties voidable-other part has right to recover reasonable cost of necessaries provided

Necessaries = necessary for survival (food, clothing, shelter, etc.)

Question 10

Minors and misrepresentation

Answer 10

Generally–not relevant that other party thought adult

Minority rule–if minor misrepresented age, estopped from defense of infancy

Question 11

Cognitive Defects Test

Answer 11

Incompetent to make contract if unable to reasonably understand the nature and consequences of the transaction

Not capable of understanding what one is doing–ex. severe Alzheimers, told to sign paper (but note–even patients w/ mental illness can have moments of clarity)

Question 12

Volitional/Affective Test

Answer 12

Incompetent to make contract if
1) unable to act in reasonable manner AND
2) Other party has reason to know of condition
-Look at context–can make stupid choice, but must be actual choice

Question 13

Intoxication

Answer 13

Basically same as mental illness incapacity–2 types
1) Entirely without understanding( no idea what doing–no meeting of minds)
2) Understands but too intoxicated to comprehend AND other party has reason to know

Question 14

Effect of Incapacity

Answer 14

Contract voidable (exception–so incompetent there was no meeting of minds, because had no idea what doing)

Exception–recover reasonable cost if necessaries

Question 15

Obligations of Incapacitated Party

Answer 15

Responsible for damage/wear and tear, unlike minors (otherwise very similar)

Exception–other party took unfair advantage

Question 16

Misrepresentation

Answer 16

1) Misrepresentation = “assertion not in accordance with the facts” (Includes half-truths)
2)Material to contract–deal-breaker (can be judged objectively or subjectively)
3) Reasonable reliance on misrepresentation (r. person under circum.)

Question 17

Fraudulent Misrepresentation

Answer 17

Must prove intent to mislead AND knowledge that is false
Can be oral, written, or through conduct

Question 18

Fraudulent Concealment

Answer 18

Same as fraudulent misrep., but re: “covering up” truth–intent to mislead AND knowledge that false

Question 19

Negligent vs. Innocent Misrepresentation

Answer 19

-Same remedies, so mostly technical
-Negligent = would have known if acted w/ reasonable care
-innocent–only need to show misrepresentation wasn’t true (+ material and reliance)

Question 20

Fraudulent Non-Disclosure/Silence

Answer 20

Generally no duty to disclose–caveat emptor
UNLESS
1) Relationship of trust and confidence
2) Prior assertion by party has been rendered untrue
3) Good faith requires (generally, if seller to buyer–must disclose known, latent, material defects)

Question 21

Remedies for non-fraudulent misrepresentation

Answer 21

1) Avoidance of contract
2) Rescission and reliance damages
3) Keep contract, sue for benefit of bargain

Question 22

Remedies for fraudulent misrepresentation

Answer 22

1) Avoidance
2) Rescission and reliance damages
3) Keep contract, sue for benefit of bargain
4) Because it is intentional tort sometimes punitive damages

Question 23

Remedies for fraudulent non-representation

Answer 23

1) Avoidance of contract
2) Rescission and reliance damages
3) If intentional tort (unsure if always is)–punitive damages

Question 24

Duress (Modern)

Answer 24

1) Improper threat

AND

2) No reasonable alternative

Question 25

Duress (CL)

Answer 25

Only available if
1) physical compulsion OR
2) unlawful threat
AND
3) No reasonable alternative

Question 26

Improper Threat

Answer 26

Context dependent, but includes threat of, for ex.
-Tort or crime
-Criminal prosecution (bad faith)
-Abuse of legal process (only if person knows/believes suit meritless)
-Unexpected breach of duty of good faith
-Unfair terms–using power for illegit ends

Question 27

Duress and Lawsuits

Answer 27

Not improper if genuinely believe have coa (even if don’t in reality)
Only improper if made in bad faith

Question 28

Economic Duress

Answer 28

Threat of bad-faith breach of contract

Demand for change in contract, does not necessarily = duress (ex. if there are changed circumstances)–must be bad faith

Question 29

Effect of duress

Answer 29

Physical compulsion–contract void
Other types of duress–voidable, put parties in position they were before

Question 30

Undue Influence

Answer 30

Vulnerable party succumbed to untoward bargaining techniques and pressures (essentially lesser version of fraud, duress)
Need:

1) unfair persuasion/untoward pressure
AND
2) other party vulnerable (not incapacitated) to such persuasion

Question 31

Unfair Persuasion

Answer 31

Element of undue influence
Totality of circum. but red flags if:
1) Discussed at unusual/inappropriate time
2) Completed in unusual place
3) Insistent demands that transaction/business be immediately completed
4) Unwarranted emphasis on urgency of completing transaction
5) Use of multiple people to persuade
6) Target has no third party to consult with
7) Persuaders emphasize that there is no time to/target shouldn’t consult lawyers or financial advisors

Question 32

Result of contract due to undue influence

Answer 32

Voidable–return parties to prior position

Question 33

Third Party Duress

Answer 33

Duress where the wrongful threat is made by a third party not the other party
Voidable unless
1) Other party gives value or materially relies on transaction AND
2) Other party is proceeding in good faith w/ no knowledge o/ the duress