Part D--Defenses, Remedies, Equity Flashcards
Affirmative Defenses
1) Statute of Frauds
2) Capacity (Infancy and Incapacity)
3) Duress
4) Misrepresentation
5) Unconscionability
6) Public Policy
Infancy
Time period before person reaches age of majority (18)
Overall rule re: minors
Contracts between minors and adults are voidable before or w/in “reasonable time” after reaching majority
Exception: contracts for necessaries
Power of Avoidance
Ability of minor to void contract
Only applicable re: minor–if multiple parties, non-minor parties still liable
Power of avoidance and emancipation/marriage
Generally/Majority–minors still have power of avoidance if married or emancipated
Majority Rule re: Minors
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
Obligations upon nullification by minor
Return any goods received under contract–but not liable for damage to goods
Minority Rule re: Minors
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)
Necessaries Exception
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.)
Minors and misrepresentation
Generally–not relevant that other party thought adult
Minority rule–if minor misrepresented age, estopped from defense of infancy
Cognitive Defects Test
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)
Volitional/Affective Test
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
Intoxication
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
Effect of Incapacity
Contract voidable (exception–so incompetent there was no meeting of minds, because had no idea what doing)
Exception–recover reasonable cost if necessaries
Obligations of Incapacitated Party
Responsible for damage/wear and tear, unlike minors (otherwise very similar)
Exception–other party took unfair advantage
Misrepresentation
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.)
Fraudulent Misrepresentation
Must prove intent to mislead AND knowledge that is false
Can be oral, written, or through conduct
Fraudulent Concealment
Same as fraudulent misrep., but re: “covering up” truth–intent to mislead AND knowledge that false
Negligent vs. Innocent Misrepresentation
-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)
Fraudulent Non-Disclosure/Silence
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)
Remedies for non-fraudulent misrepresentation
1) Avoidance of contract
2) Rescission and reliance damages
3) Keep contract, sue for benefit of bargain
Remedies for fraudulent misrepresentation
1) Avoidance
2) Rescission and reliance damages
3) Keep contract, sue for benefit of bargain
4) Because it is intentional tort sometimes punitive damages
Remedies for fraudulent non-representation
1) Avoidance of contract
2) Rescission and reliance damages
3) If intentional tort (unsure if always is)–punitive damages
Duress (Modern)
1) Improper threat
AND
2) No reasonable alternative
Duress (CL)
Only available if
1) physical compulsion OR
2) unlawful threat
AND
3) No reasonable alternative
Improper Threat
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
Duress and Lawsuits
Not improper if genuinely believe have coa (even if don’t in reality)
Only improper if made in bad faith
Economic Duress
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
Effect of duress
Physical compulsion–contract void
Other types of duress–voidable, put parties in position they were before
Undue Influence
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
Unfair Persuasion
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
Result of contract due to undue influence
Voidable–return parties to prior position
Third Party Duress
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
