Policing the Bargaining Process Flashcards
What are the three policy concerns regarding the bargaining process?
The status of the parties, behavior of the parties during the bargaining process, and substance of the bargain.
Who are the main classes of people that lack the capacity to enter into a contract?
Minors and the mentally ill.
What is the Infancy Doctrine?
A contract entered into by a minor is voidable and may be disaffirmed by them during minority or within a reasonable time after reaching the age of majority.
What is the exception for necessities regarding minors and contracts?
A minor may not avoid a contract for goods or services necessary for his health and sustenance.
What is the traditional rule for restitution for minors?
Upon disaffirming a contract, a minor can get restitution of all payments already made to a seller, but the goods must be returned.
What is the Restatement 3d rule for restitution for minors?
A person who renders performance under an agreement that is unenforceable by reason of the other party’s legal incapacity has a claim in restitution against the recipient as necessary to prevent unjust enrichment.
What does the Restatement 2d rule state about the contractual capacity of the mentally ill?
A person incurs only voidable contractual duties by entering into a transaction if by reason of mental illness or defect he is unable to act in a reasonable manner in relation to the transaction and the other party has reason to know of his condition.
What is the ordinary remedy when a contract results from duress, fraud, or mistake?
To allow the victim to rescind or avoid (void) the contract.
What is duress in the context of contracts?
Impressible pressure exerted by one party over another either during pre-contractual bargaining or during the attempted renegotiation of an existing agreement.
What does Restatement (2d) 73 state about consideration?
Performance of a legal duty owed to a promisor which is neither doubtful nor the subject of honest dispute is not consideration.
What does UCC 2-209, Comment 2 state about modifications?
Modifications made thereunder must meet the test of good faith imposed by this Act and the extortion of ‘modification’ without legitimate commercial reason is ineffective as a violation of the duty of good faith.
What does the law regard when a party merely does what he has already obligated himself to do?
He cannot demand additional compensation therefore, and if he obtains a promise for more by taking advantage of the necessities of his adversary, the law will regard it as nudum pactum.
Ligenfelder v. Brewing Co.
Duress in Business Transactions
Referred to as “business compulsion.” Demonstrated by proof that “immediate possession of needful goods is threatened.”
What must a business show to demonstrate business compulsion?
That one party has threatened to breach the agreement by withholding goods unless the other party agrees to some further demand AND the threatened party could not obtain the goods from another source AND the remedy through a breach of contract action would be inadequate.
Undue Influence
Four factors: (1) an unnatural disposition made, (2) by a person susceptible to undue influence to the advantage of someone, (3) with an opportunity to exercise undue influence, and , (4) who in fact has used that opportunity to procure the contested disposition through improper means.
