R5 M2 - Contract Part II (Note) Flashcards
Defense can make a contract unenforceable
Very few Defenses make a contract void. Most Defense are voidable.
A “P.I.E” is void every other defense is voidable
What are types of defenses: Fraud
A contracting party can establish the defense of fraud if he or she can prove it.
“M A I D S”
_M_isrepresentation of material facts by defrauding party ( they lied to me that the car is new but its not).
_A_ctual and reasonable reliance
-It’s unreasonable for the buyer to rely on the seller’s biased opinion as to value.
-The victim did actually and reasonably rely on misrepresentation.
_I_ntent to induce reliance
- They trick you so you can buy.
_D_amages
-The defrauded is liable to anyone who suffered a loss.
_S_cienter (intent to deceive)
Types of Fraud:
- Fraud in the execution.
- Sign something like an autograph but it’s a contract instead without you knowing.
Types of Defense: Duress ( threatened - blackmail) I will get you fired from your job.
- If the harm threathened is physical force, the contract is void.
- If the harm threatened is economical, social, then the contract is voidable.
Types of Defense: undue influence (voidable) - abuse your position of power
- A person in the position of trust or confidence ( spouse, trustee, guardian, attorney uses their position to take advantage of other’s weakness, infirmity or distress)
- Lawyer convinces client, a person with intellectual disability, to tell lawyer client’s personal property
Types of Defenses: Mutual Mistake
Types of Defence: Mutual Mistake
Types of Defenses: Unilateral Mistake
Other Defenses:
- Illegal
- Contract involves a minor
- Intoxication
- Adjudicated mental incompetency
- Statute of Limitations
Illegality makes a contract void. (“P.I.E”)
- Crime, Rob , Kill (torts)
- Illegally high interest rate
- Agreements in restraint of trade (unreasonable convening not to compete) - Even if you signed it not to compete court will void it)
- Gambling Contracts
- Illegally high interest rate (usurious contract)
- They don’t have a license ( CPA, Doctor, Electrician) to protect the public.
Minor
- A minor cannot ratify until they become an adult
Defense: Intoxication
- A drunk person signing a contract know by the other party can be used as a defense.
Defense: Adjudicated Incompetency
- If the judges decide that your are mentally incapacitated to understand what you signed. Than the contract would be void.
Statue of limitations
- The statute of limitations provides that a legal action must be commenced within a certain period of time.
- If the statute of limitations period has expired on a contract, it is unenforceable.
Under Common Law —> 4 to 6 years
Under Sales of goods —> Date of breach ( 4 years)
Statue of Frauds
- Although the general rule is that contracts need not be in writing, six contracts require some type of writing to be enforceable
- Both parties need not sign the written contract
- Only the party to be charged (defendant) must have signed.
My legs —>
M —> Contacts which marriage is involved
Y —> Contract that cannot be done within one year
L —> Contract of the sale of land or lease
E —> Executor promising to be liable for the debts of someone
G —> Contracts for sale of goods $500 or more
S —> Contract to act as a surety (provision to pay the debt of another)
Statue of Frauds
A contract to work for me for life can be an oral contract because the person can pass away at anytime.
Land Contracts
- When there is a sale of land or a lease of land that is greater than a year, it must be evidence by a writing.
- Lease of land for less than a year does not require a writing.
- land regardless of price has to be in writing
Other Defense: Impossibility (Void)
- Dead —> If it’s the party performing the contract.
What is an Accord & Satisfaction
An accord is when we substitute 1 agreement for another, and satisfaction is the execution of the accord.
Substituted contract is very similar to accord and satisfaction the difference is that the original contract is discharged immediately.
What is a novation?
Same Contract but different party representative
If a party is not replace once released from his contractual duty it is not a novation but a contract release.
Prevention of performance is a breach
- He did not allow me to do my job
Parol evidence rule: is a defense
- It prohibits either party in a lawsuit from introducing evidence at a trial that relates to information that happened before the contract was signed.
- The parole evidence rule prohibits any oral or written statement made prior to or contemporaneously with the written contract that contradict the terms of the contract.
- Subsequent oral modification is allowed in parole evidence after the contract is written.
What is a remedy?
Someone does not do what they are contractually meant to do.
- Specific performance cannot be used to force a party to perform personal service contracts (If someone does not want to pave your garage he can’t be forced to do so)
- You have to choose between compensatory or specific performance you can’t have both.
Recission or cancellation
- Cancel a contract and puts everybody in the original position as if they never met.
- It’s only applying if the contract has not been substantially performed.
- It’s available for unilateral or mutual mistakes and fraud.
Under the common law, a party cannot rescind or cancel if a contract has been substantially performed.
If its substantially performed in good faith –> receive money for damages
If done in bad faith –> Cancellation and money damages
