Reasons for Not Enforcing Contracts

Question 1

Legal reasons for not enforcing a contract

Answer 1

1) Lack of consideration of consideration substitute
2) lack of capacity of the person making the promise
3) statute of frauds
4) existing laws that prohibit the performance of the agreement
5) public policy
6) misrepresentations
7) nondisclosure
8) duress
9) unconscionabiliy
10) ambiguity in the words of agreement
11) mistakes at the time of the agreement as to the material facts affecting the agreement

Question 2

Define consideration and its elements?

Answer 2

A bargained-for legal detriment
Bargained-for: asked by the promisor in exchange for her promises.
Legal detriment: must be of significance
Promise as consideration: promise for a promise is okay

Question 3

Is past consideration, consideration? Why or why not?

Answer 3

NO, exception: if requested by the promisor and expectation of payment by promisee

Question 4

What is the pre-existing contractual or statutory duty rule? Can it be used as consideration: under common law? Under Article 2?

Answer 4

Common Law: doing what you are already legally obligated to do is not new consideration for a new promise to pay you more to do merely that. Under common law new consideration is required for contract modification. Exception: addition or change in performance. Exception: unforeseen difficulty so severe as to excuse performance. Exception: third-party promise to pay.

Article 2: no pre-existing legal duty rule. New consideration is not required to modify a sale of goods contract. Good faith is the test for changes to an existing sale of goods contract.

Question 5

Can Part Payment be used as consideration for release of a debt? (promise to forgive a balance of debt):

Answer 5

Due and undisputed: part payment is not consideration for release
Not yet due or disputed: then it would be consideration

Question 6

What are the 2 consideration substitutes?

Answer 6

Written promise to satisfy an obligation for which there is a legal defense is enforceable without consideration.

Promissory Estoppel

Question 7

Consideration Substitute: Promissory Estoppel. What are the elements?

Answer 7

Elements:

(i) promise,
(ii) reliance that is reasonable, detrimental, and foreseeable, and
(iii) enforcement necessary to avoid injustice.

Question 8

Defendant Promissor’s Lack of Capacity: Who lacks capacity?

Answer 8

Infants–under 18
Mental incompetents–lacks ability to understand agreement (e.g. Joe)
Intoxicated persons, if other party has reason to know of intoxication

Question 9

What are the consequences of incapacity?

Answer 9

Right to disaffirm by person without capacity.

Implied affirmation by retaining benefits after gaining capacity (make agreement without capacity, gains it later while retaining benefits after getting capacity, an implied affirmation and can be enforced against)

Quasi-Contract liability for necessities: a person who does not have capacity is legally obligated to pay for things that are necessary such as food, medical care, etc. based in quasi-contract law

Question 10

What is the Statute of Frauds in place for?

Answer 10

It is in place to prevent fraudulent claims of the existence of a contract. It requires the claimant to have proof other than just the testimony that a contract exists before he gets his day in court.

Question 11

What is required to get past the Statute of Frauds?

Answer 11

“Special poof”, either performance or writing, must be satisfied to get through that Statute of Frauds barrier to get to trial.

Question 12

Name the four contracts within the Statute of Frauds

Answer 12

1. Promises to answer for the debts of another (suretyship)
2. Service Contracts NOT capable of being performed within a year FROM THE TIME OF THE CONTRACT
3. Transfers of interest in real estate (with the exception for leases of one year or less)
4. Sale of goods $500 or greater.

Question 13

How do you determine whether a suretyship contract is within the statute of frauds?

Answer 13

Look for a guarantee to pay the debt of another.

Question 14

What is the exception to the suretyship contract being within the Statute of Frauds?

Answer 14

The main purpose exception: If the “main purpose” of the obligation allegedly guaranteed was to benefit the guarantor, then not even that guarantee is within the Statute of Frauds.

Question 15

Store sells P paint on credit for $400. Store sues Conviser for the $400 alleging that Conviser promised to pay for the paint. The paint was to be used to paint Conviser’s house. Is Conviser’s alleged promise within the Statute of Frauds?

Answer 15

No. Even though it was a guarantee to pay for the debt of another, it falls within the main purpose exception, because the main purpose of the promise was to benefit the guarantor.

Question 16

S Store sells P paint on credit to be used in painting Epstein’s house. S Store sues Conviser alleging that Conviser promised to pay for the paint if P did not pay. Conviser files a motion to dismiss based on the Statute of Frauds. Is Conviser’s alleged promise within the Statute of Frauds?

Answer 16

Yes, because Conviser guaranteed the payment if P did not pay BRAH.

Question 17

P claims that D hired him on January 15, 2012 to cut all of the trees on D’s land. Is this within the Statute of Frauds?

Answer 17

No, this is a task and it is theoretically capable of being completed within a year.

Question 18

P claims that D hired her to work for her for the rest of P’s life. P is only 21 years old and in great health. Is this within the statute of frauds?

Answer 18

No, S/F does not apply because P could in theory die tomorrow and have fully performed the contract.

Question 19

What happens if a Statute of Frauds defense is asserted and established?

Answer 19

There is no legally enforceable agreement–no contract liability.

Question 20

Can you part perform to satisfy the statute of frauds in a transfer of real estate contract?

Answer 20

Yes, if two of the following three are met: (i) improvements to the land; (ii) payment; and (iii) possession.

Question 21

What are the elements needed to satisfy the Statute of Frauds through part performance in a transfer of real estate contract?

Answer 21

(i) improvements to the land; (ii) payment; and (iii) possession.

Question 22

Can performance be used to satisfy the Statute of Frauds in a services contract?

Answer 22

Yes. Only full performance by either party satisfies the Statute of Frauds. Part performance does not.

Question 23

In a services contract w/in the Statute of frauds, P part performs. Does this satisfy the statute of frauds? If not, under what theory can he recover?

Answer 23

No it does not. Part performance does not satisfy the Statute of Frauds.

He may recover under a quasi-contract theory.

Question 24

P agrees to work for D for three years. P works for 13 months and then D fires her without cause. P sues D for breach of contract. D asserts a Statute of Frauds defense. Is the Statue of Frauds satisfied by P’s working for 13 months?

Answer 24

No, part performance does not satisfy Statute of Frauds in SERVICES CONTRACTS.

Question 25

Can you part perform to satisfy a sale of goods contract?

Answer 25

Yes. Generally part performance of a contract for the sale of goods satisfies the statute of frauds, but only to the extent of the part performance.

Question 26

S orally agrees to sell 2,000 sacks of grits to B for $10,000. S delivers 600 sacks of grits. S sues B for payment for the 600 sacks that have been delivered. Does B have a Statute of Frauds defense?

Answer 26

No, part performance satisfies the statute of frauds in the sale of goods/delivered goods. He’s merely suing to get paid for the 600 sacks he delivered.

Question 27

S orally agrees to sell 2,000 sacks of grits to B for $10,000. S delivers 600 sacks of grits. B sues S for failure to deliver the remaining 1400 sacks. S asserts a Statute of Frauds defense. Does S
have a Statute of Frauds defense?

Answer 27

Yes, B has not partially performed.

Question 28

How is S/F satisfied in a sale of goods contract when the good in question is specially manufactured or made?

Answer 28

As soon as the seller makes a substantial beginning. This means that the seller has done enough work that it is clear that what she is working on is specially manufactured.

Question 29

What is the best way to satisfy the Statute of Frauds?

Answer 29

Writing.

Question 30

What is important to satisfy the statute of frauds with a writing, in a non-Article 2 contract?

Answer 30

Looking at the contents of the writing or WRITINGS–all material terms. Also look at who signed the writing. The writing satisfies the Statute of Frauds so that there is no Statute of Frauds defense if the writing has been signed only by the DEFENDANT.

Question 31

Your offer of January 15th is hereby accepted.” s/ Dana Scully. Does this writing satisfy the Statute of Frauds?

Answer 31

Fuck no. Not all material terms are present.

Question 32

“The law firm of Franklin & Bash (FB) hereby agrees to employ Harriet Miers as an attorney for three years at $200,000 a year.” s/Peter Bash for the firm. FB wrongfully dismisses Ms. Miers. She sues for breach of contract. FB asserts a Statute of Frauds defense. Did the writing satisfy the Statute of Frauds so that FB does not have a Statute of Frauds defense?

Answer 32

Yes, who (FB hire Miers) for what (employment) has all material terms and signed by defendant.

Question 33

What is important to satisfy the Statute of Frauds with a writing in an Article 2 contract?

Answer 33

The contents, but the writing must simply indicate that there is a contract for the sale of goods and contain the quantity term.

Question 34

What are the other two ways to satisfy the Statute of Frauds, that are not a writing or performance?

Answer 34

Judicial admission. The defendant admits in a pleading or testimony that there was an agreement with the plaintiff.

Estoppel: the plaintiff’s reliance was the defendant’s oral promise can estop the defendant from asserting a S/F defense.

Question 35

When entering into a contract for someone else what is required?

Answer 35

Rules of law require that the authorization must be in writing only if the contract to be signed is within the Statute of Frauds, i.e. authorization must be of ‘equal dignity’ with the contract.

Question 36

When modifying a contract, the modified contract would be in the statute of frauds, is this permissible?

Answer 36

Yes, as long as the modification agreement is in writing.

Question 37

T leases a building from L for one year. L claims they later agreed to increase the term to three years. Does contract law require written evidence of the alleged modification?

Answer 37

Yes, changing from a one year lease (not w/in S/F) to three years (w/in S/F) therefore within S/F and requires written evidence of modification. The contract as modified is within the statute of frauds.

Question 38

Can you include a provision in a contract that requires written modification? (CL and UCC)

Answer 38

Yes, however under common law it is not effective and thus ignored. Under UCC, contract provisions requiring written modifications are effective unless waived.

Question 39

What if Joe contracts with Phil for some hot, steamy love, which is illegal pursuant to California statute, is the contract enforceable?

Answer 39

No, it involves illegal subject matter, paying for “hot, steamy love”

Question 40

What if Joe contracts with Delta Airlines to purchase a plane ticket to India. Unbeknownst to Delta, Joe intends to pillage the young boys of Mumbai, which is illegal under Federal and many other laws, can Delta sue Joe to recover the price of the ticket if Joe does not pay?

Answer 40

Yes, because Delta lacked knowledge of the illegal purpose for which Joe was purchasing the ticket.

Question 41

What if Joe contracts with Jay to purchase all of his fleshlights. Jay knows that Joe intends to use the fleshlights in a Sandusky-like manner (e.g. to rape little boys). Is the contract enforceable?

Answer 41

No, Jay is aware of the illegal purpose for which the contract was entered into.

Question 42

Can the courts decide to not enforce a contract on the basis of public policy?

Answer 42

Yes, especially if there is an exculpatory agreement that exempts intentional or reckless conduct from liability.

Question 43

Can you include covenants not to compete in a contract?

Answer 43

Yes as long as there is a reasonable need or reasonable time and place limits.

Question 44

What if a party misrepresents an existing fact prior to contracting?

Answer 44

If a statement of fact before the contract by one of the contracting parties or her agent, is false, and induces the contract, there is no wrongdoing required and the contract can be unenforceable.

Question 45

S tells B that the house had no termites. S honestly believes that the house has no termites, but the house has termites. B agrees to buy the house in reliance on S’s representation. Can B rescind the agreement to buy the house?

Answer 45

Yes. There was an existing fact that was attested to, and it ended up being false. B relied upon the untrue statement and therefore can rescind.

Question 46

What is the result of nondisclosure in a contract?

Answer 46

Generally a person making a contract has no duty to disclose what she knows, unless a fiduciary-like relationship exists or concealment occurred. If one of those wrongdoings exists, then the contract can be unenforced.

Question 47

What are the elements of economic distressed required to render a contract unenforceable?

Answer 47

(a) a bad guy–improper threat which is usually threat to breach existing contract AND (b) vulnerable guy–no reasonable alternative. Without these, it is unlikely economic distress will suffice to render a contract unenforceable.

Question 48

D has a contract to supply 1,000 pounds of kosher grits to P for Chanukah sales in 2012. D refuses to perform this contract until P agrees to buy 4,000 pounds of cheese grits in 2013. P has no other source of kosher grits and so agrees. D delivers the kosher grits. Can P get out of the agreement to buy 4,000 pounds of cheese grits in 2013?

Answer 48

D is a bad guy, P is vulnerable because he had no other source of kosher grits. P therefore entered into the agreement under duress.

Question 49

What is undue influence? And what is the result on a contract?

Answer 49

When a special relationship exists between the parties and improper persuasion of the weaker by the stronger party. The contract is unenforceable.

Question 50

Can a contract be rendered unenforceable due to unconscionability?

Answer 50

Yes.

Question 51

How is a contract rendered unenforceable through unconscionability?

Answer 51

Two tests: (i) unfair surprise (procedural) and oppressive terms (substantive) are (ii) tested as of the time the agreement was made (iii) by the court.

Procedural unconscionability refers to agreement process (undue time pressure, fine print, artificial legalise)

Substantive unconscionability are oppressive terms (unduly favorable to one party)

Question 52

Is a contract unenforceable due to ambiguity in the words of the agreement?

Answer 52

Yes. There will be no contract if (i) parties use a material term that is open to at least two reasonable interpretations and (ii) each party attaches different meaning to the term, and (iii) neither party knows or has reason to know the term is open to at least two reasonable interpretations.

Question 53

S and B contract for the sale of a cow named Rose for $80. Both were certain that Rose was barren. Rose turned out to be fertile and worth $750. S refused to deliver Rose. B sued for breach of contract. What result?

Answer 53

Even though mutual mistake made, it does not matter unless defendant did not assume the risk.

Question 54

What is the result of a unilateral mistake on the enforcement of a contract?

Answer 54

Generally, courts have been reluctant to allow a party to avoid a contract
for a mistake made by only one party. There will be relief for situations in
which the other party had reason to know of the mistake, i.e., palpable
mistake.

Question 55

BRI gets bids from ten vendors for new hoodies. Nine of the bids were more than $100,000. The other bid by X which BRI accepted was for $30,000 because X made a clerical error. Can X rescind the contract because of its unilateral mistake?

Answer 55

Yes, because this was an obvious unilateral mistake