Requirement that no Defense Exist

Question 1

Defenses

Answer 1

1. Absense of Mutual Assent
2. Absence of Consideration
3. Public Policy Defenses - Illegality
4. Lack of Capacity
5. Statute of Frauds
6. Unconscionablilty

Question 2

Ways to have Absense of Mutuality

Answer 2

1. Mutual mistake as to existing facts
2. Unilateral Mistake
3. Mistake by the Intermediary (Transmission)
4. Misunderstanding - Ambiguous K languange
5. Misrepresentation

Question 3

Mutual mistake as to existing facts

Answer 3

• if both parties are mistaken about existing facts (not future) then the K may be voidable if:
  
  1. mistake concerns basic assumption on which K was made
  2. the mistake has a material effect; and
  3. the party seeking avoidance did not assume the risk
     
     • this occurs where the party asserting the mistake assumed the risk because he was in a better position to better know the risk than the other party
• Mistake in value is generally not a defense, because parties usually assume the risk that their value is wrong

Question 4

Unilateral Mistake

Answer 4

If one party was mistaken the mistake will not prevent formation of the K unless the nonmistaken party knew or had reason to know of the mistake - then the K is voidable

Question 5

Mistake by Intermediary (Transmission)

Answer 5

the message “as transmitted” is operative unless the other party knew or should have known of the mistake

Question 6

Misunderstanding - Ambiguous K Language

Answer 6

Ambiguouty is the one area where subjective intent is taken into acct

If a term has two possible meanings, result depends on the parties awareness of the ambiguity:

• neither party aware
  
  • no K unless both parties intended same meaning
• both parties aware
  
  • no K unless both parties intended same meaning
• One party aware
  
  • binding K based on what the ignorant party reasonably believed to be the meaning of the ambiguous words

Question 7

Types of Misrepresentation & Remedy

Answer 7

1. Fraudulent Misrepresentation (Fraud in the Inducement) - K Voiadable
2. Nonfraudulent Misrepresentation - K voided if Material

Innocent party can rescind K and recover all available remedies

Question 8

Fraudulent Misrepresentation (Fraud in the Inducement)

Answer 8

If inducing party through fraud (asserting info you know is untrue) the K is voidabl by the innocent party if she justifiably relied upon the fraudulent misrep.

This is fraud in the inducement

Fraud can also be inferred from conduct

Question 9

Nonfraudulent misrerepsentation

Answer 9

Even if not fraudulent, K can be voidable if innocent party justifiably relied on misrepresentations and they were material. MAterial if:

1. would induce a reasonable person to agree
2. the maker knows it would induce, even if a reasonable person would not

Question 10

Public Policy Defenses - Illegality

Answer 10

If the consideration or subject matter of the K is illegal, it is void. Exceptions:

1. P is unaware of the illegality while D knows the illegality
2. one party is not as culpaple as the other; or
3. the illegality is a failure to obtain a license when the license is for revenue raising purposes rather than for protection of the public

If the only purpose to the K is illegal, the K is voidable by a party who was:

1. unaware of the purpose; or
2. aware but did not facilitate the purpose and the purpose does not involve serious moral turpitude

Question 11

Defenses based on lack of capacity:

Answer 11

1. Legal Incapactiy to K
2. Duress and Undue Influence

Question 12

Types of Legal Incapacities to a K

Answer 12

1. Contracts of Infants (Minors)
2. Mental Incapacity
3. Intoxicated Persons

Question 13

Contracts of Infants (Minors)

Answer 13

Infants (under 18) generally lack capacity to enter into K binding on themselves.

However contractual promises of an adult made to an infant are binding on the adult

Question 14

Dissaffirmance by infant

Answer 14

An infanct may choose to disaffirm a K any time before (or shortly after) reaching the age of majority.

If an infant chooses to disaffirm, she must return anything that she recieved under the K that still remains at the time of disaffirmance.

However, no obligation to return any part of the cinsideration that was:

• squandered
• wasted
• negligently destroyed

Question 15

Exceptions to Dissafirmance

Answer 15

• student loans
• insurance Ks
• agreements not to reveal an employer’s proprietary information

Question 16

Necessaries

Answer 16

Necessaries are items necessary for the minor’s substinence, health or education.

A minor may dissafirm a K for neccessaries but in most states will be liable in restitution for the value of benefits recieved.

Question 17

Affirmance upon attaining majority

Answer 17

An infant may affirm (choose to be bound) a K upon reaching majoirty.

He can affirm expressly or by conduct

• failing to disaffirm within a reasonable time after reaching majority is sufficient conduct to affirm

Question 18

Mental Incapacity

Answer 18

one whose mental incapacity is so deficient that he is incapable of understanding the nature and signifigance of a K may disaffirm or affirm when lucid or by his legal representative.

In otherwords, the K is voidable.

Liable for quasi-k for necessaries furnished to them.

Question 19

Intoxicated Persons

Answer 19

One who is so intoxicated that he does not understand the nature and signifigance of his promise may be held to have been made only a voidable promise.

Intoxicated person may affirm upon recovery

Question 20

Duress & Undue Influence

Answer 20

Ks induced through duress and undue influence are voidable and may be rescinded as long as not affirmed.

Generally taking advantage of a persons econ needs is not duress. However withholding something someone wants or needs will be econ duress if:

1. the party threatens to commit a wrongful act that would seriously threten property or finances; and
2. there are no adequate means avaiable to prevent threatened loss

Question 21

Elements of Undue Influence:

Answer 21

1. undue susceptability to pressure by one party; and
2. excessive pressure by the other party

Often arises in the context of a confidential or caregivier relationship

Question 22

Statute of Frauds Requirements

Answer 22

1. Writing
2. Signed

Question 23

Statute of Frauds - Writing Req

Answer 23

1. reasonably ID subject matter
2. indicate K made between the parties
3. state with reasonable certainty the essential terms

Electronic Record satisfies writing

Question 24

Signature Req for Statute of Frauds

Answer 24

• any mark or symbol made with the intention to authenticate the writing as the signers - it need not be handwritten - Party’s initials or letterhead or electronic signature is sufficient
• only the party to be charged must sign

Question 25

Statute of Frauds applies to:

Answer 25

1. Executor or Administrator Promises Personally to Pay Estate Debts from his own funds
2. Promises to Pay Debt of Another (Suretyship Promise)
3. Promises in Consideration of Marriage
4. Interests in Land
5. Performance not within 1 year
6. Goods priced at $500 or More

Question 26

What interessts in land need to be signed and what does not?

Answer 26

Does:

1. leases for more than 1 year
2. easements of more than 1 year
3. mortgages
4. fixtures; and
5. minerals or structures if they are to be served by the buyer

Doesn’t:

• contracts to build buildings or to find a buyer or seller (brokers K)

Question 27

Performance Not Within One Year

Answer 27

• by its terms cannot be performed within 1 year
• date runs from the date of the agreement and not from date of performance
• Promise to “employ till i die” is not within statute because capable of being performed within a year, even if he lives longer than a year

Question 28

Good for $500 or more

Answer 28

Needs to be in writing

Terms can be vague, but the K is not enforceable if the quantity term is not shown

Question 29

When is Writing Not Required for Goods over $500

Answer 29

1. Specially manufactured goods
2. Admission & Pleading in Court
3. Payment or Delivery of Goods

Question 30

Merchants - Confirmatory Memo Rule

Answer 30

If one merchant send the other written confirmation sufficient to bind the sender under SOF, it will bind the receipient as well if:

1. he has reason to know of the confirmation’s contents; and
2. he does not object to the writing within 10 days of receipt

Question 31

Effect of Noncompliance with SOF

Answer 31

Renders K unenforcable at the option of the party to be charged.

If statute is not raised as a defense, it is waived

Question 32

Situations in which the K is removed from SoF

Answer 32

1. Performance
2. Equitable or Promissory Estoppel
3. Judicial Admission

Question 33

Remedy if K is w/in the SoF

Answer 33

Reasonable value or restitution

Expecatition damages if suing under part performance

Question 34

Instances of Procedural Unconscionability

Answer 34

1. inconspicuous risk-shifitng provisions
2. exculpatory clauses (releasing contracting party from liability for his own intentional wrongful acts)
3. litiations of remedies which fails its essential purpose

Question 35

Equitable Defenses

Answer 35

1. Unclean Hands
   
   • other party is guilty of wronddoing in the same transaction
2. Laches
   
   • delay has prejudiced the defendant
3. Sale to a BFP