Requirement That No Defenses Exist Flashcards
Defenses Based on Lack of Capacity
- Contracts of Infants (Minors)
- Mental Incapacity
- Intoxicated Persons
Contracts of Infants (Minors)
Infants generally lack capacity to enter into a contract binding on themselves, but contractual promises of an adult made to an infant are binding on the adult
An infant may choose to disaffirm a contract at any time before reaching the age of majority and it must be disaffirmed as a whole, not in part. They do not have to disaffirm, it is just an option.
Some states have statutory exceptions for student loans, insurance contracts, and agreements not to reveal employer’s proprietary information
Necessaries: A minor may disaffirm a contract for necessaries but will be liable in restitution for the value of benefits received
Affirmance upon Attaining Majority: A minor may affirm upon reaching majority, either expressly or by conduct, such as by failing to disaffirm the contract within a reasonable time after reaching age of maturity.
Mental Incapacity
One whose mental capacity is so deficient that they are incapable of understanding the nature and significance of a contract may disaffirm when lucid or by a later appointed legal representative.
The contract is VOIDABLE! Not default void.
Intoxicated Persons
One who is so intoxicated that they do not understand the nature and significance of their proise may be held to have made only a voidable promise if the other party had reason to know of the intoxication
Duress and Undue Influence
Contracts induced by duress or undue influence are VOIDABLE and may be rescinded as long as they are not affirmed
Absence of Mutual Assent: Ambiguous Contract Language
Neither party aware: no contract unless both parties intended the same meaning
Both parties aware: no contract unless both parties intended the same meaning
One party aware: binding contract based on what the ignorant party reasonably believed to be the meaning of the ambiguous word(s)
Mutual Mistake of Fact
If both parties are mistaken about existing facts, the contract may be voidable by the adversely affected party if:
- The mistake concerns a basic assumption on which the contract is made
- The mistake has a material effect on the agreed-upon exchange
- The party seeking avoidance did not assume the risk of the mistake
BUT, mutual mistake is not a defense if the party asserting mistake as a defense bore the risk that the assumption was mistaken
Unilateral Mistake
If only one of the parties is mistaken, the mistake will not prevent formation of a contract if the nonmistaken party knew or had reason to know of the mistake
Mistake by Transmission (intermediary)
The message as transmitted is operative unless the other party knew or should have known of the mistake
Misrepresentation
Fraudulent Misrepresentation (Fraud in the Inducement): If a party induces another to enter into a contract by using fraudulent misrepresentation, the contract is voidable by the innocent party if they justifiably relied on the misrepresentation.
Material Misrepresentation: Regardless of whether or not it is fraduluent, it is voidable by the innocent party if the innocent party justifiably relied on the misrepresentation.
A misrepresentation is material if it would induce a reasonable person to agree or the maker knew it would induce this particular person to agree
Absence of Consideration
No contract exists!
Illegality
If the consideration or subject matter of a contract is illegal, the contract is void
Unconscionability
The court may modify or refuse to enforce a contract/a provision to avoid “unfair” terms
Common Instances of Procedural Unconscionability
- Inconspicuous Risk-Shifting Provisions
- Contracts of Adhesion, i.e. “take it or leave it”
- Exculpatory Clauses
- Limitations on Remedies
When does unconscionability “expire?”
After contract formed! We are only considered with the contract, not the dealing surrounding it
What are court’s options if it finds an unconscionable clause?
- Refuse to enforce the contract
- Enforce the remainder of the contract without the unconscionable clause
- Limit the application of the clause
Statute of Frauds: General Requirement
Must be evidenced by a writing signed by the party sought to be bound
Statute of Frauds: Agreements Covered
MYLEGS
- Marriage
- Year or longer
- Land sale
- Executor
- Goods $500+
- Sureties
SoF: Marriage
This applies to promises that induce marriage by offering something of value
SoF: Performance Not WIthin 1 Year from Date of Contract
If it by its terms cannot be performed within one year. The date runs from the date of AGREEMENT, not performance
SoF: Interest in Land
This includes not only real property sale, but also:
- Leases for more than one year
- Easements for more than one year
- Mortgages
- Fixtures
- Minerals
SoF: Executor or Administrator
A promise by an executor or administrator to pay the estate’s debts out of their own funds must be evidenced by a writing
SoF: Goods Priced at $500 or More
A contract for the sale of goods for a price of $500 or more generally must be evidenced by a writing. Note that the contract is not enforceable beyond the quantity of goods shown in the writing
Sof: Suretyship Promises (promises to pay debt of another)
A promise to answer for the debt or default of another must be evidenced by a writing
Effect of Noncompliance with the Sof?
The contract is unenforceable at the option of the party to be charged
When is a contract removed from the SoF?
- Contract modifications
- Land Sale Performance: payment (whole or in part), possession, and valuable improvements
WHen is writing not required?
- Specially Manufactured Goods
- Admissions in Pleadings or Court
- Merchants: confirmatory memo rule
Remedies if Contract Within Statute
If a contract violates the SoF, a aprty van sue for the reasonable value of the services or the restitution of any other benefit that has been conferred
