Requirement That No Defenses Exist

Question 1

Defenses Based on Lack of Capacity

Answer 1

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

Question 2

Contracts of Infants (Minors)

Answer 2

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.

Question 3

Mental Incapacity

Answer 3

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.

Question 4

Intoxicated Persons

Answer 4

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

Question 5

Duress and Undue Influence

Answer 5

Contracts induced by duress or undue influence are VOIDABLE and may be rescinded as long as they are not affirmed

Question 6

Absence of Mutual Assent: Ambiguous Contract Language

Answer 6

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)

Question 7

Mutual Mistake of Fact

Answer 7

If both parties are mistaken about existing facts, the contract may be voidable by the adversely affected party if:

1. The mistake concerns a basic assumption on which the contract is made
2. The mistake has a material effect on the agreed-upon exchange
3. 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

Question 8

Unilateral Mistake

Answer 8

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

Question 9

Mistake by Transmission (intermediary)

Answer 9

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

Question 10

Misrepresentation

Answer 10

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

Question 11

Absence of Consideration

Answer 11

No contract exists!

Question 12

Illegality

Answer 12

If the consideration or subject matter of a contract is illegal, the contract is void

Question 13

Unconscionability

Answer 13

The court may modify or refuse to enforce a contract/a provision to avoid “unfair” terms

Question 14

Common Instances of Procedural Unconscionability

Answer 14

1. Inconspicuous Risk-Shifting Provisions
2. Contracts of Adhesion, i.e. “take it or leave it”
3. Exculpatory Clauses
4. Limitations on Remedies

Question 15

When does unconscionability “expire?”

Answer 15

After contract formed! We are only considered with the contract, not the dealing surrounding it

Question 16

What are court’s options if it finds an unconscionable clause?

Answer 16

1. Refuse to enforce the contract
2. Enforce the remainder of the contract without the unconscionable clause
3. Limit the application of the clause

Question 16

Statute of Frauds: General Requirement

Answer 16

Must be evidenced by a writing signed by the party sought to be bound

Question 17

Statute of Frauds: Agreements Covered

Answer 17

MYLEGS

1. Marriage
2. Year or longer
3. Land sale
4. Executor
5. Goods $500+
6. Sureties

Question 18

SoF: Marriage

Answer 18

This applies to promises that induce marriage by offering something of value

Question 19

SoF: Performance Not WIthin 1 Year from Date of Contract

Answer 19

If it by its terms cannot be performed within one year. The date runs from the date of AGREEMENT, not performance

Question 20

SoF: Interest in Land

Answer 20

This includes not only real property sale, but also:

1. Leases for more than one year
2. Easements for more than one year
3. Mortgages
4. Fixtures
5. Minerals

Question 21

SoF: Executor or Administrator

Answer 21

A promise by an executor or administrator to pay the estate’s debts out of their own funds must be evidenced by a writing

Question 22

SoF: Goods Priced at $500 or More

Answer 22

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

Question 23

Sof: Suretyship Promises (promises to pay debt of another)

Answer 23

A promise to answer for the debt or default of another must be evidenced by a writing

Question 24

Effect of Noncompliance with the Sof?

Answer 24

The contract is unenforceable at the option of the party to be charged

Question 25

When is a contract removed from the SoF?

Answer 25

1. Contract modifications
2. Land Sale Performance: payment (whole or in part), possession, and valuable improvements

Question 26

WHen is writing not required?

Answer 26

1. Specially Manufactured Goods
2. Admissions in Pleadings or Court
3. Merchants: confirmatory memo rule

Question 27

Remedies if Contract Within Statute

Answer 27

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