Specific Scenarios Flashcards
Elements of Option Contracts
Restatement makes option binding if:
- There is an offer (promise)
- Offeror should reasonably expect offer to induce action or forbearance of substantial character by offeree before acceptance
- Offeree does act or forbear
- Injustice can be avoided only by enforcement of option
Elements of a Firm Offer
UCC 2-205 says an offer is not revocable if:
- Made by a merchant AND
- Signed in writing by the merchant AND
- Gives assurance it is not revocable
Negates Restatement 25 requirement of consideration for option contract
Define Express Warranty
An affirmation of fact or promise or description or sample/model that becomes the basis of the bargain.
Define Implied Warranty of Fitness
Seller has reason to know of particular purpose and buyer is relying on seller’s skill or judgment.
Define Implied Warranty of Merchantability
Goods that will pass without objection in the trade.
Minor Rule
K entered into with minor voidable by minor (rescission)
Issues:
- after 18 yrs, continued retention of article may result in ratification
- tortious conduct may affect ability to avoid K
- Ignorance of age is no excuse
- money must be returned but may deduct for depreciation or damages
- Marriage - Arkansas - marriage does not remove ability of minor to avoid K
Mental Capacity
K is voidable by person with mental defect or illness if:
- Person is unable to understand with reasonable manner nature and consequences of transaction (cognitive test) OR
- Unable to act in reasonable manner in relation to transaction and other person has reason to know condition (volitional test)
Issues:
- Majority uses cognitive test, including Arkansas
- Must restore what obtained under the K unless circumstances indicate to court unjust…like improper conduct by side without mental illness
- May ratify contract based upon conduct once regained capacity
Intoxication
K is voidable by person that was intoxicated at the time of K formation.
Issues:
- Must restore what obtained under the K unless circumstances indicate to court unjust…like improper conduct by side not intoxicated
- May ratify K based upon conduct once sober
Duress
K is voidable if compelled by duress
- Involuntary acceptance of terms
- No alternative AND
- Coercive, wrongful and oppressive acts by other party
Issues:
- Majority: induced by threat? (Subjective test)
- Must be person of ordinary firmness and courage (objective test)
- circumstances must leave the party with no reasonable alternative
- may include threat of criminal or tortious act, criminal prosecution, breach of good faith, and fair dealing
Undue Influence
K is voidable if it was compelled by undue influence
Factors MAY include:
- Discussion at unusual time
- Consummation of K at unusual place
- Demand done now!
- Extreme emphasis on untoward consequences of delay
- Multiple persuaders v. Single person
- Absence of 3rd party advisor
- Statements made to servient person no time to consult attorney or financial advisor
Misrepresentation
K is voidable if entered into due to a material misrepresentation.
- Intent to induce action AND
- Knows or believes representation is not in accordance with facts OR
- No confidence in representation made OR
- No basis for representation made
Material misrepresentation need:
A. Likely induce a reasonable person to manifest assent OR
B. Maker knows likely induce recipient to manifest assent
Nondisclosure Rule
K is voidable if entered into due to non disclosure
- Duty to disclose material facts not observable and to correct mistake of other party
- Material is reasonable person would attach importance to fact in making a decision
Unconsionability
K is voidable if term is unconscionable at the time the K was entered
Majority Rule needed:
- Procedural unconscionability - lack of choice in bargaining process or fraud AND manner the K entered into questionable (maze of terms, lack of understanding)
- Substantive unconscionability - terms not fair
Issues:
-did not read K no excuse
Public Policy Rule
K is voidable if it violates public policy
Issues:
- what violates public policy?
- primary object of contract violates law (like gambling)(may blue pencil strike a portion that is ancillary)
- Usury
- Restrictive Covenants (may violate anti-trust laws)
- K where one party required to have license to do the act specified in K and does not have license
- K relating to certain family law matters
Mutual Mistake Rule
Both parties make mistake at time of K formation
- Mistake must be material AND
- Relate to basic assumption under contract
Issues:
- K voidable, but not voidable if agreed to risk
- A party assumes risk of mistake by agreement or aware has limited knowledge at time of K but proceeds treating such knowledge as sufficient or court deems reasonable party bear risk
- Relief may be reformation, restitution, or otherwise
