Week 8- Statute of Frauds and Defenses Flashcards
What is sovereign debt?
Debt issued by nation-states, usually in the form of bonds.
What typically happens when a nation-state repays its sovereign debt?
It is usually repaid without incident.
What is a common outcome when a nation-state defaults on its sovereign debt?
Debt restructuring and bondholders taking a ‘haircut’.
What significant event occurred in 2001 regarding Argentina’s sovereign debt?
Argentina defaulted on more than $82 billion worth of bonds.
What is a ‘haircut’ in the context of sovereign debt?
A significant loss taken by creditors on the debt.
How did Argentina resolve its debt crisis in 2005 and 2010?
By reaching an agreement with about 93% of its creditors to issue new bonds.
What percentage of the original bond value were the new bonds worth?
Less than 30 percent of the original bonds.
Who are referred to as ‘vulture funds’ in the context of Argentina’s debt?
Investors holding original bonds who refused to agree to the debt restructuring.
What legal action did NML Capital take against Argentina?
Filed suit in New York federal district court to recover on the original bonds.
What clause did the court rule Argentina violated?
‘Pari passu’ clause, promising equal treatment to all creditors.
What did the district court issue against Argentina regarding its payments?
A broad injunction against payments to creditors without honoring original bondholders’ claims.
Was there an insolvency procedure for sovereign states under international law?
No, there is currently no insolvency procedure.
What did NML Capital seek to attach in Ghana in 2013?
The Argentine frigate, Libertad.
What was the outcome of the Ghanaian Supreme Court ruling regarding the ship?
The ship was ordered released as a matter of public policy.
What exception allowed the attachment of Argentina’s sovereign funds in New York?
The commercial activity exception to the FSIA.
What was the U.S. Supreme Court’s decision regarding Argentina’s sovereign assets on June 16, 2014?
Upheld broad, worldwide post-judgment discovery and execution order.
True or False: The International Monetary Fund always approves sovereign debt restructuring.
False.
What is the primary focus of the statute of frauds?
The statute of frauds addresses whether certain contracts must be in writing to be enforceable.
It is the eighth and final contract defense listed in Diagram 5-1.
What are the three potential issues raised by statute of frauds problems?
- Is the contract subject to a statute of frauds?
- Does the contract comply with the writing requirement?
- Is the contract enforceable despite non-compliance?
These issues help determine the enforceability of a contract under the statute of frauds.
When can you stop analyzing a contract under the statute of frauds?
If the contract is not subject to a statute of frauds.
Many contracts do not need to be in writing.
What must a common law contract comply with to be enforceable?
It must be in writing and signed by the party against whom enforcement is sought.
This applies when a contract is subject to a common law statute of frauds.
What is promissory estoppel?
A doctrine that allows recovery for reliance on a promise, even if the contract fails to comply with the statute of frauds.
It requires a promise inducing reliance, actual reliance, and a showing that injustice can only be avoided by enforcing the promise.
List the types of contracts subject to the statute of frauds.
- Land sale contracts
- Suretyship contracts
- Contracts that cannot be performed within one year
- Contracts for the sale of goods for $500 or more
- Contracts made in consideration of marriage
- Contracts by executors to answer for a duty owed by their decedents
The first three types are most frequently encountered in practice.
What is required for a land sale contract to comply with the statute of frauds?
It must be in writing and signed by the party against whom enforcement is sought.
This includes any interest in land.
Define a suretyship contract.
A contract where a surety promises to pay or perform on behalf of another party to a contract.
For example, if one party defaults on a loan, the surety agrees to fulfill the obligation.
When does the statute of frauds apply to suretyship contracts?
If the person owed money knows of the suretyship relation or if the surety’s promise is conditioned on a default.
This ensures that the surety’s promise is enforceable.
What is the requirement for contracts not to be performed within one year?
They must comply with the statute of frauds if performance cannot possibly occur within one year from the contract date.
If any possibility exists for performance within one year, no written contract is necessary.
What does a contract need to comply with the common law statute of frauds?
It must be evidenced by a writing that identifies the subject, indicates a contract has been made, includes essential terms, and is signed by the party against whom enforcement is sought.
This does not require a formal contract.
Can a contract be enforceable despite failing to meet the writing requirement?
Yes, if the elements of promissory estoppel are satisfied or if both parties fully perform.
Courts allow enforcement of unwritten contracts under certain conditions.
What is a breach by non-performance?
A breach where a party does not perform her obligations at all
Example: Chrissie Contractor never shows up to build the house.
What is a breach by defective performance?
A breach where a party renders performance that is incomplete or substandard
Example: Chrissie builds a house without a promised fireplace.
Why is the distinction between breach by non-performance and breach by defective performance important?
Different remedies apply for each type of breach, affecting the compensation for harm caused.
What is the traditional goal of contract remedies?
Compensation of the promisee for the loss resulting from breach
Punitive damages are generally not awarded for breach of contract.
What is the ordinary remedy for breach of contract?
An award of damages designed to give the party a monetary substitute equivalent to the value of promised performance.
What are the two main sub-topics of damages?
- Measure of damages
- Limitations on damages
What is the core goal in awarding damages for a breach of contract?
To place the plaintiff in the exact same economic situation as if the contract had been fully performed.
What does the acronym ‘Four Ps’ stand for in the context of damages?
Put the Plaintiff in the Performance Position.
What are damages a substitute for?
A suffered loss.
When can damages not be recovered?
If the party suing for breach did not suffer any harm.
What is the difference between contract damages and tort damages?
Contract damages are measured by the post-performance position, while tort damages are measured by the pre-tort position.
What are ‘general damages’?
Damages that any party who suffered a similar wrong would incur.
How are general damages measured for breach by non-performance?
Damages = FMV of Defendant’s Performance – Contract Price.
What is the formula for calculating general damages when a buyer breaches a contract?
Damages = Contract Price – FMV of Plaintiff’s Performance.
What is the significance of the fair market value (FMV) in calculating damages?
It represents what a willing buyer would pay for the defendant’s performance.
What are ‘special damages’?
Damages necessary under particular circumstances to ensure the plaintiff ends up in the same economic position as if the contract had been performed.
What is the aim of awarding damages?
To give the plaintiff the economic equivalent of performance, not a windfall.
What are the two alternative measures of general damages for breach by defective performance?
- Loss in value caused by the breach
- Cost of repair (COR)
What is the formula for measuring damages for defective performance?
Damages = FMV as Promised – FMV as Received.
What are special damages?
All losses, other than general damages, caused by a breach
Special damages are sometimes called ‘indirect’ damages and include reliance and consequential damages.
What are the two main categories of special damages?
- Reliance damages
- Consequential damages
What do reliance damages include?
Expenditures made while preparing to perform or performing a contract
Examples include costs for renting equipment or advertising for replacement buyers.
In what scenario might reliance damages not be recoverable?
When the plaintiff is fully compensated by an award of general damages
Give an example of reliance damages.
Expenses of renting an excavator to dig a swimming pool
Another example is a seller’s purchase of a special car cover for a car not delivered.
What are consequential damages?
Indirect losses resulting from a breach of contract
Includes loss of profits, property damage, or personal injuries caused by defects.
What is meant by ‘Costs and Losses Avoided’?
Savings a non-breaching party realizes due to a breach
For example, a buyer saves money if a seller repudiates a contract.
How can a breach of contract save a party money?
By preventing them from incurring costs they would have paid otherwise
What is the impact of a buyer contracting to purchase a house for more than its worth?
The loss avoided is deducted from the buyer’s overall damage award
What types of breaches do the first three damage cases address?
Breaches by non-performance
What types of breaches do the next two damage cases address?
Breaches by defective performance
What are the elements of duress?
Elements include economic duress, undue influence, and illegality.
What categories of incapacity are discussed?
Categories include minority, mental incapacity, and intoxication.
What is economic duress?
Economic duress is a form of duress where a party is forced to agree to a contract due to a wrongful economic threat.
Why is proving duress difficult?
It is hard to prove that there has been something that truly precludes free will.
What is the significance of the Austin Instruments case?
It is a rare instance of economic duress that helps clarify the concept.
What was the relationship between Laurel and Austin in the Austin Instruments case?
Laurel was the general contractor with a contract with the Navy, and Austin was a subcontractor providing necessary gears.
What did Austin demand from Laurel to continue fulfilling their contract?
Austin demanded higher payments for the existing contract and to be hired for a second contract at a higher rate.
What choice did Laurel ultimately make regarding Austin’s demands?
Laurel accepted Austin’s demands to fulfill their contractual obligations with the Navy.
What was the outcome of Laurel’s lawsuit against Austin?
Laurel sought recovery for the overcharge after paying Austin more than originally agreed.
What constitutes a wrongful act in the context of duress?
A wrongful act includes threatening to breach a contract.
What must be established for a contract to be voidable due to duress?
It must be shown that the party was forced to agree by means of a wrongful threat that precluded free will.
Fill in the blank: A contract is voidable on the grounds of duress when it is established that the party making the claim was forced to agree to it by means of a _______.
[wrongful threat]
What does it mean when there is no practical choice in a duress case?
It means the threatened party cannot obtain the goods from another source.
True or False: A mere breach of contract can be sufficient for a claim of duress.
False
What is required to prove that a wrongful act precludes free will?
It must appear that the threatened party could not obtain the goods from another source.
What did Laurel do when Austin stopped delivering under the existing contract?
Laurel sought bids from other manufacturers but could not find a timely replacement.
What was the primary concern for Laurel in the Austin Instruments case?
Laurel’s primary concern was fulfilling its obligations under the contract with the Navy.
What is an example of a wrongful act in contract law?
A threat to breach a contract.
What precludes free will in a contractual agreement?
No choice due to only one bad option.
In the case discussed, what was the consequence of not being able to fulfill the contract with the Navy?
Laurel would be in breach of contract.
What did Laurel need from Austin to fulfill their contract with the Navy?
The actual gears.
Why might Laurel not sue Austin for breach of contract?
They needed the gears, not just money damages.
What does the term ‘duress’ refer to in contract law?
Coercion that affects free will in contract agreements.
What is the significance of proving a lack of free will in contract law?
It is difficult to prove and requires thorough analysis of facts.
What is the primary legal issue in the Odorizzi case?
Whether pressure from school officials constitutes undue influence.
What was the legal status of being gay in California at the time of the Odorizzi case?
It was against the law.
What did the principal and superintendent pressure Odorizzi to do?
To resign from his job immediately.
What does ‘undue influence’ mean in the context of contract law?
Improper pressure that can make a contract voidable.
Why is the Odorizzi case not classified as duress?
There was no wrongful act at the time of the events.
What did Odorizzi seek after the charges against him were dropped?
To get his job back.
What is the contract in question in the Odorizzi case?
The resignation contract.
What is required to establish duress in contract law?
A wrongful act that precludes free will.
What cultural stereotypes can be reinforced by legal cases?
Judges’ language and societal depictions.
What does the case illustrate about the legal system’s treatment of marginalized groups?
It reflects historical injustices, such as against LGBTQ+ individuals.
Fill in the blank: A threat to breach a contract is considered a _______.
[wrongful act]
Fill in the blank: The lack of free will in a contractual agreement can arise when there is _______.
[no choice]
True or False: The principal acted unlawfully by suspending Odorizzi.
False.
What must be proven to show that a contract was signed under undue influence?
Improper pressure from a party in a position of power.
What authority does the principal have regarding the plaintiff?
The principal has the right to suspend the plaintiff.
Suspending the plaintiff wouldn’t have been wrongful in a legal sense.
What is the significance of the hearing process mentioned?
The hearing process will be very embarrassing for the plaintiff, but it does not eliminate his choice.
The plaintiff can either resign or refuse to resign and face the hearing.
What does undue influence involve?
Undue influence involves excessive pressure to persuade someone vulnerable to such pressure.
It requires a dominant party applying pressure to a subservient party.
What is the definition of undue influence according to the court?
Persuasion which tends to be coercive in nature, overcoming the will without convincing the judgment.
The hallmark of such persuasion is high pressure.
What are the ingredients necessary to establish undue influence?
- Weakness (vulnerability)
- Strength (excessive pressure)
- Pressure applied by a dominant party
This imbalance is crucial in assessing undue influence.
List some characteristics that suggest excessive persuasion might be present.
- Discussion of the transaction at an unusual or inappropriate time
- Consummation of the transaction in an unusual place
- Inconsistent demands for immediate completion
- Extreme emphasis on consequences of delay
- Use of multiple persuaders against a single party
- Absence of third-party advisors
- Statements indicating no time to consult advisors
Presence of one or more of these elements may indicate over persuasion.
What condition did the plaintiff claim affected his judgment during resignation?
The plaintiff claimed he was under severe mental and emotional strain due to recent events.
He had just been arrested and was sleep-deprived.
What did the court state about the representatives of the school board?
They used over persuasion and imposition to secure the plaintiff’s resignation through high-pressure tactics.
They suggested reliance on their advice and urgency in decision-making.
What is a non-compete agreement?
A contract that prohibits an individual from operating a business in a certain area for a specified time after leaving employment.
Such agreements can be subject to scrutiny for legality and public policy.
What were the four issues on appeal in the case regarding non-compete agreements?
- Are restrictive covenants void for public policy?
- Is there adequate consideration for such covenants?
- Are the restrictions reasonable as to time and area?
- Can a court modify unreasonable restrictions using equitable principles?
These issues guide the assessment of the validity of non-compete agreements.
What does the term ‘illegality’ refer to in the context of contracts?
It refers to contracts that are against public policy, even if they do not violate a specific law.
Non-compete agreements are often evaluated under this principle.
True or False: The court found that there was fraud or misrepresentation in the case.
False.
The court found no allegations of false information or reliance on false information.
Fill in the blank: Undue influence involves _____ pressure to persuade someone vulnerable.
[excessive]
This pressure can stem from a relationship of trust or power imbalance.
What happens if a contract violates general public policy?
The court may modify the terms using equitable principles.
What is the core issue regarding restrictive covenants?
Whether the restrictive covenant is necessary for the protection of the business or goodwill of the employer.
What is the balancing test applied by the court regarding restrictive covenants?
The court assesses if the restraint on the employee is necessary to protect the business while also considering the employee’s right to work.
List some professions where public policy may restrict non-compete clauses.
- Doctors
- Lawyers
- Grocery store operators
- Bankers
True or False: All non-compete agreements are automatically void.
False
What is necessary for a contract to exist?
There must be consideration, which is a mutual exchange of legal detriment.
What does the court say about the specific terms of a restrictive covenant?
The terms may be unreasonable and unduly harsh, curtailing the employee’s ability to earn a livelihood.
What evidence did the court consider regarding the number of horses in the area?
There are 3000 horses, suggesting that there is room for additional blacksmiths without significant competition.
What can a court do if a contract is found to be unreasonable?
The court can modify the contract terms using equitable principles.
What is the difference between voiding a contract and modifying a contract?
Voiding a contract eliminates it entirely, while modifying adjusts the terms to make them reasonable.
What does the dissenting opinion argue in relation to non-compete agreements?
The dissent argues that no non-compete agreement is appropriate and believes the entire agreement should be thrown out.
What core idea should one understand regarding incapacity in contract law?
One must fall into a category of incapacity at the time of the contract and raise the defense in a reasonable time.
What are the categories of incapacity one should be familiar with?
- Mental incapacity
- Intoxication
- Minority
Fill in the blank: The court’s balancing test involves protecting the business owner while also protecting the ability of employees to become ______.
independent earners
What is the significance of equitable principles in contract law?
They allow courts to modify contracts instead of voiding them entirely.
What is the legal detriment the employee faced in the context of the contract?
The employee learned a trade that the employer taught.
What is the role of public policy in determining the validity of restrictive covenants?
Public policy helps assess whether the restraint is overly burdensome on the employee and necessary for business protection.
What is the maximum radius discussed in the context of non-compete clauses?
100 miles
True or False: The court believes that all covenants not to compete should be void regardless of context.
False
What principle is applied when modifying a contract to make it more reasonable?
Equitable principles
What does each periodical installment payment include under the present lease?
The amount of each periodical installment payment shall be inclusive of, and not in addition to, the amount of each stolen payment under prior leases
This indicates that the payment structure does not allow for additional charges beyond what is owed from previous agreements.
What happens to all payments made by you under the lease?
All payments made shall be credited pro-rata on all outstanding leases, bills, and accounts due to the company
This means that payments will be distributed proportionately to all debts owed at the time each payment is made.
True or False: Payments under the current lease are in addition to any prior lease payments.
False
The payments under the current lease are inclusive of prior lease payments.
Fill in the blank: The amount of each periodical installment payment shall be _______ of the amount of each stolen payment.
inclusive
This emphasizes that the current payments encompass previous obligations.
What is the consequence of making payments under the lease?
Payments shall be credited pro-rata on all outstanding leases, bills, and accounts due to the company at the time each payment is made
This indicates a systematic approach to managing multiple obligations.
when does statute of frauds apply?
- Contracts made in consideration of marriage
- contracts which cannot be completed within 1 year
- Land sale contracts
- Contracts by an executor of an estate (if the executor promises to pay money on behalf of that estate)
- Guarantee contracts (AKA surety)
- Sale of goods for $500 or more
Statute of Frauds
What kind of writing is needed under SOF?
You require some writing which proves that there is an agreement. This does not have to be a contract, but it does require:
1. The subject of the contract (IE this is regarding the loan being guaranteed)
2. Proof of the agreement- some evidence of mutual assent IE ‘we promise to’.
Unconscionability
Procedural v Substantive Unconscionability
Procedural
- Unfair negotiations
Substantive
- courts will sometimes say this shocks the conscience.
What is the primary goal of tort damages?
Making somebody whole, putting them into the same position they were in before the tort happened.
What is the difference between general damages and expectation damages in contracts?
General damages are about what the non-breaching party expected to receive, while expectation damages focus on the benefit they anticipated from the contract.
What are expectation damages?
They reflect what the non-breaching party expected to gain from the contract.
What is the formula to calculate expectation damages?
Expected benefit minus expected cost.
In a hypothetical where Peter expects to pay $1 for an apple worth $2, what is his expected benefit?
$2.
If Peter expected to give $1 for an apple worth $2, what is his expected profit?
$1.
What are special damages?
Damages that can be added on top of the benefit of the bargain.
What types of damages fall under special damages?
- Reliance damages
- Consequential damages
What are reliance damages?
Money spent in reliance on the contract being performed.
What constitutes money spent in reliance?
- Money spent performing the contract
- Money spent preparing to perform the contract
If Peter spends $2.50 to withdraw cash for a $1 payment, what kind of damages does this represent?
Reliance damages.
What are consequential damages?
Money lost due to the breach of contract that disrupts plans.
Can personal injury be considered a type of consequential damage?
Yes, if it results from the breach.
What example illustrates personal injury damages due to a breach?
Peter trips over a backpack and injures himself after realizing he did not receive the apple.
Can property damage be included in consequential damages?
Yes, if it occurs as a result of the breach.
What is a key principle regarding damages in contract law?
You cannot add the same cost or loss twice.
What is restitution in contract law?
A principle requiring a party who is unjustly enriched to return the benefit received.
What does the benefit of the bargain represent?
The expected profit or value the non-breaching party anticipated from the contract.
What happens if you account for both benefit of the bargain and reliance damages?
You must ensure not to double count the same dollar amount.
True or False: Reliance damages can include money spent in anticipation of the other party’s performance.
True.
Fill in the blank: The fair market value of the apple in the hypothetical is _______.
$2.
What is the total amount of damages Peter could claim if he lost $1 in expectation, spent $1 performing, and incurred $2.50 in preparation?
$4.50.
What is the role of fair market value in determining damages?
It helps assess the value of what was expected versus what was actually received.
What is the expected outcome for Peter if he pays $1 for an apple worth $2 but does not receive it?
He expects to be $1 richer but ends up losing $1.
What is restitution in the context of unjust enrichment?
Restitution is when a party who is unjustly enriched must disgorge the benefit received.
What does it mean to ‘disgorge’ in legal terms?
To disgorge means to give back or return something, typically money, that was unjustly obtained.
Can you count the same dollar twice in calculating damages?
No, you can never count the same dollar twice in calculating damages.
What are general damages?
General damages are compensation for loss that does not have a specific dollar amount, such as loss of value.
What are reliance damages?
Reliance damages are compensation for expenses incurred in preparation for or performance of a contract.
What are consequential damages?
Consequential damages, also known as special damages, are losses that occur as a direct result of a breach of contract.
True or False: You can add special damages to general damages in a claim.
True
What should be subtracted from damages calculations?
Any expenses or losses avoided should be subtracted from damages calculations.
What is the purpose of subtracting avoided losses in damages?
To prevent giving the non-breaching party a windfall.
What is the contract price in Paula’s case?
$250,000
What was Paula’s down payment for the land?
$25,000
Fill in the blank: Reliance damages include money spent in preparation for _______.
[performance]
What were the total reliance damages Paula incurred?
$26,250
What was the resale contract price Paula expected to earn?
$275,000
What is the amount of consequential damages Paula expected from the resale?
$25,000
What is the total damages Paula is entitled to after her calculations?
$51,250
What does ‘give minus get’ refer to in legal damage calculations?
It refers to the calculation method where the amount given is subtracted from the amount received.
What are the three components of Paula’s damages?
- Reliance damages: $26,250
- Consequential damages: $25,000
- General damages: $0
What is the significance of the market value in Paula’s case?
The market value is the same as the contract price, indicating no benefit of the bargain damages.
How do reliance damages and consequential damages differ?
Reliance damages compensate for expenses incurred due to reliance on a contract, while consequential damages reflect lost profits from a breach.
