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Contracts
Modules #7-8
| Question | Answer |
|---|---|
| Defenses to Contract Enforcement | Despite the existence of a contract, one or both parties may have a defense to enforcement of the contract based on defects in the bargaining process, incapacity of the parties, or public policy constraints. Help to reinforce justice. |
| Defenses involving agreements by a party who lacked the capacity to contract by being too young or cognitively disable to engage in the assent process. | This set includes infancy, mental illness or defect, intoxication. |
| A second set of defenses involving circumstances in which one or both parties assent was fundamentally flawed, looks like parties assented but they really did not. | This set includes mistake, misrepresentation, duress, undue influence, and unconsciousability. |
| Final set of defenses involves agreements in which the parties mutual asset was unimpaired but the substance of the agreement violates societal norms. | This set involves public policy and violation of societal norms the court deems these contracts to be void and enforcement of the agreement can be challenged by either party as well as by third parties in appropriate circumstances. |
| Under all the defenses except for public policy and contracts with persons under guardianship due to a formal adjudication of incompetency, a contract is voidable. (True or False) | True (voidable except for contracts for public policy and contracts w/ persons under guardianship due to a formal adjudication of incompetency) |
| What does it mean to avoid an agreement? | Legally taking action to rescind, nullify, or also known as terminate a contract. Essentially making the contract unenforceable usually due to mistake, fraud, duress, lack of capacity or unconsciousability that occurred during contract formation. |
| Unconscionable remedies | If determined to be unconsciousable, the court has additional remedies available: 1)equitable discretion to void the contract, 2)to void the unconscionable clause or 3) to limit application of the offending clause to eliminate the unconscionability. |
| Unconscionable defined | Means not reasonable, unfair or not right. |
| Infancy Elements R§14 | Unless a statute provides otherwise, a natural person has the capacity to incur only voidable contractual duties until the beginning of the day before the persons 18th birthday. |
| Disaffirm definition | to refuse to abide by. You have a reasonable time to disaffirm the contract. |
| Affirmance definition | upon age of majority (after age 18) |
| Recession definition | to rescind the contract |
| Avoidance definition | to avoid or terminate the contract. Party can decide if they eat to go through with voiding the contract or not. |
| Void definition | Makes the contract void. small amount of cases this occurs; usually in public policy cases. |
| "Bearing a/the risk" definition | "bearing risk of mistake" means that a party to a contract is responsible for any negative consequences arising from an error in information or understanding about the contract subject matter, essentially accepting the potential loss if a mistake occurs. |
| Assertion definiton | A strong statement or claim you say, its expressed (not a belief) that someone ,makes claiming it is true or valid, especially to enforce a legal right or as part of an argument. |
| Mistake Defined (R§151) | A belief that is not in accord with the facts. Facts differ from promises, predictions, or opinions. Both or one partie(s) were mistaken about a fact at the time of contract formation, the disadvantaged party can attempt to avoid the contract. Erroneous. |
| Mistake Elements (Mutual) (R§151) | 1)mistake of both parties at the time the contract is made, 2)had a material effect, 3)contract is avoidable, 4)does not bear risk of mistake |
| Unilateral Mistake (R§53) | More difficult to get relief for a unilateral mistake than a mutual mistake. One party was mistaken by a fact at the time of contract formation. Belief not in accord w the facts. |
| Mutual Mistake (§152) | Both parties were mistaken about a fact at the time of contract formation. Belief not in accord w the facts. |
| Mistake Elements (Unilateral) (R§153) | 1)mistake of a party at the time the contract is made, 2)had a material effect, 3)contract is avoidable, 4)does not bear risk of mistake, and 4)prove unconsciousability or that the other party had reason to know of the mistake or his fault caused it |
| Misrepresentation Defined | Mistaken and misled. a party can mislead another by affirmatively stating a mistruth, by taking affirmative steps to hide the truth or by remaining slient and permitting other person to misunderstand. An assertion of fact not a belief. |
| An assertion of fact: | An assertion of fact differs from belief in that is not a belief rather one of fact. Differs from mistake for this reason. |
| Affirmative Misstatement | deliberate lie |
| Concealment | hiding truth by an affirmative act |
| Nondisclosure | keeping slient |
| Duress Defined | When a party is forced or coerced into agreeing to enter a contract so that his apparent assent was not truly voluntary. Agreement was compelled by threats or pressure. Includes economic duress. |
| Duress Elements | 1)coercion, 2)putting a person in such fear that he is lacking of the quality of mind essential to the making of a contract and, 3)contract was thereby obtained as a result of this state of mind |
| Threats are improper if they: | 1)are a crime or tort, 2)criminal prosecution, 3)use of civil process in bad faith, 4)breach of duty of good faith and fair dealing under a contract and in some cases economic situations or when one party is at the mercy of another party |
| Undue Influence Defined | When a party is forced or coerced into agreeing to enter a contract so that his apprenticeship assent was not truly voluntary. Unfair persuasion by a party on another. Based on claims other party obtained assent by coercing agreement. Contracts voidable |
| Undue Influence Elements | 1)unfair persuasion must be exercised against someone under domination of persuader, 2)exercised against someone justified in assuming the persuader will not act in a manner inconsistent with his well fare. |
| Unconsciousability | Relates to contract as it was created and does not police against unfair conduct during the performance of the contract. The requirement of good faith sometimes performs that function. Raised by the contracting party with less knowledge, or power |
| Releases | in some circumstances can release reformed, avoid in full, or avoid part of it. |
| Warranties | language in this restatement closely mimics that of rules governing warranties in a sale by a seller of goods or of other kinds of property. |
| Reformation | Party may choose to seek relief this way, a court ordered change to a written contract to reflect the parties original intentions. Equitable remedy when a contract doesn't accurately represent the agreement between parties original intentions. |
| R§154-When a Party Bears a Mistake | 1)risk is allocated to him by agreement of the parties, 2)he is aware at the time the contract is made that he has only limited knowledge w respect to the facts to which the mistake relates but treats knowledge as sufficient, 3)court allocates risk |
| R§157--Effect of Fault of Party Seeking Relief | a mistaken party's fault in not learning the facts before making a contract does not prevent them from avoiding or reforming the contract. |
| R§158--Relief including Restitution | Good faith in knowing or discovering the facts before making a contract does not bar a party from avoidance or reformation under the rules in this chapter. |
| R§12-Capacity to Contract | legal capacity to contract, and reasonable ability (as long as no mental impairment, not intoxicated, not an infant) |
| R§16--Intoxication | incurs only voidable duties by entering into a transaction if the other party has reason to know that by intoxication that person is unable to understand the nature of their consequences or they are unable to act in a reasonable manner. |
| R§14--Infants | ability to recognize a contract as voidable until person is 18 yrs old then can no longer use infancy as a defense to contract formation. |
| R§15--Mental Illness or Defect | contract can become voidable if the person is unable to understand the contract or unable to act in a reasonable manner. If the other party is w/o knowledge of the other parties mental illness, may not be able to get out of the contract if perf in w/part |
| R§159--Misrepresentation | A misrepresentation is an assertion that is not in accord w/ the facts. |
| R§160--When Action is Equivalent to Concealment | Action intended to or known to be likely to prevent another from learning a fact is equivalent to an assertion that the fact does not exist. |
| R§161--When non-disclosure is equivalent to an assertion | 1)knows fact disclosure prevent some previous assertion from being misrepresented or fraud, 2)knows disclosure of fact would correct other party of their basic assumption, 3)disclosure would correct mistake 4)relationship between parties requires it |
| R§162--When a misrepresentation is fraudulent or material | 1)knows or believes the assertion is not in accord w facts, 2)does not have the confidence that he states or implies in the truth of the assertion, 3)knows he does not have basis he states or implies for the assertion |
| R§163--When a misrepresentation prevents formation of a contract | Misrepresentation as to the character or essential terms of a proposed contract induces conduct that appears to be a manifestation of assent to the contract by someone who does not know or have reasonable opportunity to know of the terms in the contract. |
| R§164--When a misrepresentation makes a contract voidable | Fraud or misrepresentation makes contract voidable by recipient. Misrepresentation by a third party. |
| R§174--When Duress by physical compulsion prevents formation of a contract | physical duress makes a contract voidable by the victim. |
| R§175--When Duress by threat makes a contract voidable | improper threat and no reasonable alternative for the victim; makes contract voidable by the victim. |
| R§176-When threat is improper | 1) crime/ tort, 2)criminal prosecution, 3)use of civil process in bad faith, 4)breach of duty concerning good faith and fair dealing. Resulting exchange results in power used for illegitimate ends |
| R§177-When undue influence makes a contract voidable | unfair persuasion under the domination of a party inducing the other party to assent. Contract is voidable by the victim. |
| R§178-When a term is unenforceable on grounds of public policy | if legislation provides that it is unenforceable or the interest in its enforcement is clearly outweighed in the circumstances by a public policy against the enforcement of such terms |
| UCC §2-302: Unconscionable contract or clause definition | court may refuse to enforce a contract if found to be unconsciousable or it may enforce the remainder of the contract w/o the unconsciousable clause. |
| Webster Street Partnership v. Sheridan | In certain circumstances infants can disaffirm and void contracts if they are not of the age of 18. If they engage in adult activities or dangerous activities they are liable. Necessaries: usually limited to food, medical expenses, shelter. |
| Halbaman v. Lemke | minors have an absolute right to disaffirm a contract for the purchase of items that are not necessities and, upon doing so, the minor must return as much of the consideration as remains in his possession. |
| Fingerhut v. Kralyn Enterprises | Contract can be made voidable due to a persons mental illness or defect if they are unable to understand or act in a reasonable manner whether the other party knows of the mental illness or not. |
| Gonzalez v. Jurella | Court enforced the settlement agreement stating that the state didn't know & should not have known inmate was intoxicated or under the influence of marijuana by his emails. R§16. |
| Wood v. Boynton | Wood had the stone in her possession for quite some time and could have investigated into it further, and could not invoke defense of mistake if sale was in good faith and fairness and only the grounds she just made a bad deal (for herself!). R§152. |
| Everbank v. Marini | Duress can make a contract void or voidable depending on the circumstances. R§174 & §175. two prong test: 1)inducement by proper threat and 2)victim must have no proper alternative but to succumb |
| G.A.S. vs. S.I.S. | when a party in a dominant position has an opportunity to exert influence over the inferior party, the dominant party has a disposition to exert such influence for an improper purpose, and the dominant party actually exerts such influence. R§177. |
| Williams v. Walker-Thomas Furniture Co. | Uniform Commercial Code--explicitly states that a court may refuse to enforce a contract which it finds to be unconscionable at the time it was made. (UCC §2-302: Unconscionable contract or clause). Unconsciousable means not right or fair or equitable. |
| Misunderstanding: prevents contract formation completely; is in accord with the facts just not the same. Mistake: makes contract voidable and the belief is not in accord with the facts. (True or False!) | True! Misunderstanding: prevents contract formation completely; is in accord with the facts just not the same. Mistake: makes contract voidable and the belief is not in accord with the facts. |
| Mental Illness or Defect Elements R§15 | if by mental illness or defect if he is unable to understand the transaction or unable to act in a reasonable manner and other party has reason to know of his condition. |
| Intoxication Elements R§16 | other party has reason to know that by reason of intoxication, he is unable to understand a reasonable manner the nature and consequence of the transaction or he is unable to act in a reasonable manner in relation to the transaction. |
Created by:
kfott783
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