Mutual Mistake to Existing Facts
Rule: If both parties are mistaken about existing (not future) facts the contract may be voidable by the adversly affected party if:
- Mistake concerns a basic assumption on which the contract is made;
- The mistake has a material effect on the agreed-upon exchange; and
- Party seeking avoidance did not assume the risk.
NOTE: A mistake in value is generally not a defense.
Unilateral Mistake
Rule: The mistake will not prevent formation of the contract.
- However, if the nonmistaken party knew or had reason to know of the mistake made by the other party, the contract is voidable by the mistaken party.
Ambiguous Contract Language
Rule: If the contract includes a term with at least two possible meanings, the result depends on the paries’ awareness of the ambiguity:
- Niether 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 reasonbly believed to be the meaning of the ambiguous words (Subjective Standard).
Misrepresentation
Fruad in the inducement:
- If a party induces another to enter into a contract by using fraudulent misrepresentation, (asserting somethign she knows is untrue) the contract is voidable by the innocent party if she justifiably relied on the misrepresentation.
Nonfradulent Misrepresentation:
- Even if a misrepresentation is not fraudulent, the contract is still voidable if the innocent party justifiably relied on the misrepresentation and it was material.
- Misrepresentation is materail if: (i) it would induce a reasonable person to agree; or (ii) the maker of the misrepresentation knew the infromation assrted would cause a particular person to agree.
Public Policy Defenses
Rule: If the consideration or subject matter of the contract is illegal then the contract is void.
Exceptions:
- P is unaware of the illegality, and D is aware;
- Parties are not in pari delicto (i.e. one party is not as culpable as the other; or
- The illegality is the failure to obtain a license when the license is for revenue-raising purposes rather than for protection of the public.
Contracts of Infants (Minors)
Rule: Generally, infants (under 18) lack capacity to enter into a contract binding on themselves. However, contractual promises of an adult made to an infant are binding on the adult.
- Disaffirmance: An infant may chose to disaffirm a contract any time before reaching the age of majority. Anything that she recieved under the contract that still remains at the time of dissaffirmance must be returned.
- Affirmance upon Attaining Majority: The infant can affrim the contract expressly or impliedly after reaching the age of majority (e.g. failing to dissaffirm within a reasonable amount of time after reaching age of majority).
Exceptions: Contracts for an infant’s necessities (shelter, medical expenses, etc.) are en
Undue Influence/Duress/Economic Duress (Lack of Capicity)
Rule: Contracts induced by duress or undue influence are voidable and may be rescinded as long as not affirmed.
Duress:
- One of the parties makes a threat;
- the threat must be improper; and
- it must leave induce the apparent assent, in that it leaves the victim no reasonable alternative but to agree.
- EXAMPLE: “Sign or I’ll shoot you.”
Economic Duress: Taking advantage of someone’s economic needs is NOT enough. Must have:
- a threat to commit a wrongful act that would seriously threaten other patie’s property of finances; and
- there are no adequate means available to prevent the threatened loss.
Undue Influence: Victim must establish:
- Undue susceptibility to pressure by one party; and
- Excessive pressure by the other party.
- EXAMPLE: Confidential or caregiver relationships with the other party.
Mental Capacity (Lack of Capacity)
Rule: One whose mental capacity is so deficient that he is incapable of undertstanding the nature and signficance of his promise may disaffirm when lucid or by his legal representative.
- Note: As in the case with infants, mentally incompetent persons are liable in quasi-contract for necessaties furnished to them.
Intoxication (Lack of Capacity)
Rule:** **One who is so intoxicated that he does not understand the nature and significance of the his promise may be hel to have made only a voidable promise if the other party had reason to know of the intoxication.
- There may be quasi-contractual recover for necessities furnished during the period of incapacity.
Agreements Covered by Statute of Frauds
MY LEGS
Marriage
- Not proposals, but considerations for marraige, such as “if you two marry, i will give you my house”.
Year
- Contracts that by its terms cannot be performed within one year.
- Effective date runs from the **date of agreement. **
- Lifetime contracts are not included in the statute (since you can die at any time).
Land
- Includes leases and easements for more than one year.
- Does not inlcude contracts to build a building.
- EFFECT: If seller conveys property (fully performs) seller can enforce an oral promise to pay. Likewise, under part performance doctrine buyer can enforce oral promise.
Executor (or Administartor)
- A promise to pay the estate’s debts out of the executor’s or aministrator’s own funds must be in writing.
Goods
- Contract fo sale of goods of $500 or more must be in writing.
- BUT SEE - exceptions to writing requirement.
**Surety **
- Promise to answer for the debt or default of another must be evidenced by a writing. However, if the main purpose or leading object of the promisor is to serve a pecuniary interest of his own, the contract is not within the statute of frauds.
Requirements of Statute of Frauds, General Rule(Defense to Enforcement)
Rule: A contract within the scope of the statute may not be enforced unless a memorandum of it is written and signed by the party to be charged.
Writing Requirement (Statute of Frauds)
Rule: One or more writings signed by the person to be held liable that reflect the material terms of the contract.
- Note: The actual contract need not be in writing.
Signature requirement is very broad (e-mails ok).
- Note: Need not be signed by both parties.
Sale of Goods Exceptions to Statute of Frauds
Rule: No writing is required under that statue of frauds for sale of goods >$500 under the follwing three situations (remember “SAWP”):
Specially manufactured;
Admissions or pleading in court;
Written confirmation memo;
Partial payment or delivery or acceptance.
Confirmatory Memo Rule
Rule: In contracts between merchants, if one party, within a reasonable time after an oral agreement has been made, sends to the other party a written confirmation of teh understanding that is sufficient under the Statute of Frauds to bind the sender, it will also bind the recipient if:
- He has reason to know of the confirmation’s contents; and
- He does not object to it in **writing within 10 days of the reciepts. **
Unconscionability
Rule: The concept of unconscionability allows a court to refuse to enforce a provision or an entire contract to avoid “unfair” terms, usually due to some unfairness in teh bargaining process.
Common Instances of Procedural Unconscionability:
- Inconspicious risk-shifting provisions (fine print, boilerplate, not easily undertsood).
- Contracts of adhesion (take it or leave it);
- Exculpatory clauses (relieving negligence or intentional acts);
- Limitations on Remedies: Where a contract limits a remedy and that remedy fails its essential purpose (e.g. the contract limits remedies to repair and the item cannot be repaired).
Timing: Determined at the time the contract was formed.
Result: Court can refuse to enforce contract; enforce the remainder of the contract without the clause; or limit the application of the clause.
NOTE: Usually a bad choice on the MBE.
Specially Manufactured
Rule: Goods specially manufactured for the buyer and are not suitable for sale to others by the seller in the ordinary course of business.
- The contract is enforceable if the seller has made a substantial beginning in their manufacture or commitments for the their pruchase before notice of repudiation is recieved.
Admissions and Pleadings in Court
Rule: If the party against whom enforcement is sought admits in pleadings, testimony, or otherwise in court that the contract for sale was made, the contract is enforceable without a writing.
Partial Payment or Delivery Exception
Rule: If goods are recieved or accepted or paid for, the contract is not enforeceable beyond the quantity of goods accepted or paid for.
