Module 3: Failure to Create Enforceable Contracts & Performance, Breach of Contract and Remedies for Breach

Question 1

What makes contracts unenforceable and why?

Answer 1

• Misrepresentation (innocent, negligent, or fraudulent)
• Mistake (misunderstandings, mistaken assumptions, mistakes in integration)
• Duress
• Undue Influence
• Unconscionability

*Why Unenforceability Occurs:
The breach of a condition (essential term) or warranty (less important term) in the contract can lead to termination or damages.
Unenforceability due to factors like misrepresentation, mistake, duress, undue influence, and unconscionability arises when these elements are present in the contract.

Question 2

What is misrepresentation in contracts?
What is the difference between innocent, negligent, and fraudulent misrepresentations? What happens legally in each case?

Answer 2

Misrepresentation occurs when one party makes a false statement about a material fact, inducing the other party to enter the contract.

• Innocent: Party honestly believes the false statement.
• Negligent: Party lacks diligence in making false statements.
• Fraudulent: Party knows or ought to have known that the statement is false.

Consequences:
- Rescission: Injured party may seek to set aside the contract.
- Restitution: Monetary compensation may be awarded.
- Limits to Rescission: Impossible restoration, good faith acquisition by a third party, etc.

Question 3

What do duress and undue influence mean in contracts?
*When can contracts become voidable or unenforceable due to these practices?

Answer 3

• Duress: (violence or threats)
  Rare reason for contract failure.
  Contract can be treated as enforceable if coerced party wants. Duress to a person, duress of goods, and economic duress are recognized.
• Undue Influence:
  Occurs if one party dominates the other, undermining the weaker party’s capacity for independent action.
  Presumption of undue influence may arise in certain relationships.
  Traditional remedy is rescission, and sometimes, monetary compensation.

Question 4

What is unconscionability in contracts?
What makes a contract unconscionable?
How do courts step in to protect vulnerable parties?

Answer 4

Applies in dealings between strangers or parties with a pre-existing relationship.

It is unconscionable if it is one-sided or unfair.

Remedy: Compensation for the value of the benefit conferred.

Question 5

*If someone breaks a contract, what can the affected parties do?
What are the available solutions for dealing with contract violations?

Answer 5

Breach Types:
- Repudiation: Express or implied refusal to perform.
- Fundamental Breach: Departure from contractual obligations.

Remedies:
- Damages (Expectancy Principle): Compensatory, forward-looking, includes consequential damages.
- Specific Performance: Rare equitable remedy for unique situations.
- Injunctions: Prohibitory and Mandatory, issued to enforce negative obligations.
- Restitution and Disgorgement: Claims for benefits conferred or profits made due to the breach.