R5 Module 2

Question 1

defenses

Answer 1

can make a contract unenforceable
types of fraud
-lack of an agreement
-lack of consideration
-fraud

Question 2

fraud defense

Answer 2

must prove:
1) misrepresentation of material fact
2) scienter (intent to deceive)
3) intent to reduce reliance (persuading to rely on misrepresentation)
4) reasonable reliance
5) damages (can rescind contract or sue for money damages but not both)

Question 3

tort

Answer 3

a wrongful action or infringement of a right leading to civil liability

Question 4

fraud in the execution

Answer 4

when a party is deceived into signing something that does not look like a contract
-make a contract void and not voidable because no meeting of the minds
ex. signing autograph book that’s actually a contract

Question 5

fraud in the inducement

Answer 5

defrauded party know they are making a contract with terms materially represented
-most fraud in this manner and makes a contract voidable
-misrepresentations made by experts

Question 6

innocent misrepresentation

Answer 6

has all the elements of fraud except scienter
-misrepresentation made innocently but with intention
-makes contract voidable by party who relied on misrepresentation

Question 7

duress

Answer 7

party’s free will to a contract overcome by unlawful use of threat of harm
-if physical force = void
-if social/economic = voidable
-duress occurs if party caused poor condition
-merely taking advantage of someone’s economic condition to negotiate favorable contract does not necessarily constitute as duress

Question 8

undue influence

Answer 8

party’s free will to contract is overcome by defendant’s abuse of position of trust or confidence
-person in position of trust takes advantage of other’s weakness, infirmity, or distress
-makes contract voidable

Question 9

void vs voidable

Answer 9

-void is unenforceable by either party
-voidable is it can be avoidable at option of party adversely affected

Question 10

mutual mistake quality and existence

Answer 10

if both parties mistaken by a contract to a material fact, adversely affected party can avoid contract
-does not have to do with value, as value is a matter of opinion
-ex. (buyer and seller realize watch is a fake)
-if subject matter of contract is not in existence when contract made and both parties did not know, contract void (ex. watch was broken and both did not know)

Question 11

unilateral mistake

Answer 11

-mistake made by one party as to a material fact is a defense if other party knew or should have known of the mistake
-party who is buying must show intention of what plan to do to the seller
-if not material and non-mistaken party did not know of mistake, contract valid
-contract not unenforceable or voidable

Question 12

illegality of contract

Answer 12

-if consideration or subject matter of contract is illegal, contract generally void and cause party to be discharged of performance if became subsequently illegal after contract made
-ex. committing crime or tort, agreements in restraint of trade, gambling contracts, usurious contract etc.

Question 13

licensing: revenue raising vs. protection

Answer 13

-if contract illegal because party does not have required license, enforceability of contract depends on reason for license
1) failure to have license required to protect public voids contract and party cannot collect
2) license merely to raise revenue, contract enforceable

Question 14

ways minors can disaffirm contracts

Answer 14

-generally a person under 18
-must return whatever he/she possesses when disaffirms
-minority is defense for minor
-other party cannot raise minor’s minority as defense to avoid performance

Question 15

minors reaching age of majority in contracts

Answer 15

-person can become bound on contracts he/she enters into as minor and then becomes of age by ratifying contract.
Contract can be ratified by:
1) failing to disaffirm within reasonable time after reaching age
2) expressly ratifying entire contract orally or in writing
3) retaining or accepting benefits
Note: ratification does not require consideration and minority has right to disaffirm; adult cannot rescind because minor disaffirmed

Question 16

intoxication

Answer 16

a defense to a contract only if intoxication prevents promisor from knowing nature and significance of promise made and other party knew of impairment

Question 17

adjudicated mental incompetence

Answer 17

contract made by party after adjudicated mental incompetency is void

Question 18

statute of limitations

Answer 18

-provides a legal action must be commenced within a certain period of time
-if it has expired = unenforceable
-makes access to remedies disbarred and not void for contract
-generally 4-6 yrs
-actions for breach usually measured from time cause of action accrued

Question 19

statute of frauds: six contracts requiring writing for them to be enforceable (MYLEGS)

Answer 19

1) marriage
2) contracts that cannot be performed within a year
3) interests in land (sale of house or warehouse)
4) executors or representatives to pay estate debts out of personal funds
5) contracts for sale of goods $500 or more
6) contracts to act as surety (pay debt of another)

Question 20

surety definition

Answer 20

a person who takes responsibility of another person of an undertaking, such as appearing in court or debt payments

Question 21

contracts performed more than one year

Answer 21

-must be evidenced in writing
-one-year period runs from date of contract not when performance begins
ex. construction

Question 22

land contracts

Answer 22

-must be evidenced in writing
-leases of land for < 1 yr do not require writing

Question 23

goods for $500 or more

Answer 23

-must be evidenced in writing
-if sales contract modified requires writing
-if sale of goods ($500 does not apply)

Question 24

sufficient contract writing

Answer 24

-contract need not be in writing
-only writing required that provides evidence of material terms of contract signed by person being sued
Items that can suffice:
1) letter about contract
2) letter to revoke contract
3) quantity term and signature (person being sued) of sale of goods
-terms stated in more than one document (does not have to be in single writing)

Question 25

effect of noncompliance

Answer 25

-failure to satisfy Statute of Frauds does not prevent formation of contract but makes contract unenforceable by one or both parties

Question 26

contract objectively impossible

Answer 26

-after parties enter into a contract where an event occurs that makes performance of contract impossible, impossibility valid defense
-defense discharges adversely affected party from any further duty to perform
-a mere increase in cost does not make performance impossible
-if subject matter destroyed, contract can be avoided due to impossibility
-death or incapacity of person to perform personal service discharge contract due to impossibility

Question 27

accord and satisfaction and substituted contract

Answer 27

-accord is an agreement to substitute one performance for another
-satisfaction is the execution of accord
-accord and satisfaction discharge original duty
-until accord is satisfied, a party may sue under original contract or accord
-substituted contract similar to accord and satisfaction case, but duties under original contract are discharged immediately
-agreements in accord or substituted depends on parties intent

Question 28

novation

Answer 28

-available as defense to party when party has been released from the contract
-occurs when a new contract substitutes a new party for an old party in an existing contract
-all parties must agree to release
-release or agreement of discharge one of the parties without replacing party is NOT novation but simple release; requires new consideration or detrimental reliance to be enforceable

Question 29

conditions that can affect a party’s duty to perform

Answer 29

-condition is an event, the occurrence or nonoccurrence which will end party’s duty to perform
-conditions often preceded by “if”, “subject to” or similar language

Question 30

precedent condition

Answer 30

-a condition that must occur before other party must perform

Question 31

concurrent condition

Answer 31

-conditions that must occur simultaneously
ex. payment of money for exchange of goods in face to face sale contracts

Question 32

condition subsequent

Answer 32

a condition that will occur after a party’s duty to perform has arisen and will cut off that duty

Question 33

prevention of performance

Answer 33

-if one party prevents the other from performing contract duties, a material breach has occurred
-non-breaching party excused from performance

Question 34

Parol (oral) of evidence rule

Answer 34

-prohibits a party in a lawsuit involving fully integrated written contract from introducing evidence at trial
1) oral or written statements made prior to written contract or oral statements made at the same time as written contract
2) seek to vary terms of written contract
-oral or written modifications made after contract are valid under parol of evidence

Question 35

remedies

Answer 35

-if there has been a material or substantial breach, non-breaching party can be discharged from contract
-if breach if minor, non-breaching party not discharged and entitled to damages
-once there is a breach, damages to be determined
-damages help put non breaching party in good condition as though no breach occurred
-delay in performance can only result in discharge of performance if involved in UCC sales contract (time is of essence) or delay breaches contract

Question 36

compensatory damages (benefit of bargain)

Answer 36

-damages for personal service contracts awards non-breaching party enough money to obtain substitute performance

Question 37

consequential damages if foreseeable

Answer 37

a party can collect all damages that are reasonably foreseeable as a result of breach

Question 38

specific performance (used with land or unique items)

Answer 38

-a court order that the breaching party perform or face contempt charges
-available if interests in land or unique personal property are involved
-in this case, money is an inadequate remedy
-specific performance cannot be used to force party to perform personal service contracts
-if specific performance available, party can receive either a specific performance or compensatory damages, but not both

Question 39

liquidated damages (damages agreed to contract)

Answer 39

-a clause in a contract that specifies what damages will be if there is a breach
-liquidated damage clause is enforceable if amount reasonable to actual harm done and not a penalty
-damages would not be easily assessable and good approximation of damages is considered enforceable for liquidated damages (vice versa if not enforceable)
-penalties are easy to calculate and excessive in nature

Question 40

punitive damages

Answer 40

generally not available for breach of contract only fraud, which is a tort cause of action

Question 41

rescission or cancellation of contracts

Answer 41

-cancels the contract and restores parties to former position
-available for mutual or unilateral mistakes, fraud and most material contract breaches
-party cannot rescind or cancel if contract has been substantially performed
-non-breaching party’s only remedy is monetary damages for minor breach

Question 42

limitations on monetary damages

Answer 42

to receive monetary damages there must be foreseeability (could see a breach coming) and reasonable efforts to avoid damages (tried best to recover from damages that could have been reasonably avoided)

Question 43

appraised value

Answer 43

constitute as misrepresentation of material fact because made by qualified experts

Question 44

assignment and delegation

Answer 44

the assignor continues to be liable on the obligation.

Question 45

third party beneficiary contract

Answer 45

a person who is not a contracting party of a contract but can still receive the benefits from performance of the contract

Question 46

when is oral evidence permissible under parol of evidence?

Answer 46

-parol generally disbars evidence from prior or current oral statements offered to vary terms of fully integrated contract
-oral statements permitted when contract is incomplete, ambiguous, invalid, or subject to a condition precedent, or when modification made after original contract written

Question 47

when you have a separate contract…

Answer 47

other consideration is required

Question 48

criteria of substantial performance

Answer 48

-where person got most of what bargained for but their is a minor breach