Contracts 5 - Defenses, Remedies, 3rd Parties Flashcards Preview

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Flashcards in Contracts 5 - Defenses, Remedies, 3rd Parties Deck (65)
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Incapacity - Infancy/Minor

Minors may enter into a K but the K is voidable at the option of the minor.


Minors who are emancipated or married

Majority - still voidable. Minority - not voidable.


Minor Voided K

Majority - minor must return goods but not liable for any damage or depreciation. Minority - minor liable for depreciation and damages or compensation for services.


Minor K's - Ratification

Once they turn 18 they can expressly or impliedly ratify K entered into during minority and thus bind themselves.


Minor K's - Necessities

A minor's K for necessities is voidable but merchant can recover reasonable value of goods or services under quasi contract.


Misrepresentation by a Minor

In a minority of jrdx, if a minor misrepresents his age he may be equitably estopped from proving his age in court.


Incapacity - Mental Incompetence

If a party is adjudicated incompetent and a guardian is appointed, this adjudication will be sufficient to establish mental incompetence for K cases.


Cognitive Defects

A person is deemed mentally incompetent if he's unable to understand in a reasonable manner, the nature and consequences of the transaction.


Volitional Defects

A person is mentally incompetent if (1) they are unable to act in a reasonable manner in relation to the transaction; and (2) the other party has reason to know of this condition.


Effect of Adjudication of Incompetency

K is all together void.


No Adjudication but Incompetency

K is voidable at the option of the incompetent party.


Incompetency Ratification of K

A party who becomes competent can expressly or impliedly ratify a K and bind themselves.


Mentally Incompetent - Restitution

If K is voided and person has received some benefit, he is required to make the other party whole by paying reasonable value of the goods or services received. Unless other party took unfair advantage by being aware of incompetency, then they're only entitled to benefits still in possession of the incompetent party.


Fraudulent Misrepresentation

(1) D makes an assertion that was inconsistent with existing facts. Professional opinions count.
(2) Knowing it to be false or having no idea whether it was true or false.
(3) The assertion is likely to induce a reasonable person to enter into a K or party had reason to know it was likely to induce this particular person into entering the K.
(4) The party reasonable relied on the misrepresentation.


Negligent and Innocent Misrepresentation

(1) Misrepresentation
(2) That was material
(3) Reasonably relied on the misrep
(4) D would have known the assertion was false had he exercised reasonable care or D simply made an assertion not in accord with existing fact if innocent misrep


Fraudulent Non-disclosure

(1) The non-disclosure was material to the K
(2) Reasonable reliance on the non-disc
(3) A duty of disclosure and failure to fulfill that duty


Circumstances where there's a duty of disclosure

(1) Where parties enjoy a relationship of trust and confidence.
(2) Where a party has made an assertion that was true at the time but has since been rendered untrue by intervening events
(3) If the obligation of good faith would require the party to disclose the information



(1) Threat
(2) That was wrongful in nature
(3) No reasonable choice but to succumb to the threat.


Examples of Economic Duress

(1) When there are no adequate and reasonably priced substitutes for teh services or goods that are threatened to be withheld.
(2) When the threatened breach would cause the aggrieved party to break his own contracts.
(3) When the alternative of acquiescing to the threat and then suing for damages is inadequate to address the harm caused


Legal Consequences for Duress

(1) K's made under physical compulsion are void, all other K's are voidable.
(2) The aggrieved party is entitled to restitution of any benefits conferred as long as he returns any received.


Undue Influence

(1) Unfair persuasion used.
(2) Party was vulnerable to such persuasion


Unfair Persuasion Factors

(1) Discussion of the trx at an unusual or inappropriate time.
(2) Consummation of the trx at an unusual place.
(3) Insistent demands that the trx or business be finished immediately.
(4) Extreme emphasis on the untoward consequences of delaying the trx.
(5) The use of multiple persuaders against the target of persuasion.
(6) Absence of 3rd party advisers
(7) Statements that there is no time to consult advisers or attorneys


Examples of Vulnerable Parties

(1) Where the mental infirmity is due ot age or illness.
(2) Where the vulnerability is due to some recent trauma or event.
(3) Where there's a relationship of trust or confidence.


Legal Consequences of Undue Influence

(1) The K is voidable at option of aggrieved party.
(2) The aggrieved party is entitled to restitution of benefits conferred if he returns any received.



(1) Procedural unconscionability
(2) Substantive unconscionability
Must have both


Procedural Unconscionability

Where the bargaining process created an absence of meaningful choice for the aggrieved party. i.e. near miss cases and absence of bargaining power


Substantive Unconscionability

Where the K terms are unreasonably favorable to one party of the K:
(1) Grossly excessive price
(2) Grossly disproportional consequences for a minor breach.
(3) Provisions binding on one party but not the other.
(4) Provisions that are grossly unfair.


Legal Consequences of Unconscionability

Court may:
(1) Refuse to enforce the K.
(2) Excise the offending clause and enforce rest of K.
(3) Limit the application of the offending clause so as to avoid any unconscionable result.


Public Policy Reasons for Not Enforcing a K

(1) Where the subject of the K is specifically prohibited by law.
(2) Where K is formed for purpose of committing a crime.
(3) Where K performance would constitute a tort.
(4) Where K performance would violate certain values and freedoms designated by the state.


3 Types of Monetary Damages Common Law

(1) Expectation Damages
(2) Reliance Damages
(3) Restitution Damages
Can only choose 1.