Defenses Flashcards
(11 cards)
What type of defense is misrepresentation/fraud?
When is this defense available?
Misrepresentation/fraud is a defense to formation.
This defense is available when:
- A party either
- knowingly/recklessly makes a misrepresentation to induce the other party’s assent to the contract
- misrepresents a material fact (regardless of intent, a material fact is one that is likely to induce assent)
- The misrepresentation does, in fact, induce the other party’s assent to the contract
- The other party’s reliance on this misrepresentation was reasonable.
- The other party sues to void the contract within a reasonable time.
- if fraudulent misrepresentation a reasonable time = starts from when the other party learns about the misrepresentation.
- if non-fraudulent misrepresentation, a reasonable time = starts from when the other party knows or should know about the misrepresentation.
When does the “reasonable time” period start running in misrepresentation cases?
This depend on whether the misrepresentation is fraudulent (knowing or reckless).
If fraudulent, the reasonable time period starts running when the other party discovers the misrepresentation.
If non-fraudulent, the reasonable time period starts running when the other party knows or should know about the misrepresentation.
What type of defense is incapacity? What are the different types of incapacity?
This is a defense to formation.
The different types include:
- Infancy: a child who is under 18 does not have the capacity to contract. They can void the contract if they sue/disaffirm it before they turn 18, or shortly thereafter. (Child must return material benefits acquired)
- Mental infirmity:
- a contract is void if made with a person who is deemed incompetent (unaware).
- a contract is voidable if made with a person whose has a temporary inability to reasonably understand their actions and consequences AND the party who they are contracting with knows or has reason to know this.
- a contract is also voidable if it is disaffirmed by the incompetent party during a time of lucidity.
(person must return material benefits acquired)
- Intoxication: a contract is voidable if made with a person who, as a result of intoxication, cannot reasonably understand their actions and consequences AND the party who they are contracting with has reason to know this; AND the intoxicated person sues/disaffirms the contract shortly after sobering up.
What is the impact of concealment?
Concealment is a form of fraudulent misrepresentation and can be a defense to formation.
What type of defense is mutual mistake?
When is this defense available?
This is a defense to formation.
It is available when:
- The mistake is related to an underlying assumption that the contract is based on.
- The mistake is material/materially impacts the fairness of the exchange to the adversely impacted party
- AND the adversely impacted party did not assume the risk of the mistake (explicitly or through willful ignorance)
What type of defense is unilateral mistake?
When is this defense available?
This is a defense to formation.
It is available when:
- The mistake is related to an underlying assumption that the contract is based on.
- The mistake materially impacts the agreed upon exchange, making it unfair for the party claiming the defense to perform.
- The adversely impacted party did not assume the risk of the mistake (explicitly or through willful ignorance)
- AND enforcement of the contract would be unconscionable OR one party knew or had reason to know about the mistake, or caused the mistake.
When does the failure to know or discover information prevent a party from using a defense?
For mistake–when the risk of the mistake is substantial AND a party was or should have been aware of the risk and taken steps to discovery it.
Think about the construction company who failed to hire an expect to test for subsurface granite.
What type of defense is impracticability?
When it is available?
This is a defense to performance.
It is available when:
- There is an unexpected event that makes it nearly impossible to perform
- The non-occurrence of the event was assumed when contracting
- The party who does not want to perform did not cause the unexpected event to occur.
Examples include: death/incapacity, destruction of the subject of the contract, the contract becomes illegal to perform.
What type of defense is illegality?
When is the defense of illegality available?
This is a defense to performance.
If the purpose of the contract its formation or its performance violates the law, then there will be no remedy for breach.
However, there are some exceptions.
A non-breaching party may recover expectation damages if:
- their part of the contract is divisible from other illegal parts of the contract
- they did not know that the contract was illegal
- they substantially performed and the contract’s purpose was not illegal (even though its performance or formation may have been).
A nonbreaching party can recover restitution if:
- they did not know the contract was illegal
- they backed out of the contract and did not do anything illegal
- they were less culpable than the breaching party.
When asserting mutual mistake to rescind a contract, does it matter which party wants to rescind?
Yes, a party cannot assert the defense of mistake to rescind a contract if they are actually benefitted by the mistake.
Does the defense of impossibility apply when the goods promised by the promissor are accidentally sold to a third party instead of the promisee?
No.
