Defenses & Statute of Frauds Flashcards
(16 cards)
Capacity
Defendants without capacity can disaffirm contract
* Infants (in most jurisdictions, anyone under the age of 18) generally lack capacity to enter into a contract binding on themselves. But, contractual promises of an adult made to an infant are binding on the adult.
* A minor may affirm, that is, choose to be bound by the contract in whole, upon reaching majority. A minor affirms either expressly or by conduct, such as by failing to disaffirm the contract within a reasonable time after reaching majority.
* Pay attention to defendants capacity, not plaintiffs
* Reatining benefits after gaining capacity = Implied affirmation
* Exceptions: States have created a few statutory exceptions for student loans, insurance contracts, and agreements not to reveal an employer’s proprietary information.
* Necessaries: “Necessaries” are items necessary for subsistence, health, or education (including food, shelter, clothing, and medical care). A minor may disaffirm a contract for necessaries but will be liable in restitution for the value of benefits received.
Duress & Undue Influence
Econimic Duress:
1. The party threatens to commit a wrongful act that would seriously threaten the other contracting party’s property or finances; and
2. There are no adequate means available to prevent the threatened loss.
Undue Influence:
1.* Undue susceptibility to pressure by one party, and
2. *Excessive pressure by the other party.
Misunderstanding - Ambiguous Contract Language (Absence of Mutual Assent)
If the contract includes a term with at least two possible meanings, the result depends on the parties’ awareness of the ambiguity:
* Neither party aware—no contract unless both parties intended the same meaning;
* Both parties aware—no contract unless both parties intended the same meaning; or
* One party aware—binding contract based on what the ignorant party reasonably believed to be the meaning of ambiguous words.
Ambiguity is one area where subjective intent is taken into account.
Mutual Mistake as to Existing Facts (Absence of Mutual Assent)
If both parties entering into a contract are mistaken about existing facts (not future happenings) relating to the agreement, the contract may be voidable by the adversely affected party if:
* The mistake concerns a basic assumption on which the contract is made (for example, the parties think they are contracting for the sale of a diamond but in reality the stone is a cubic zirconia);
* The mistake has a material effect on the agreed-upon exchange (the cubic zirconia is worth only a hundredth of what a diamond is worth); AND
* The party seeking avoidance did not assume the risk of the mistake.
a. Not a Defense If Party Bore the Risk
* Mutual mistake is not a defense if the party asserting mistake as a defense bore the risk that the assumption was mistaken. This commonly occurs when one party is in a position to better know the risks than the other party (for example, contractor vs. homeowner) or where the parties knew that their assumption was doubtful (that is, when the parties were consciously aware of their ignorance).
Mistake in Value Generally Not a Defense
* If the parties to a contract make assumptions as to the value of the subject matter, mistakes in those assumptions will generally not be remedied—even though the value of the subject matter is generally a basic assumption and the mistake creates a material imbalance—because both parties usually assume the risk that their assumption as to value is wrong.
Unilateral Mistake (Absence of Mutual Assent)
- If only one of the parties is mistaken about facts relating to the agreement, the mistake will not prevent formation of a contract.
- But, 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.
- As with mutual mistake, the mistake must have a material effect on the agreed-upon exchange, and the mistaken party must not have borne the risk of the mistake.
Unconscionability
Two Basis Elements:
1. Unfair Surprise; and
2. Oppressive terms at the time of formation
If a court finds as a matter of law that a contract or any clause of the contract was unconscionable when made, the court may: (1) refuse to enforce the contract; (2) enforce the remainder of the contract without the unconscionable clause; or (3) limit the application of any clause so as to avoid an unconscionable result.
Agreements Covered by Statute of Frauds (MY LEGS)
Marriage:
* Contracts where marriage is consideration
* Doesn’t include promise to marry
* This applies to promises that induce marriage by offering something of value (other than a return promise to marry—for example, “if you marry my son, I will give the two of you a house”).
(more the one) Year:
* Contract is impossible to complete in 1 year from date of formation
* Time of actual performance doesn’t matter
* Does not apply to lifetime deals (ex: Hiring someone to do something the rest of their life. Person in theory could die and finish performance before year)
Land:
Executor (or Administrator):
* A promise by an executor or administrator to pay the estate’s debts out of their own funds must be evidenced by a writing.
Goods (for $500 or more):
* A contract for the sale of goods for a price of $500 or more is within the Statute of Frauds and generally must be evidenced by a signed writing to be enforceable.
* Note that a writing is sufficient even though it omits or incorrectly states a term, but the contract is not enforceable beyond the quantity of goods shown in the writing.
Surety:
* A promise to answer for the debt or default of another must be evidenced by a writing.
* “if he doesn’t pay, I will pay”
Interests in Land (Staute of Frauds)
A promise creating an interest in land must be evidenced by a writing. This includes not only agreements for the sale of real property, but also:
* Leases for more than one year
* Easements of more than one year
* Mortgages and most other security liens
* Fixtures
* Minerals (or the like) or structures if they are to be severed by the buyer
* Items that Do Not Create an Interest in Land Contracts to build a building or to find a buyer for a seller (for example, a broker’s contract) do not create an interest in land.
* Effect of Performance on Contracts Full performance by the seller will take the contract out of the Statute of Frauds. Part performance by the buyer may also remove the contract from the Statute.
Contract Modifications (Statute of Frauds)
Modification must be in writing only if modified contract within statute of frauds
* So, for a sale of goods contract, if the contract as modified is for $500 or more, it must be evidenced by a writing; if the contract as modified is for less than $500, no writing is necessary.
Common Law: Clauses prohibiting oral modification = Not Enforceable
* The common law rule is that even if a written contract expressly provides that it may be modified only by a writing, the parties can orally modify the contract.
UCC—No-Modification Clauses Effective
* Under the UCC, if a contract explicitly provides that it may not be modified or rescinded except by a signed writing, that provision is given effect. If the contract is between a merchant and nonmerchant, however, this provision requires the nonmerchant’s separate signature.
Waiver
* If the parties attempt to orally modify a contract that requires written modification (either because of a contract clause or the Statute of Frauds), it is technically ineffective as a modification but can operate as a waiver.
* A waiver will be found whenever the other party has changed position in reliance on the oral modification.
* However, a party who makes a waiver affecting an executory (not yet performed) portion of the contract may retract the waiver if they notify the other party that strict performance of the waived terms is required.
* The waiver may not be retracted if the other party detrimentally relied on it.
Land Sale Exceptions (Statute of Frauds)
Lease of 1 year or less = Can be Oral
Part performance of real estate contracts:
* Payment, Possession, Improvement
* Need 2 of 3 to satsify without writing
Service Contracts (Stautes of Frauds Exception)
Full performance of service contract = Statute of Frauds satisfied
* Partial performance = Not satisfied
Sale of Goods (Staute of Frauds Exceptions)
Part performance takes a sale of goods contract out of the Statute of Frauds when:
1. The goods have been specially manufactured; or
2. The goods have been either paid for or accepted.
- Substantial beginning on custom goods
- If a sales contract is only partially paid for or accepted, the contract is enforceable only to the extent of the partial payment or acceptance.
- If goods are either received and accepted or paid for, the contract is enforceable.
- However, the contract is not enforceable beyond the quantity of goods accepted or paid for.
- Thus, if only some of the goods called for in the oral contract are accepted or paid for, the contract is only partially enforceable.
- If an indivisible item is partially paid for, most courts hold that the Statute of Frauds is satisfied for the whole item.
Merchants - Confirmatory Memo Rule (Satute of Frauds Exception)
- Merchants
- Agree to Contract
- One party sends signed writing containing quantity of terms
- No objection by recipient within 10 days
Judicial Admissions Exception (Statute of Frauds)
Agreement admitted to under oath enforceable without writing
Writing Requirement - Sale of goods $500+ (Statute of Frauds)
Must include:
* Quantity term
* Defendant’s signature
Writing Requirement - Contract for Services (Statute of Frauds)
Must include:
* All Material Terms
* Defendant’s Signature
Need to know who the contract is between and whar is the contract about
* Writings evidencing land sale contracts must contain a description of the land and the price
* Writings for employment contracts must state the length of employment
* Writings evidencing sales of goods contracts (UCC) must indicate that a contract has been made and specify the quantity term
