Flashcards in Reasons for Not Enforcing Contracts Deck (55)
Legal reasons for not enforcing a contract
1) Lack of consideration of consideration substitute
2) lack of capacity of the person making the promise
3) statute of frauds
4) existing laws that prohibit the performance of the agreement
5) public policy
10) ambiguity in the words of agreement
11) mistakes at the time of the agreement as to the material facts affecting the agreement
Define consideration and its elements?
A bargained-for legal detriment
Bargained-for: asked by the promisor in exchange for her promises.
Legal detriment: must be of significance
Promise as consideration: promise for a promise is okay
Is past consideration, consideration? Why or why not?
NO, exception: if requested by the promisor and expectation of payment by promisee
What is the pre-existing contractual or statutory duty rule? Can it be used as consideration: under common law? Under Article 2?
Common Law: doing what you are already legally obligated to do is not new consideration for a new promise to pay you more to do merely that. Under common law new consideration is required for contract modification. Exception: addition or change in performance. Exception: unforeseen difficulty so severe as to excuse performance. Exception: third-party promise to pay.
Article 2: no pre-existing legal duty rule. New consideration is not required to modify a sale of goods contract. Good faith is the test for changes to an existing sale of goods contract.
Can Part Payment be used as consideration for release of a debt? (promise to forgive a balance of debt):
Due and undisputed: part payment is not consideration for release
Not yet due or disputed: then it would be consideration
What are the 2 consideration substitutes?
Written promise to satisfy an obligation for which there is a legal defense is enforceable without consideration.
Consideration Substitute: Promissory Estoppel. What are the elements?
(ii) reliance that is reasonable, detrimental, and foreseeable, and
(iii) enforcement necessary to avoid injustice.
Defendant Promissor's Lack of Capacity: Who lacks capacity?
Mental incompetents--lacks ability to understand agreement (e.g. Joe)
Intoxicated persons, if other party has reason to know of intoxication
What are the consequences of incapacity?
Right to disaffirm by person without capacity.
Implied affirmation by retaining benefits after gaining capacity (make agreement without capacity, gains it later while retaining benefits after getting capacity, an implied affirmation and can be enforced against)
Quasi-Contract liability for necessities: a person who does not have capacity is legally obligated to pay for things that are necessary such as food, medical care, etc. based in quasi-contract law
What is the Statute of Frauds in place for?
It is in place to prevent fraudulent claims of the existence of a contract. It requires the claimant to have proof other than just the testimony that a contract exists before he gets his day in court.
What is required to get past the Statute of Frauds?
"Special poof", either performance or writing, must be satisfied to get through that Statute of Frauds barrier to get to trial.
Name the four contracts within the Statute of Frauds
1. Promises to answer for the debts of another (suretyship)
2. Service Contracts NOT capable of being performed within a year FROM THE TIME OF THE CONTRACT
3. Transfers of interest in real estate (with the exception for leases of one year or less)
4. Sale of goods $500 or greater.
How do you determine whether a suretyship contract is within the statute of frauds?
Look for a guarantee to pay the debt of another.
What is the exception to the suretyship contract being within the Statute of Frauds?
The main purpose exception: If the "main purpose" of the obligation allegedly guaranteed was to benefit the guarantor, then not even that guarantee is within the Statute of Frauds.
Store sells P paint on credit for $400. Store sues Conviser for the $400 alleging that Conviser promised to pay for the paint. The paint was to be used to paint Conviser's house. Is Conviser's alleged promise within the Statute of Frauds?
No. Even though it was a guarantee to pay for the debt of another, it falls within the main purpose exception, because the main purpose of the promise was to benefit the guarantor.
S Store sells P paint on credit to be used in painting Epstein’s house. S Store sues Conviser alleging that Conviser promised to pay for the paint if P did not pay. Conviser files a motion to dismiss based on the Statute of Frauds. Is Conviser’s alleged promise within the Statute of Frauds?
Yes, because Conviser guaranteed the payment if P did not pay BRAH.
P claims that D hired him on January 15, 2012 to cut all of the trees on D's land. Is this within the Statute of Frauds?
No, this is a task and it is theoretically capable of being completed within a year.
P claims that D hired her to work for her for the rest of P's life. P is only 21 years old and in great health. Is this within the statute of frauds?
No, S/F does not apply because P could in theory die tomorrow and have fully performed the contract.
What happens if a Statute of Frauds defense is asserted and established?
There is no legally enforceable agreement--no contract liability.
Can you part perform to satisfy the statute of frauds in a transfer of real estate contract?
Yes, if two of the following three are met: (i) improvements to the land; (ii) payment; and (iii) possession.
What are the elements needed to satisfy the Statute of Frauds through part performance in a transfer of real estate contract?
(i) improvements to the land; (ii) payment; and (iii) possession.
Can performance be used to satisfy the Statute of Frauds in a services contract?
Yes. Only full performance by either party satisfies the Statute of Frauds. Part performance does not.
In a services contract w/in the Statute of frauds, P part performs. Does this satisfy the statute of frauds? If not, under what theory can he recover?
No it does not. Part performance does not satisfy the Statute of Frauds.
He may recover under a quasi-contract theory.
P agrees to work for D for three years. P works for 13 months and then D fires her without cause. P sues D for breach of contract. D asserts a Statute of Frauds defense. Is the Statue of Frauds satisfied by P’s working for 13 months?
No, part performance does not satisfy Statute of Frauds in SERVICES CONTRACTS.
Can you part perform to satisfy a sale of goods contract?
Yes. Generally part performance of a contract for the sale of goods satisfies the statute of frauds, but only to the extent of the part performance.
S orally agrees to sell 2,000 sacks of grits to B for $10,000. S delivers 600 sacks of grits. S sues B for payment for the 600 sacks that have been delivered. Does B have a Statute of Frauds defense?
No, part performance satisfies the statute of frauds in the sale of goods/delivered goods. He's merely suing to get paid for the 600 sacks he delivered.
S orally agrees to sell 2,000 sacks of grits to B for $10,000. S delivers 600 sacks of grits. B sues S for failure to deliver the remaining 1400 sacks. S asserts a Statute of Frauds defense. Does S
have a Statute of Frauds defense?
Yes, B has not partially performed.
How is S/F satisfied in a sale of goods contract when the good in question is specially manufactured or made?
As soon as the seller makes a substantial beginning. This means that the seller has done enough work that it is clear that what she is working on is specially manufactured.
What is the best way to satisfy the Statute of Frauds?