Viodable Contracts: Capacity and Consent

Question 1

Capacity

Answer 1

concerns the legal ability of a party to enter a contract in the first place
ex: age or mental infirmity

Question 2

Consent

Answer 2

refers to whether a contracting party truly understood what she was getting into and whether she made the agreement voluntarily
ex: arise in cases of fraud, mistake, duress, and undue influence

Question 3

Minors

Answer 3

in contract law under the age of 18

Question 4

Disaffirmance

Answer 4

a minor who wishes to escape from a contract may give notice of refusal to be bound by an agreement

Question 5

Rescind

Answer 5

a minor can go further and undo a contract that has already been completeled by filling a suit to cancel a contract

Question 6

Restitution

Answer 6

a minor who disaffirms a contract must return the consideration he has received to the extent he is able. Resorting an injured party to its original position

Question 7

Status quo rule

Answer 7

if a minor can not return the consideration the adult or store is only required to return its profit margin to the minor

Question 8

Ratification

Answer 8

Words or actions indicating an intention to be bound by a contract
-minors right to disaffirm ends if they ratify

Question 9

exception: necessaries

Answer 9

something essential to the minors life and welfare. on a contract of nesccesarries a minor must pay for the value of the benefit received
ex: food, clothing, housing

Question 10

exception: misrepresentation of age

Answer 10

rules change somewhat if minor lies about his age. there is no clear rule

Question 11

what is a person if they by reason of mental illness or defect is unable to understand the nature and consequences of the transaction?

Answer 11

mentally impaired person

Question 12

when a person creates only a voidable contract and they have the right to disaffirm what are they? (voidable not void)

Answer 12

mentally impaired person

Question 13

when the law creates an exception if a person has been adjudicated insane, then all of his future agreements are…

Answer 13

void

Question 14

Adjudicated insane

Answer 14

a judge has made a formal finding that a person is mentally incompetent and has assigned the person a guardian

Question 15

intoxication

Answer 15

when one party is so intoxicated that he cannot understand the nature and consequences of the transaction, the contract is voidable

Question 16

Landmark case: Babcock v. Engel

Answer 16

• Charles Engel drinking alone at home
• made agreement with Babcock
• trade 320 acre-farm and $2,000 worth of property for a hotel
• Engels property is worth twice the value of the hotel
• Engel later refused to honor the deal
• Babcock sued
• Jury sided with Engel
• Babcock appealed
• Was Engel intoxicated that his agreement with Babcock became voidable?
• Yes, affirmed.

Question 17

Four claims that parties make in an effort to rescind a contract based on lack of valid consent

Answer 17

1. fraud
2. mistake
3. duress
4. undue influence

Question 18

Bilateral mistake

Answer 18

occurs when both parties negotiate based on the sane factual error
-if the parties contract based on an important factual error, the contract is voidable by the injured party

Question 19

Conscious uncertainty

Answer 19

no rescission is permitted where one of the parties now he is taking on a risk; he realizes there is uncertainty about the quality of the thing being exchanged

Question 20

Unilateral mistake

Answer 20

occurs when only one party enters a contract under a mistaken assumption

Question 21

To rescind for unilateral mistake a party must demonstrate that they entered the contract because of a basic factual error and that either…

Answer 21

1. enforcing the contract would be unconscionable

2. the nonmistaken party knew of the error

Question 22

Duress

Answer 22

An improper threat made to force another party to enter into a contract

Question 23

If one party makes an improper threat that causes the victim to enter into a contract and the victim had no reasonable alternative then the contract is…

Answer 23

voidable

Question 24

A claim of economic duress looks at these factors

Answer 24

1. acts that have no legitimate business purpose
2. greatly unequal barraging power
3. an unnaturally large gain for one party
4. financial distress to one party

Question 25

To prove undue influence the injured party must demonstrate

Answer 25

1. a relationship between the wo parties either of trust or of domination
2. improper persuasion by the stronger party