Week 6 Defenses and Promissory Estoppel

Question 1

What is the fundamental goal of promissory estoppel?

Answer 1

To protect a party if that party legitimately relies on another party’s promise, even if the technical requisites for contract formation have not been met.

Question 2

What theory does promissory estoppel contrast with?

Answer 2

The formation theory (the ‘bargain theory’).

Question 3

What is the reliance theory in relation to promissory estoppel?

Answer 3

A separate theory of contract formation that allows enforcement of promises based on reliance.

Question 4

What are the two departures reflected by the doctrine of promissory estoppel?

Answer 4

1. A departure from traditional contract formation to an alternative doctrine.
2. A departure within contract law from a formal approach to modern approaches based on policy rationales.

Question 5

What does Diagram 4-1 in the Contract Law Graphic Organizer depict?

Answer 5

Where promissory estoppel fits within the big picture of contract law.

Question 6

True or False: Promissory estoppel is considered a traditional method of contract formation.

Answer 6

False.

Question 7

Fill in the blank: Promissory estoppel may be thought of as a doctrine based on a completely separate theory of contract formation called the _______.

Answer 7

[reliance theory]

Question 8

What does promissory estoppel allow courts to do?

Answer 8

Enforce promises based on reliance.

Question 9

Who advocates for the more modern approaches in contract law reflected in promissory estoppel?

Answer 9

Lawyers, law professors, and judges.

Question 10

What is a statute of fraud?

Answer 10

Statutes which require signed writings.

Question 11

What role does promissory estoppel play in contract law?

Answer 11

Provides a mechanism to enforce promises that do not comply with signed writing requirements.

Question 12

What is the focus of this chapter in contract law?

Answer 12

A range of contract defenses that enable parties to get out of contracts.

Question 13

What can lead parties to assert contract defenses?

Answer 13

Inducement by deception, duress, or fundamentally mistaken apprehension.

Question 14

What is the common thread in contract defenses discussed?

Answer 14

Legally cognizable ground to doubt voluntary and fully informed consent.

Question 15

How do contracts affect freedom of action?

Answer 15

They limit contracting parties’ freedom of action.

Question 16

What is ‘buyer’s remorse’?

Answer 16

The feeling of regret after entering a contract that turns out to be a bad deal.

Question 17

What is ‘seller’s remorse’?

Answer 17

The feeling of regret after entering a contract that is unfavorable from the seller’s perspective.

Question 18

What should courts be cautious about regarding contract defenses?

Answer 18

Parties’ attempts to assert defenses as a way to avoid contractual obligations.

Question 19

What does the Latin phrase ‘pacta sunt servanda’ mean?

Answer 19

Agreements are to be observed.

Question 20

What tension exists in contract law according to this chapter?

Answer 20

Between public policy rationales of predictability and freedom of contract and fairness concerns.

Question 21

What categories are highlighted under ‘Contract Defenses’?

Answer 21

Deception and Mistake.

Question 22

What is the significance of Diagram 5-1 in the text?

Answer 22

Depicts where contract defenses fit within the big picture of contract law.

Question 23

What do parties often feel after realizing a contract is not beneficial?

Answer 23

Remorse.

Question 24

Fill in the blank: Promissory estoppel is a mechanism to enforce promises that do not comply with _______.

Answer 24

signed writing requirements.

Question 25

True or False: Courts are generally very receptive to parties' attempts to assert defenses to avoid contractual obligations.

Answer 25

False.

Question 26

What is misrepresentation?

Answer 26

Misrepresentation refers to a false statement that leads another party to enter into a contract. ## Footnote Misrepresentation can be intentional (fraudulent) or unintentional (negligent or innocent).

Question 27

What are the five elements of misrepresentation?

Answer 27

* A false statement of fact, intention, or opinion * Addressing a fact, intention, or opinion material to the contract * Made with the requisite state of mind (intentional, negligent, or innocent) * Actually and justifiably relied on by the other party * Caused damage to the other party

Question 28

True or False: If a misrepresentation is intentional, it is necessary to establish that it was material.

Answer 28

False

Question 29

What does 'false' mean in the context of misrepresentation?

Answer 29

'False' means untrue, inaccurate, or erroneous.

Question 30

Define 'fact' as used in misrepresentation law.

Answer 30

A 'fact' is something that exists or occurs.

Question 31

What is an 'intention' in the context of misrepresentation?

Answer 31

An 'intention' is a determination to act in a certain way in the future.

Question 32

What is an 'opinion' in legal terms?

Answer 32

An 'opinion' is an expression of a person's belief or viewpoint, not a matter of positive knowledge.

Question 33

When are opinions actionable in misrepresentation?

Answer 33

Only opinions that imply specific underlying facts are actionable.

Question 34

What does 'material' mean in the context of misrepresentation?

Answer 34

A fact is 'material' if a reasonable person would regard it as important in deciding whether to make a contract.

Question 35

What does the term 'reasonable person test' refer to?

Answer 35

It refers to an objective standard used to determine if a fact is material based on what a hypothetical person would think.

Question 36

What are the three states of mind in misrepresentation?

Answer 36

* Intentional misrepresentation (fraud) * Negligent misrepresentation * Innocent misrepresentation

Question 37

What distinguishes intentional misrepresentation from negligent and innocent misrepresentation?

Answer 37

Intentional misrepresentation does not require a showing of materiality, while negligent and innocent do.

Question 38

What remedies are available for victims of intentional misrepresentation?

Answer 38

Victims are entitled to punitive damages and may also rescind the contract.

Question 39

What is the remedy for victims of innocent misrepresentation?

Answer 39

Victims can only rescind the contract; they are not entitled to damages.

Question 40

Fill in the blank: A misrepresentation is actionable if it is _______.

Answer 40

[false and material]

Question 41

Why do courts not usually award damages for innocent misrepresentations?

Answer 41

It is considered efficient to place losses on the parties who are in the best position to avoid the problems causing losses.

Question 42

What is the public policy rationale for limiting liability in innocent misrepresentation?

Answer 42

It promotes efficiency by placing losses on the better loss avoider.

Question 43

What is 'actual' reliance in the context of contract law?

Answer 43

'Actual' reliance occurs when a party acts because of a representation, meaning the representation caused them to make a contract. ## Footnote This concept is reflected in RESTATEMENT (SECOND) OF CONTRACTS §167.

Question 44

What does 'justifiable' reliance mean?

Answer 44

'Justifiable' reliance means that reliance on a representation is not completely irrational, preposterous, or absurd. ## Footnote Courts consider reliance justifiable if there is any basis for believing the representation, even if a reasonable person would not have believed it.

Question 45

What is the standard for finding justifiable reliance?

Answer 45

The standard for finding justifiable reliance is very low. ## Footnote This low standard is supported by public policy and sympathy for victims.

Question 46

What rationale supports the low standard for justifiable reliance?

Answer 46

The rationale is that 'no rogue should enjoy his ill-gotten plunder for the simple reason that his victim by chance is a fool.'

Question 47

What does the term 'damage' refer to in legal terms?

Answer 47

'Damage' refers to some type of loss, harm, or injury. ## Footnote Courts generally require some type of harm to be shown before a party is entitled to a remedy in a legal action.

Question 48

What elements are analyzed in a legal problem concerning damage?

Answer 48

The elements that may arise and be analyzed include: * Damage * Falsity * Reliance

Question 49

True or False: Actual reliance requires that a party acted without any representation.

Answer 49

False

Question 50

Fill in the blank: A party's reliance is ‘justifiable’ if it is not completely _______.

Answer 50

irrational

Question 51

What is the primary focus of non-disclosure?

Answer 51

Failing to speak about important facts.

Question 52

What are the five elements of non-disclosure?

Answer 52

* Failure to disclose a fact * A duty to disclose that fact * The non-disclosed fact was material * The other party actually and justifiably relied on the state of things in the absence of disclosure of the fact * Damage

Question 53

What is the first element of non-disclosure?

Answer 53

Failure to disclose a fact.

Question 54

What is the second element of non-disclosure?

Answer 54

A duty to disclose that fact.

Question 55

Is there generally a duty to disclose material facts to another party?

Answer 55

No.

Question 56

What is the focus of the material fact requirement in non-disclosure?

Answer 56

The importance of a fact to a party's decision to enter into a contract.

Question 57

What does the actual reliance element focus on?

Answer 57

The causal basis for a party's decision to enter into a contract.

Question 58

What does the justifiable reliance requirement assess?

Answer 58

The reasonableness of a party's decision to believe a representation.

Question 59

What is the definition of concealment?

Answer 59

Engaging in active efforts to prevent another party from learning a fact.

Question 60

What are the elements of concealment?

Answer 60

* Active efforts to prevent another party from learning a fact * The concealed fact was material * The other party actually and justifiably relied on the facts as they appeared without the concealed fact * Damage

Question 61

What is an example of concealment?

Answer 61

A homebuilder installing tiles on a floor to cover up a defect.

Question 62

How does misrepresentation differ from non-disclosure?

Answer 62

Misrepresentation involves misstating a fact, while non-disclosure involves not stating a fact.

Question 63

How does concealment differ from the other types of deception?

Answer 63

Concealment involves hiding a fact.

Question 64

What should you identify on an exam regarding deception?

Answer 64

Which type of deception a given question raises.

Question 65

Fill in the blank: The focus of non-disclosure is _______.

Answer 65

[not stating a fact]

Question 66

True or False: Concealment involves lying about a fact.

Answer 66

False.

Question 67

What is the second contract defense discussed in the text?

Answer 67

Mistake

Question 68

What are the two types of mistake defenses?

Answer 68

* Mutual mistake * Unilateral mistake

Question 69

What is mutual mistake?

Answer 69

It applies to situations where parties make contracts based on crucial assumptions about particular qualities of what they are buying and selling, which later prove untrue.

Question 70

What are the three elements of mutual mistake?

Answer 70

* A mistake by both parties about the facts surrounding a transaction at the time a contract is made * Concerning a basic assumption on which the contract was made * Which has a material effect on the parties' contractual exchange

Question 71

Fill in the blank: Mutual mistake applies to situations where parties make contracts in light of certain, crucial assumptions about particular qualities of what they are buying and selling and those assumptions prove _______.

Answer 71

[untrue]