BLAW Ch. 13 - Defenses to Contract Enforceability

sufficiency of the writing: non-UCC contracts - the writing (written or electronic evidence of the contract) needs: (5) - what information is needed for land contracts?

(land, collateral/secondary, one year rule, marriage) 1. the name of the parties; 2. the identity of the subject matter; 3. the consideration (value exchanged); 4. the quantity term; and 5. to be signed by the party against whom enforcement is sought (by at least one party) - description of land, legal description (land is unique and has an identifies...tax id,street address, surveyor's description, subdivision, lot #, etc.)

3. misrepresentation of law - case ex. 13.7: parcel of land - exceptions

- ORDINARILY doesn't entitle a party to be relieved of a contract - cameron has a parcel of property has she's trying to sell to Levi. cameron knows that a local ordinance prohibits building anything higher than 3 stores on the property but she tells levi "you can build a condo one hundred stories high if you want to." levi buys the land and later discovers that cameron's statement is false. levi generally cannot avoid the contract, because under the common law, people are assumed to know state and local laws - when the misrepresenting party is in a profession known to require greater knowledge of the law than the average citizen - if cameron, had been a lawyer or real estate broker, her willful misrepresentation of the area's zoning laws probably would have constituted fraud

what are mutual mistakes of fact? - mutual (bilateral) mistakes of fact - ex. 13.3: coleman holdings bought a parcel of real estate subject to setback restrictions imposed by a document entitled "partial release of restrictions" that effectively precluded building a structure on the property. lance and joanne eklund offered to buy the parcel from coleman, intending to combine it with an adjacent parcel and build a home. coleman gave the elklunds a title report that referred to the "partial release of restrictions," but they were not given a copy of the release

- a mistake made by both parties concerning a *material fact* that is important to the subject matter of the contract - either party may cancel or rescind a contract due to mutual mistakes of *material fact* - contract is voidable - mistakenly believing that the document released restrictions on the property, the eklunds didn't investigate further...meanwhile, coleman mistakenly believed that the setback restrictions had been removed. after buying and discovering restrictions, eklunds filed a suit in a nevada state court against coleman, seeking rescission of the sale. the court ordered the deal rescinded. nevada supreme court affirmed the order -- the parties made a mutual mistake in their mutual belief that the parcel had no setback restriction

promises made in consideration of marriage - ex. 13.20 - prenuptial agreements - ex. 13.21

- a unilateral promise to make a monetary payment or to give property in consideration of marriage must be in writing - evan promises to by celeste a house in maui if she marries him. celeste would need written evidence of evan's promise to enforce it - agreements made before marriage that define each partner's ownership rights in the other partner's property; must be in writing - before marrying country singer keith urban, actress nicole kidman entered into prenuptial agreement with him. kidman agreed that if they divorced, she would pay urban $640,000 for every year they had been married, unless urban had begun to use drugs again...then he would receive nothing

what constitutes a writing: - a writing can consist of.... - ex. 13.24:

- any confirmation, invoice, sales slip, fax, or email - or such terms in combination - written contract need not be contained in a single document to constitute an enforceable contract - one document may incorporate another document by expressly referring to it - several documents may form a single contract if they are physically attached - such as by staple, paper clip, or glue - or even if they are only placed in the same envelope - simpson orally agrees to sell some land next to a shopping mall to terro properties. simpson gives terro an unsigned memo that contains a legal description of the property, and terro gives simpson an unsigned first draft of their contract. -simpson sends terro a signed letter that refers to the memo and to be the first and final drafts of the contract. - terro sends simpson an unsigned copy of the final draft of the contract with a signed check staped to it...together, the documents can constitute a writing sufficient to satisfy the statute of frauds and bind both parties to the terms of the contract as evidenced by the writings

collateral promises example: - college apartment

- apmt complex near PSU and college student is original contract; contract 1- primary; in writing still because involving land -guaranty contract between complex and parent of student is contract 2- secondary; in writing because secondary - guarantor (parent) agrees to pay debt if primary debtor (college student) does not pay the original creditor (apmt complex)

misrepresentation of material fact has occurred (1st element) - 4 types

- can occur by words or actions 1. by conduct 2. statements of opinion 3. of law 4. by silence

case 13.1 - cronkelton v. guaranteed const. services, llc

- court appointed shivley to be receiver of a foreclosed car wash that was being sold in ohio - buyer, clifford cronkleton, inspected car wash in 2009 and knew some equipment would have to be replaced but was concerned that property needed to be winterized to protect from damage. - shivley assured him that winterizing would be done through phone calls and emails. - shivley contracted guaranteed const. services, which hired strayer company to winterize property - strayer told shively that only way to avoid problems was to leave heat on at car wash but shivley knew that bank had shut off heat because property was not generating income - in march 2010, shivley informed bank of damage to property caused by freezing, but did not share this info with cronkelton, who didn't become aware of damage until after he had bought car wash in june - cronkelton filed suit in ohio against guaranteed and shivley, asserting fraud - jury returned in cronkelton's favor and awarded more than $140k in damages/attorney's fees and defendants appealed. - cronkelton did justifiabily rely on shivley's representations that car wash had been winterized, appellate court affirmed in cronkelton's favor - there was competent , credible evidence that cronkelton had reasonably relied on shivley's representations -knew about the freezing but had proof that shivley said it'd be taken care of - he could've inspected again, but he has the right to rely on the seller

unilateral mistake example 13.2 - jet ski

- elena intends to sell her jet ski for $2,500 - when she learns that chin is interested in buying a used jet ski, she sends him an email offering to sell it to him - when typing the email, she mistakenly keys in the price of $1,500 - chin immediately sends elena an email accepting her offer - even though elena intended to sell her jet ski for $2,500, she has made a unilateral mistake and is bound by the contract to sell it to chin for $1,500

case 13.2 - fazio v. cyrpess/GR houston I, LP

- fazio began talks with cypress to buy retail property whose main tenant was a garden ridge store - while doing background investigation, fazio and his agents became concerned about garden ridge's financial health - but was assured that garden ridge had positive financial outlook so fazio sent cypress a letter of intent to buy property for $7.67 M based on the current reported $805k net income - cypress then agreed to provide all information in its possession, but failed to disclose: 1. consultant for garden ridge had requested $240k reduction in annual rent as part of restructuring of company's real estate leases 2. cypress's bank was concerned about garden ridge's financial health that it had required a personal guaranty of the property's loan - parties entered purchase agreement, but garden ridge went bankrupt after deal closed - fazio sued cypress for fraud after he was forced to sell the property 3 years later for only $3.75 million - jury found fazio's favor - agreed cypress had failed to disclose material, but determined that fazio was not entitled to damages - no damages had been proximately caused by fraud, because fraud had not negatively affected value of property at time it was sold to fazio - trial court entered judgement notwithstanding the verdict in favor of cypress, and fazio appealed - fazio was fraudulently induced to enter into purchase agreement - appellate court affirmed jury's verdict. cypress's failure to disclose these facts constituted fraud. fazio was not entitled to damages, because misrepresentation had not negatively affected property's value - fazio based purchase price on predicted income, so he bought it for the it's value at the time

fraud misrep example: - shady weight loss companies

- forced to issue huge refunds - said if you put powder on food, you can lose 30 lbs without going to the gym or dieting - made $4.5m and obviously it didn't work - claimed scientific data proved weight loss, but no data to back it up - consumer doesn't have to do research, they should be able to rely on company and have them be truthful/ethical - consumers didn't lose weight

what is fraudulent misrepresentation? - misrepresentation has occurred when: (4)

- generally, refers only to misrep that is consciously false and intended to mislead another 1. wrongdoer made false statement of material fact 2. wrongdoer intended to deceive innocent party 3. innocent party justifiably relied on misrepresentation in making the contract 4. for damages, innocent party must show some injury - offeree is denied full understanding about what they're getting

case example 13.4: l&h construction company v. circle redmont, inc

- l&h construction company contracted with circle redmont, inc. to make a cast-iron staircase and a glass flooring system, but installation was later dropped from the deal as a cost-cutting measure - the final contract stated that payment was due on "supervision of installation," although "install" appeared elsewhere in the contract. - l&h insisted that installation was included and sued redmont - the court found that the word install in the phrase "engineer, fabricate, and install" was the result of a mutual mistake - both parties understood that redmont would only supervise the installation, not perform it - trial court said it was a mutual mistake - appellate court went in favor of redmont and said terms were ambiguous and couldn't figure out intent because both parties had different meanings of "install" - can't enforce because nothing matches

- what must be contained in the writing? - land contracts must include - ex. 13.25: lake house

- needs only the essential terms, not every term; indication that parties voluntarily agreed to terms - different types of contracts need different terms included - because only the party against whom enforcement is sought must sign, contract may be enforceable by one party but not the other - property description, price - rock orally agrees to buy betty devlin's lake house and lot for 350,000 - devlin writes rock a letter confirming the sale by identifying the parties and the essential terms of the sales contract - price, method of payment, and legal address - and signs the letter - devlin has made a written memorandum of the oral land contract - because she signed the letter, she normally can be held to the oral contract by rock -devlin cannot enforce the agreement against rock, however. - because he has not signed or entered into a written contract or memorandum, rock can please the statute of fraud as a defense

4. misrepresentation by silence - car example

- neither party to a contract has a duty to come forward and disclose facts, and a contract normally will not be set aside because certain info has not been volunteered - jude is selling a car that has been in an accident and has been repaired. he doesn't give this info to potential buyer. if the buyer asks about bodywork and he lies, jude has committed fraudulent misrepresentation

what are mistakes?

- occurs when one or both parties have an erroneous belief about: 1. the subject matter; 2. value; or 3. some other aspect of the contract - mistakes can be unilateral or mtual (bilateral) - fail to pin these down during CF - can be mistakes of fact or mistakes of value/quantity - only mistakes of fact can allow a contract to be voidable

Unilateral Mistakes -- material fact - may the mistaken party cancel a contract due to unilateral mistakes of material fact

- occurs when only one party is mistaken about a material fact regarding the subject matter of the contract -- fact important to subject matter of contract (if it wasn't there, party would walk away) - no, doesn't give the mistaken party any right to relief from the contract, usually still enforceable against mistaken party

admissions - ex. 13.23: bistro corp

- party against whom enforcement is sought concedes that a contract for sale was made - admission is made in court documents or proceedings - contract is enforceable - if a party against whom enforcement of an oral contract is sought "admits" under oath that a contract for sale was made, the contract will be enforceable - party's admission can occur at any stage of the court proceedings, such as during a deposition or other discover, pleadings, or testimony - if a party admits a contract subject to the UCC, the contract is enforceable, but only to the extent of the quantity admitted - rachel, president of bistro corp, admits under oath that an oral agreement was made with commercial kitchens, inc., to buy certain equipment for 10,000. a court will enforce the agreement only to the extent admitted (10,000), even if commercial kitchens claims that the agreement involved 20,000 worth of equipment

promissory estoppel

- party against whom enforcement is sought made promises that the injured party relied upon justifiably to his/her detriment - detrimental reliance must have been foreseeable - contract is enforced to prevent unjust enrichment - an oral contract that would otherwise be unenforceable under the statute of frauds may be enforced under the doctrine of promissory estoppel - section 139 of the restatement (second) of contracts provides that an oral promise can be enforceable, notwithstanding the statute of frauds, if the promisee has justifiably relied on the promise to his or her detriment - promisee's reliance must have been foreseeable to the person making the promise, and enforcing the promise must be the only way to avoid injustice

lucky buyer example - scrap metal dealer discovers faberge egg worth $33 million - faberge egg designed for russian royal family in 1800s

- person A had the metal because he has golden precious jewels (objet de art) $13k and melted it down - he sold it to a scrap dealer for $13k - scrap dealer brought it to auction to investigate and finds it's worth $33 mill - the mistake that increased the price was the unknown historical value (faberge and russian royal family) - if A knew it was worth $33 mill, he wouldn't have sold it and would've went straight to auction and sold for $33m not $13k - difference in price is a mistake of value not a mistake of fact - golden precious jewels is the fact, but no mistake here for that because both knew it was golden precious jewels - a mistake of fact would be if one party thought it was brass v. gold - both didn't know it was faberge, scrap dealer only knew after buying and investigating

case ex. 13.9 - robert sarvis

- robert sarvis applied for a position as a business law professor two weeks after his release from prison - on resume, said he'd been corporate president for 14 yrs and had taught business law at another college - after hired, probation officer altered school to his criminal history - school fired him, and sarvis sued for breach of contract - court concluded that by not disclosing his history, he had clearly exhibited an intent to deceive and that the school had justifiably relied on his misrepresentations - school could then rescind his employment contract

mistakes with voluntary assent

- something wrong with offer and something wrong with acceptance - mistakes with respect to formation of agreement

one year rule: - time period starts the day after contract is formed - ex. 13.14:

- superior university forms a contract with kimi san stating that san will teach three courses in history during the coming academic year (sept 15 through june 15). if contract is formed in march, it must be in writing to be enforceable - because it cannot be performed within on year. if contract is formed in july, in contrast, it will not have to be in writing to be enforceable - because it can be performed within on year

a valid contract may be unenforceable if... - then 4 things

- the parties have not genuinely assented to its (material) terms (no agreement) because of: 1. mistakes of fact (talking about different things; no meeting of the minds -> not enforceable) 2. Misrepresentation 3. undue influence 4. duress - good formation can still be unenforceable -genuinely assented: issue because parties don't have true meeting of the minds - parties only find this out when time to perform

unilateral mistakes: when may contracts be rescinded? - general rule: - two exceptions to rule:

- unilateral mistakes are not grounds to cancel contract 1. non-mistaken party to the contract knows or should have known that a mistake of fact was made (the other party to the contract knows or should have known that a mistake of fact was made) 2. if mistake was due to a clerical or mathematical mistake and was made inadvertently and without gross negligence (the error was due to a substantial mathematical mistake in addition, subtraction, division, or multiplication and was made inadvertently and without gross (extreme) negligence)

one year rule: - must be objectively impossible to perform within one year 1. ex. 13.15: when performance of a contract is objectively impossible during the one-year period, the contract must be in writing to be enforceable 2. ex. 13.16: if performance is possible within one year under the contract's terms, the contract does not fall under the Statute of Frauds and need not be in writing

- when a contract is objectively impossible in during the one year period, it must be in writing to be enforceable - doesn't matter if it's likely to be performed during that period, just possible 1. a contract to provide 5 crops of tomatoes to be grown on a specific farm in illinois would be objectively impossible to perform within one year. no farmer in illinois can grow five crops of tomatoes in a single year. 2. janine enters into a contract to create a carving of president barack obama's face on a mountainside, similar to the carvings of other presidents' faces on mount rushmore....technically possible, but not likely, that the contract could be performed within one year...so janine's contract need not be in writing to be enforceable

1. misrepresentation by conduct - case ex. 13.5: tom selleck

- when a party takes specific action to conceal a fact that is material to the contract....also done if a seller is to untruthfully deny knowledge of facts that are material to the contract when a buyer requests such information - actor tom selleck contracted to purchase a horse named Zorro for his daughter from dolores cuenca. cuenca acted as though zorro were fit to ride in competitions, but really the horse was unfit for this use because of a medical condition. selleck filed a lawsuit against cuenca for wrongfully concealing the horse's condition and a jury awarded selleck more than $187,000 for cuenca's misrepresentation by conduct

intent to deceive (2nd element) - scienter or guilty knowledge is inferred from the wrongdoer's conduct: (3) - example - 2 types

- wrongdoer must make false statement with intent to deceive innocent party 1. wrongdoer's knowledge that fact is not as stated 2. wrongdoer makes a reckless statement with disregard of the truth 3. wrongdoer implies that statement is based on personal knowledge or investigation when it is not - price goes up when artist dies, people copy work and say it's real; challenged against fake jean michael basquiat- auction house put up fake art, so it's their liability - innocent misrepresentation - negligent misrepresetation

1. primary obligations - ex. 13.18 vs. 2. secondary obligations - ex. 13.19

1. a direct party to a contract incurs a primary obligation under that contract; a contract in which a party assumes a primary obligation normally does not need to be in writing to be enforceable - nigel tells dr. lu, an orthodontist, that he will pay for the services provided for nigel's niece. because nigel has assumed direct financial responsibility for his niece's debt, this is a primary obligation and need not be in writing to be enforceable 2. in contrast, a contract in which a party assumes a secondary obligation does have to be in writing to be enforceable. - kareem's mother borrows 10,000 from medford trust company on a promissory note payable in 6 months. kareem promises the bank officer handling the loan that he will pay the 10,000 *if his mother does not pay the loan on time.* kareem, in this situation, becomes known as guarantor on the loan. he is guaranteeing to the bank (creditor) that he will pay loan if his mother fails to do so...this must be in writing to be enforceable

justifiable reliance on misrepresentation (3rd element) - what are justifiable reasons?

1. innocent party must have justifiable reason for relying on misrepresentation of fact 2. misrepresentation must be an important factor in causing innocent party to enter contract reliance is not justified if the innocent party knows the true facts or relies on obviously extravagant statements....same rule applies to defect in property sold (ex. if defects would be obvious on inspection, the buyer cannot justifiably rely on the seller's representations. if defects are hidden or latent, the buyer is justified in relying on the seller's statements)

Injury to the innocent party: 1. most courts do not require a... 2. some courts hold that because rescission returns the parties to the positions they held before the contract was made,... 3. however, to recover damages to fraud...

1. showing of harm in an action to rescind a contract 2. a showing of injury to the innocent party is unnecessary 3. proof of harm is universally required

business contracts that must be in writing to be enforceable - exceptions: 1. contracts for the sale of goods priced at $500 or more 2. contracts involving interests in land 3. contracts that cannot be performed within one year 4. contracts containing collateral promises

1.- customized goods - admissions (quantity) - partial performance - merchants confirmed in writing 2.- partial performance - admissions - promissory estoppel 3.- admissions - promissory estoppel 4. - main purpose rule - admissions - promissory estoppel

contracts for the sale of goods - writing must include the following

UCC (merchant to merchant) requires a writing or memorandum for the sale of goods priced at $500 or more 1. quantity terms; and 2. signed by the party against - whom enforcement is sought (typically the defendant in lawsuit) writing normally need not designate the buyer or seller, the terms of payment, or the price in addition, a written memorandum or series of communications (including email) evidencing a contract will suffice, provided that the writing is *signed by the party against whom enforcement is sought*

the one-year rule

a contract that cannot by its own terms, be performed within on year from the date it was formed must be in writing to be enforceable (if it can be done within a year and one day, then no writing) one-year period begins to run the day after the contract is made *test*: whether performance is possible (although unlikely) within one year - only need to know if possible - necessary because don't want parties to forget the terms or lie about them

latent defect

a defect that is not obvious or cannot readily be ascertained - there is a duty to speak on these

negligent misrepresention - ex. 13.11: scale operator

a misrepresentation that occurs when a person makes a false statement of fact because he or she did not exercise reasonable care or use the skill and competence required by her or his business profession - equal to scienter in almost all states - dirk, an operator of weight scale, certifies the weight of sneed's commodity - if dirk knows that the scale's accuracy has not been checked for more than three years, his actions may constitute negligent misrepresentation

innocent misrepresentation - ex. 13. 10: acres of land

a misrepresentation that occurs when a person makes a false statement of fact that he or she believes is true (but actually misrepresents material facts) - can rescind but no get damages - parris tells roberta that a tract of land contains 250 acres - parris is mistaken - the tract contains only 215 acres - but parris had no knowledge of the mistake - roberta relies on the statement and contracts to buy the land - even though the misrepresentation is innocent, roberta can avoid the contract if the misrepresentation is material

collateral promises

a promise made by a third party to assume the debts or obligations of a primary party to a contract if that party does not perform his/her contractual obligations - aka a secondary promise - someone cosigning something for you - a secondary promise to a primary transaction, such as a promise made by one person to pay the debts of another if the latter fails to perform. a collateral promise normally must be in writing to be enforceable.

statue of frauds - five types

a state statute that requires certain types of contracts to be in writing to be enforceable- doesn't have to be in a particular form, just has to be written anywhere with essential information to be enforceable, the following 5 types of contracts must be in writing (or evidenced by a written memorandum or an electronic record) and signed: 1. contracts involving interest in land 2. contracts involving "one year rule" (contracts that cannot by their terms be performed within one year from the day after the date of formation) 3. collateral or secondary contracts (promises to answer for the debt or duty of another) 4. promise made in consideration of marriage 5. contracts for the sale of goods priced at $500 or more (Uniform Commercial Code)- essentially a federal law for contracts that all states buy into

sale of goods example: - used car salesperson alison offers to sell bob a car off her lot of $6,000 - bob accepts - alison prepares the contract - alison is unable to sell the car - is this contract enforceable?

alison is plaintiff, bob is defendant not enforceable, not signed by anyone

sale of goods example: -used car sales person alison offers to sell bob her used car for $6,000 - alison prepares the contract and sends it to bob - he signs it, but alison does not sign it - alison decides to sell her car to carl because he offers $7,000 - is this contract enforceable?

alison is plaintiff, bob is defendant not enforceable, she didn't sign, and both need to sign it

what a party to a contract knows or should know....

can determine whether the contract is enforceable

example 1: PSU hires a new professor on July 1, 2016 to teach for fall 2016. the parties do not have a written agreement....is contract enforceable example 2: PSU hires a new professor on July 1, 2016 to teach for the fall 2017. the parties do not have a written agreement.....is this contract enforceable?

example 1: (YES) if contract can be completely performed within 1 year, no writing is needed example 2: (NO) if contract can't be completely performed within 1 year, writing is needed; the period to perform is well outside one year and a day

exceptions to the statue of frauds

exceptions: these contracts are enforceable without a writing 1. partial performance 2. admissions 3. promissory estoppel

sufficiency of the writing: UCC - the writing needs: (2)

for the sale of goods (UCC) 1. the quantity term; and 2. to be signed by the party to be charged (doesn't have to be actual signature, can be an identifier - #)

unilateral example: - honda salesman offers to sell bart a car for $19,000 - bart agrees to buy car for $19,000 via email - next day, bart signs a sales agreement with a price of $18,000 - is the contract for $18,000 enforceable?

have agreement (buy car for $19,000 via email), the writing was wrong (writing is just snapshot of agreement)...$18,000 is not enforceable....$19,000 is enforceable - so yes, because mistake was due to a clerical mistake, not done with gross negligence, so this is an exception - does not cause contract to be rescinded - just fix the writing because meeting of the minds is present

a word or term in a contract may be subject to more than one reasonable interpretation

if the parties to the contract attach materially different meanings to the term, their mutual misunderstanding may allow the contract to be rescinded

the lack of voluntary consent...

is a defense to the enforcement of a contract

scienter

knowledge on the part of a misrepresenting party that material facts have been falsely represented or omitted with an intent to deceive

contracts involving interest in land - example

land is real property land includes the soil and all physical objects that are permanently attached to the soil (ex. buildings, crops in field, vegetation, minerals and soil, fences and gazebos, etc.)- expect these to be attached to land all contracts for the transfer of other interests in land must be in writing (eg. license to use land; landlord-tenant situation/right to use and enjoy land for period of time, mortgage agreements and leases, rental vacation house, timeshare, etc.) ex. 13.13 - skylar contracts orally to sell his property in fair oaks to beth. if he later decides not to sell, under most circumstances, beth cannot enforce the contract.

should there be a writing? example - farmer brown agrees to sell his farm and chicken coops to william - farmer brown and william discuss whether the hens are part of the deal - william signs letter confirming sale with description of land and price - farmer brown realizes that william wants to create a housing development, and refuses to hand over the farm and coops - is this contract enforceable?

no because farmer wasn't keeping word, had land and didn't sign 1. writing (essential terms) 2. signed by the party against when enforcement is sought

is writing required? example - cindy student would like to buy a car - her mother mitsy moneybags calls the dealership and agrees on the telephone to pay the car note if cindy does not - cindy misses 2 payments and the dealership calls mitsy seeking payment - may the dealership enforce the agreement?

no because the agreement was not in writing and it needs to be; it was over the phone

unilateral example: - bart wants to buy a car with automatic transmission - he looks at several models, but does not tell salesperson of his preference of an automatic rather than a manual transmission - bart buys a model that he believes has his preference, but it does not - may bart cancel the contract?

no. bart has no control, unilateral, one-sided mistake (his mistake because he never told his preference)

justifiable reliance example: - simon offers his vermont dairy farm and cows for sale to ben. ben intends to continue working the dairy farm - simon says that the autumn foliage is spectacular - later that year, ben is disappointed to see very ordinary fall colors - may this contract be rescinded?

no...because make or break factor is can you operate it as a dairy farm, not based on foliage

duress

one party through threats of force, extortion or blackmail forces the other party to enter into the contract - essentially no choice; must say yes and if you don't, it could cause you a lot of harm - contract is voidable - duress is both a defense to enforcement of a contract and a ground for rescission - to establish duress, there must be proof of a threat to do something that the threatening party has no right to do; proof there wasn't voluntary assent to occur, the threatened act must be wrongful or illegal, and it must render the person who receives the threat incapable of exercising free will - a threat to exercise a legal right, such as the right to sue some, ordinarily does not constitute duress

undue influence

one party unfairly dominates the other party during the formation of the contract a contract entered into under excessive or undue influence lacks voluntary consent and thus the contract is voidable - persuasion that is less than actual force but more than advice and that induces a person to act according to the will or purposes of the dominating party - people are pressured and feel that can't say no; usually family and fiduciary relationships - need proof that they couldn't exercise free will

it is important to distinguish between mistakes of fact and mistakes of value or quality

only a mistake of fact may allow a contract to be avoided ex. 13.1 - paco buys a violin from beverly for $250. although the violin is old, neither party believes that it is valuable. later, an antiques dealer informs the parties that the violin is rare and worth thousands of dollars....here, both parties were mistaken, but the mistake is a mistake of value rather than fact that warrants contract rescission. therefore, beverly cannot rescind the contract

2. statements of opinions - case ex. 13.6: arthur murray dance school

statements of opinion and representations of future facts (predictions) are generally not subject to claims of fraud BUT when a purchaser relies on an opinion from an expert, the innocent party may be entitled to rescission or reformation; allowed to use puffery - instructor at dance school told vokes, a widow without a family, that she had the potential to become an accomplished dancer. instructor sold her hours of dancing lessons for 2016 value of $144,000. when it became clear that vokes didn't have potential to be great dancer, she sued school for fraudulent misrepresentation. the court held that because the dance school had superior knowledge about a person's dance potential, the instructor's statements could be considered statements of fact rather than opinion

mutual mistake example: - beth cleans out grandma's attic and finds this silkscreen print - beth believes that it is a warhol print and sells it to susie for $200,000, which is the value of a genuine warhol print (susie also believes it's a warhol) - susie has print appraised for insurance and finds out that it is a clever fake - may susie cancel the sale and recover the contract price?

susie CAN cancel the sale and recover the contract price because mutual mistake and genuine aspect was material

if one party does not voluntarily consent to the terms of a contract...

then there is no genuine "meeting of the minds," and the law will not normally enforce the contract

generally, a party who demonstrates that he or she did not genuinely agree to the terms of a contract...

they can choose either to carry out the contract or to rescind (cancel) it and thus avoid the entire transaction

when the dominant party benefits from the relationship, a presumption of undue influence may arise... - ex. 13.12: erik and kinsley

thus, then a contract enriches the dominant party in a fiduciary relationship, the court will often presume that the contract was made under undue influence - erik is guardian for kinsley, his ward. on her behalf, he enters into a contract from which he benefits financially. if kinsley challenges the contract, the court will likely presume that the guardian has taken advantage of his ward. to rebut (refute) this presumption, erik has to show that he made full disclosure to kinsley and that consideration was present he must also show that kinsley received, if available, independent and competent advice before completing the transaction - unless the presumption can be rebutted, the contract will be rescinded

UCC means...

uniform commercial code

mistakes may be either....

unilateral or mutual (bilateral)

partial performance - specific performance - case ex. 13.22: NYKcool and Pacific fruit

when a contract has been partially performed and the parties cannot be returned to their positions prior to the contract's formation (because someone partially performed)....a court may grant specific performance *specific performance* is an equitable remedy that requires that a contract be performed according to its precise terms....parties still must prove that an oral contract existed - pacific fruit, inc. exports cargo from ecuador. nykcool, based in sweden, provides maritime transportation. nykcool and pacific entered into a written contract with two-year duration, under which nykcool agree to transport weekly shipments of bananas from ecuador to cali and japan at end of period, parties agree to extend deal, but new contract was never signed. parties continued making weekly shipments for 4 more years until dispute arose over unused cargo capacity and unpaid freight charges. an international arbitration panel found that pacific fruit was liable to nykcool for 8.7 million for breach of contract. pacific fruit appealed, arguing that there was no contract in place. the court affirmed the award in favor of nykcool. "the parties' substantial performance on the contract weighs strongly in favor of contract formation"

unilateral example: -honda salesman advertises car for $19,000 - sends bart an email offering to sell the car for $17,000 - bart agrees to price via email - next day, bart signs a contract with a sales price of $17,000 -is the contract for $17,000 enforceable?

yes because both agreed and signed

is writing required? example - cindy student sends her mother a gift certificate for spa services - cindy and the beautician agree on the telephone that cindy will pay after her mother has obtained the services - mitsy gets an expensive diamond facial - cindy tells beautician she doesn't have to pay because contract was not in writing - may the beautician enforce this contract.

yes because not a guarantor promise....only a third-party beneficiary - contract is between cindy and beautician but mom gets benefit (3rd party) enforceable

intent to deceive example: - sally is selling a used car that she bought from a katrina victim - when bill sees the car's louisiana plates, he says "i hope this car was not flooded in the hurricane." - sally says that it was not, even though she knows the the former owner was a new orleans resident. - bill later finds out the car was underwater - may this contract be cancelled?

yes because sally's answer denies the buyer's opportunity for a material fact sally is misrepresenting the car by knowing that the car was from New Orleans but not saying

justifiable reliance example: - simon offers his vermont bed and breakfast inn for sale to ben - simon says that the autumn foliage on the landscaped grounds are spectacular - later, that year, ben is disappointed to see very ordinary fall colors. his guests depart early - may this contract be rescinded?

yes because the foliage was a requirement for guests to say (lost business= material) - simon is the owner and has a responsibility to know everything in respect to material terms - person with most info about bargain has the responsibility to be truthful