Bus Law Ch.8 (pt.2)

Under the one-year rule:

- If the contract can possibly be performed within a year, the contract does not have to be in writing to be enforceable - If performance cannot possibly be completed within a year, the contract must be in writing to be enforceable

Bilateral (Mutual) Mistake

-BOTH parties are mistaken - is a "mutual understanding concerning a basic assumption on which the contract was made."

Unilateral Mistake

-Occurs when only ONE party is mistaken as to a material fact ( a fact important to the subject matter of the contract) -generally does not give the mistaken party any right to relief from the contract (contract normally is enforceable against the mistaken party)

The elements of fraudulent misrepresentation are:

1. A misrepresentation of a material fact must occur ( by words or actions) 2. There must be an intent to deceive 3. The innocent party must justifiably rely on the misrepresentation

The following types of contracts are said to fall "within" or "under" the Statute of Frauds and therefore require a writing:

1. Contracts involving interests in land 2. Contracts that cannot by their terms be performed within one year from the day after the date of formation 3. Collateral contracts, such as promises to answer for the debt or duty of another 4. Promises made in consideration of marriage 5. Under the Uniform Commercial Code, contracts for the sale of goods priced at $500 or more

Neither party can recover damages excepts under the following circumstances:

1. Justifiable ignorance of the facts -when one of the parties to a contract has no reason to know that the contract is illegal, the courts will not enforce the contract, but will allow the parties to return to their original positions 2. Members of a protected class - when a statute protects a certain class of people (such as flight attendants or certain other types of employees), a member of that class can enforce an illegal contract even though the other party cannot 3. Withdrawal from an illegal agreement -if the illegal part of a bargain has not yet been performed, a party can withdraw from the contract and recover the performance or its value 4. Severable, or divisible, contracts -contracts that consist of distinct parts that can be performed separately, with separate consideration provided for each part. If a contract is divisible into legal and illegal portions, a court may enforce the legal portion but not the illegal one, so long as the illegal portion does not affect the essence of the bargain 5. Fraud, duress, or undue influence -Sometimes, one party has been induced to enter into an illegal bargain through the other party's fraud, duress, or undue influence. In that situation, the first party will be allowed to recover for the performance or its value

In a unilateral Mistake a contract is enforceable unless:

1. Other party knew or should have known that mistake was made or 2. Mistake was due to substantial mathematical error, made inadvertently and without gross negligence (in both situations a mistake must involve a material fact)

Exceptions to the applicability of the Statute of Frauds are:

1. Partial Performance -when a contract has been partially performed and the parties cannot be returned to the positions they held before the contract was formed, a court may grant specific performance (an equitable remedy that requires a contract to be performed according to its precise terms. 2. Admissions -if a party against whom enforcement of an oral contract is sought admits in pleadings, testimony, or otherwise in court proceedings that a contract for a sale was made, the contract will be enforceable 3. Promissory Estoppel - an oral promise can be enforceable, notwithstanding the Statute of Frauds, if the promisee has justifiably relied on it to her or his detriment

Mistakes of fact occur in two forms:

1. Unilateral 2. Bilateral (mutual)

Scienter exists if:

1. a party knows that a fact is not as stated 2. a party makes a statement that he/she believes not to be true or makes a statement recklessly, without regard to whether it is true or false 3. a party says or implies that a statement is made on some basis, such as personal knowledge or personal investigation, when it is not

The One- Year rule

A contract that cannot, by its own terms, be performed within one year from the day after it is formed must be in writing to be enforceable.

Collateral Promise

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. - normally must be in writing to be enforceable

Statute of Frauds

A state statute that requires certain types of contracts to be in writing to be enforceable

To establish duress, there must be proof of a threat. The threatened act must be wrongful or illegal and must render the person incapable of exercising free will.

A threat to exercise a legal right, such as the right to sue someone, ordinarily does not constitute duress.

Prenuptial Agreement (also known as antenuptial agreement)

An agreement made before marriage that defines each partner's ownership rights in the other partner's property. -must be in writing to be enforceable

Normally, the seller must disclose only latent defects- defects that could not readily be ascertained.

Example: Because a buyer of a house could easily discover the presence of termites through an inspection, termites may not qualify as a latent defect.

Misrepresentation by conduct often occurs when a party takes specific action to conceal a fact that is material to the contract.

Example: If a seller, by his/her actions, prevents a buyer from learning of some fact that is material to the contract, the seller's behavior constitutes misrepresentation by conduct

Scienter or "guilty knowledge"

Knowledge by a misrepresenting party that material facts have been falsely represented or omitted with an intent to deceive.

Statements of opinion and representations of future facts (predictions) are generally not subject to claims of fraud.

Statements such as "This land will be worth twice as much next year" and "This car will last for years and years" are statements of opinion, not fact.

Undue influence arises from special relationships, such as fiduciary or confidential relationships, in which one party's free will has been overcome by the undue influence exerted by the other party. Usually, the contract is voidable.

Such relationships include: 1. attorney-client 2. physician-patient 3. guardian-ward 4. parent-child 5. husband-wife 6. trustee-beneficiary

Justifiable reliance on the misrepresentation of fact.

The deceived party must have a justifiable reason for relying on the misrepresentation, and the misrepresentation must be an important factor ( but necessarily the sole factor) in inducing the party to enter into the contract.

Duress

is the tactic of forcing a party to enter a contract under the fear of a threat (for example, the threat of violence or serious economic loss); the party forced into the contract can rescind the contract.