Lack of Consent, Lack of Capacity, Illegality

basic assumption mistake

identity, existence, quality, or quantity of subject matter are among basic assumptions on which contracts typically are founded. Some are so basic they are taken for granted.

adjudicated

when a court decrees one or more parties are mentally incompetent or impaired, this voids the contracts

unilateral mistake definition

when one of parties makes a mistake about basic assumption on which he made the contract

requirements for mutual mistake

1) mistake relates to basic assumption on which the contract was made 2) mistake has material effect on agreed upon exchange 3) party adversely affected by mistake does not bear the risk of the mistake

requirements for unilateral mistake

1) nonmistaken party caused or had reason to know of the mistake 2) it would b eunconscionable to enorce the contract in addition to elements of mutual mistake

four requirements for misrepresentation

1) untrue assertion of fact was made 2) fact asserted was material or assertion was fraudulent 3) complaining party entered contract because of reliance on the assertion 4) reliance of complaining party was reasonable

illegal agreements three categories

1) violate statues 2) violate public policy in courts 3) unconscionable and contracts of adhesion

Coma v. Kansas Department of Labor

Company refused to pay undocumented immigrant for work he performed because he was illegal. Court says should be paid because it would be unfair to the worker and enforcing hte case for Kansas would go against public policy against hiring undocumented workers. It would in fact incentivize what the policy is trying to prevent.

Sumerel v. Goodyear Tire and Rubber Company

Goodyear's attorney erroneously sent a contract with improper calculation of payments with the instructions to review these then discuss. Other party didn't inform of overstatement of damages to attorney or to Goodyear as response requested. Other party demands Goodyear pays for higher amount even when initial attorney saw error before anyone signed anything Court-- sending documents to look over and discuss doesn't constitute an offer capable of acceptance. Enforcing the contract would be oppressive to mistaken party. Goodyear's calculations were in error, purported agreement was oppressive and unconscionable, relief wasn't substantial hardship on plaintiffs. They're exploting.

Rogers v. HLIC

Rogers entered into health insurance policy without informing HLIC of his father's Alzheimefather lacked capacity to contractr's and that he was the guardian. Court ruled that the adjudication of full guardianship powers to Rodgers means that

Clarks Inc vs. Smith

Smith had knowledge, skil, and info in connection with appliance sales representative at Clarks, went on to work in Carmel as an appliance manager with no direct sales duties. Clarks tries to enforce noncompete, doesn't work because while goodwill was a legitimate interest, the rest weren'. Covenant was unreasonable with scope of activities and geographic area restricted. A covenant that restricts employee from competing with portions of business with which he was never associated is invalid. Blue pencil doesn't work because court can only strike unreasonable restraints and not give effect to parties intentions and write new ones. Scope was too large to begin with.

unconscionability

UCC says courts can decline to enforce unconscionable terms or contracts with sale of goods, has been adopted in banking transactions and others

right to disaffirm mentally

a person formally mentally incapacited can ratify if regained capacity. If capacity is regained he must disaffirm contract unequivocally within a reasonable time and must give consideration by other party back.

justifiable reliance

a reliant party's failure to discover facts before entering the contract does not make his reliance unjustiable unless the degree of his fault was so extreme as to amout to a failure to act in good faith and in accordance with reasonable standards of fair dealing

capacity

ability to incur legal obligations and acquire legal rights

meaning of unconscionability

absence of meaningful choice with unreasonably advantages to one party terms

how to rescind?

act promptly and unequivocally upon learning the facts and express her intent to cancel, avoid any behavior suggesting ratification

concealment

active concealment intended to prevent other party from discovering the fact is considered to be the equivalent of an assertion

ratifaction

affirming contract upon age of majority expressed- oral or written implied-- conduct on part of former minro

no reasonable alternative

alternative options to complaining party don't exist, like if a person charges way more open fixing your car when you really need your car

misrepresentation

assertion not in accord with the truth, entered with this the contract is voidable innocent- not intentionally deceptive fradulant- made with knowledge of falsity and intent to deceive

mistake definition

belief about a fact that is not in accord with the truth. Must be when contract was created. Unlike misrepresentation because the erroneous belief is not hte result of untrue statements.

what happens if no reason to know of incapacity

can't be disaffirmed unless other party is in status quo (position you were in before contract)

rescind

cancel contract, person ho does this is entitled to the return of anything given to the other party and must return anything he received from other party

nonmistaken party caused or had reason to know of mistake

caused or knew ofmistake or if mistake was so obvious that nonmistaken party had reason to realize that mistake had been made. This reflects judgmet that people shouldn't take advantage of hte mistakes of others

requirements for duress

contract was induced by an improper threat victim had no reasonable alternative but to enter into contract

contracts of adhesion

contractsin which a stronge rparty is able to determine terms of contract, leaving weaker party no practicalchoice but to adhere toterms. Unsonscionability, refuse to grant equitable remedy for specific performance forbreach of contract if oppressively unfair

unconscionable

convince the court that the consequences of hte mistake are so severe that to make contract unreasonably harsh or oppressive if it was enforced

contains illegal part entirely uneforceable then indivisible, otherweise divisble

cool

no remedy for reach of illegal agreements

cool

overly broad noncompete

courts strike it completely or rewrite

Gamboa v. Alvarado

crazy Mexican immigrant case. The deal itself was illegal, but enforcing the fraudulent behavior in the deal was essential to fairness. Ask Rubin

agreements that violate public policy

crime-- any contract to commit one is illegal promote violations of statutes-- if connection between illegal conduct and the agreement in teh form of active intentional participation in an illegal act, it can be labeled illegal improper licensing-- regulatory license you will not get paid, revenue raising you will get paid

party harmed by mistake does not bear risk of mistake

doesn't hapen in instances of conscious awareness, aka ignorant or has limited info about a fact

duty to return

each party has duty to return to other any consideration the other has given upon disaffirmance. Minor must return any consideration given to him by adult that remains in his possession.

how to show noncompete is valid

employer can show that employee knows trade secrets, confidential information, or goodwill with near permanent customers is threatened

sale of business noncompete vs employees

employes judged stricter because restriction on work competition places a greater hardship on employee than a business selling

ancillary covenenat not to compete

employment contracts, sale ofbusiness, partnerships. Agree not to engage in particular competing activity in specified geographic area for a specified time after termination of employment

misrepresentation of age

estopped from asserting his infancy as a defense or allow to disaffirm regardless of age but must be held responsible for losses suffered by adult by allowing adult to counterclaim or by requiring minor to reimburse

nondisclosure

failure to volunteer a fact pertinent to the agreement. Disclosure of some facts that harm the speaker's bargaining position is required in many situations when the person already offered some info but further info is needed to give other party an accurate e picture of what is going on

Galloway v. Iowa

field trip form not held to be valid because public policy of protecting children outweighs interest of parents and other tort people in freedom to contractually nullify a minor child's personal injury claim before an injury occurs Parents don't have right to release or compromise causes of action belonging to a minor

ratification

for a voidable contract, means that a person who had the right to rescind has elected not to do so

undue influence

gives relief to persons unfairly persuaded to enter into a contract while in position of weakness that makes them particularly vulnerable to being preyed upon by those they trust or fear. Death of person who has been the subject of undue influence when relatives seek to set aside person's contract or will

statue illegal agreements

if legislature said contract is void, court only needs to interpret

noncompete clauses

if sole purpose is noncompete it will be ruled illegal.

how to determine whether agreement is illegal

importance of public policy underlying statue in questionand degree of interference with that policy are sufficiently great to outweigh any interests that favor enforcement of agreement

materiality

innocent misrepresentation must be proven material to rescind the contract. It had to play a significant role in inducing a reasonable person to enter the contract or if person asserting fact knows other person will rely on fact. If fraudulent and not material contract can still be recinded to take away incentive for deceptive conduct

unfair methods of persuasion

isolating individual, discussed and consummated unusually, rasonably fair and voluntary

scienter

knowledge of falsity that distinguishes fraud from misrepresentation

procedural unconscionability

legalese, inconspicuously placed terms, serious inequlaity of bargaining power

three noncompete necessities

legitimate business purpose-- person protected by clause must hvae justifiable interest to be protected (like trade secrets and good will) must be ancillary to contract

quasi contractual

liability fo necessaries supplied to him, pay for resaonable value of necessaries she receives.

when void v voidable for mental impairment

mentally incompetent before contract void, afterwards voidable

reformation

modification of written instrument to express agreemet that parties made but failed to express correctly

tests for undue influence

no precise dividing line between permissible and impermissible but relationship between parties is either one of trust and confidence or one in which person exercising persuasion dominates person being persuaded, and it must be unfair

restriction on competition must be reasonable in time, geographic area, and scope

not be any greater than necessary to protect a legitimate interest

should not impose an undue hardship

not enforce noncompete if restraints are unduly burdensome on public or party whose ability to compete is restrained

material effect on agreed upon excange

not enough to show that the exchange is different form expected, needs to show imabalanced caused b this is so severe that it would be unfair for the law to require him to perform the contract. Other party gets unbargained for advantage

excusable ignorance of legislation

only used when one parties acted in ignorance of illegality and other was aware of illegality, minor in character, damage claimant can't recover for anything done after learning of illegality.

untrue representation of fact

one of the parties must have made an untrue assertion of fact or engaged in some conduct that is equivalent of untrue assertion of fact. Must be past or existed, not a promise or prediction

intoxication as a defense

only if other party ahs reason to know that affected person is so intoxicated that he cannot understand or act reasonably in relation to the transaction

substantive unconscionability

oppressive, unreasonably one sided, unjustifiably harsh. Disproportionate amount of risk or negative aspect on one party or deprived of remedy for breach

illegality in law

particular type of contract is uneforceable or void because agreement violates public policy or statutes, administrative regulation, or other source of law

actual reliance

person pursues somecourse of action because of faith in assertion made to him. Causal connection between assertion and complainig parties decision to enter into contract

voidable

person whose consent was not real has the power to rescind contract

purpose of mistake

prevent unexpected and unbargained for losses that result when parties are mistaken about a fact central to their contract

exculpatory clause

provision in contract purporting to relieve one of parties from tort liability. Courts get concerned with these pbecause party can contract away liabiity for negligence and wont have incentive to use care and avoid harming others. Secon agreement that accords one party that powerful might be an abusive contract. Can't protect a party from liability for any wrongdoing greater than negligence. Won't be effective to exclude tort liability on part of party who owes a duty to public like an airline because this would present obvious threat to public health and safety

time of disaffirmance

real estate is special case, cannot be disaffirmed until majority. Has adult rendered performance under contract or relied on contract? Minor must disaffirm within reasonable time after reaching majority, if not he ratifies contract

rights of party not equally in the wrong

recover what she has parted with under ilegal agreement, protects rights of protected parties

consequences of unconscionability

refuse to enforce entire agreemnt, refuse to enforce unconscionble and enforce therest, limit application of unconscionable to avoid unconscionable result

recission before performanc eof illegal act

rescind contract before illegal act can recover consideration given

necessaries

something essential for minor's continued existence ad general welfare not provided by parents or guardians. Disaffirming minors need to pay reasonable value of these.

contract of adhesion

standardized contract that is take it or leave it. No opportunity to negotiate terms, no say, might not understand terms of signing. Can be harsh or opressive to dictate unfair terms. Term tthat isn't harsh or opppressive but adhering party could not beexpected to be aware of.

tests for mental capacity

sufficient mental capacity to understand nature and effect of contract, doesn't take into account person might be unable to control conduct. Restatement says protection provided to people who understood transaction but because of mental defect weren't able to exercise appropriate judgment or control conduct effectively.

emancipation

termination of a parent's right to control a child and receive services and wages form him. Can occur by parent's express or implied consent or by occurrence of some events like marriage.

Timothy v. Keetch

the Keetchs collaterized the horse to two different parties without telling the other party that the horse was encumbered. Defendants tha tmake misrpresentations can be held liable, and failure to examine public records doesn't defeat an action for false representation because in most cases there isn't a duty to do it. The plaintiff resaonably relied on the assertions of defendant without independent representation because the Keetches unqualifiedly represented that the horse did not have encumbrances.

disaffirmance

the right a minor has to avoid a contract to protect against their own incompetence. Adult party must perform contract unless to minor's advantage to disaffirm it.

deceit

the tort for fraud, they are liable for damages including punitive damages different from innocent misrepresentation

business compulsion, economic duress

threaten breach of contract unless other party agrees to modify terms. Ex: giving only a small amount of money to creditor and refusing to pay more

improper threat

threaten to do something she was not legally entitled to do like threaten to commit a crime or tort. Threats to induce legal action could count.

relationship between parties

trust and confidence, in which person being influenced justifiably belives that the other party is loking out for his interests or at least that he would not do anything contrary to his welfare. Parent and child, husband and wife, lawyer and client.

erroneous expression

when something is typed wrong on the contract, it is reformed

public policy

widely shared view about what ideas, interests, insitutions, or freedoms promote public welfare

negligent mistakes

won't get relief unless his fault amounted to a failiure ot act in good faith

duress

wrongful coercison inducing a person to enter or modify a contract. Threat of physical, emotional, or economic harm. Makes the contract voidable.