Requirement That No Defense Exist

If the contract was formed for an illegal purpose but neither the consideration nor the subject matter is illegal (e.g., a contract to rent a plane when the renter's purpose is to smuggle drugs out of Colombia), the contract is only voidable (rather than void) by the party who [blank or blank]

(1) did not know of the purpose; or (2) knew but did not facilitate the purpose and the purpose does not involve "serious moral turpitude."

A misrepresentation is material if: 2

(1) it would induce a reasonable person to agree, or (2) the maker knows that for some special reason it is likely to induce the particular person to agree, even if a reasonable person would not.

The Statute of Frauds does not require a formal written contract. Among other things, the writing could be a receipt, a letter, a check with details in the memo line, or a written offer that was accepted orally. The Statute requires only one or more writings, signed by the party to be charged, that: 1 2 3

(1) reasonably identify the subject matter of the contract, (2) indicate that a contract has been made between the parties, and (3) state with reasonable certainty the essential terms of the unperformed promises.

If a court finds as a matter of law that a contract or any clause of the contract was unconscionable when made, the court may: 1 2 or 3

(1) refuse to enforce the contract; (2) enforce the remainder of the contract without the unconscionable clause; or (3) limit the application of any clause so as to avoid an unconscionable result.

Part performance is sufficient to take a sale of goods contract out of the Statute of Frauds when:

(1) the goods have been specially manufactured, or (2) the goods have been either paid for or accepted. If a sales contract is only partially paid for or accepted, the contract is enforceable only to the extent of the partial payment or acceptance.

Inconspicuous risk-shifting examples: 3

(i) Confession of judgment clauses, which are illegal in most states; (ii) Disclaimer of warranty provisions; and (iii) "Add-on" clauses that subject all of the property purchased from a seller to repossession if a newly purchased item is not paid for.

when both parties entering into a contract are mistaken about existing facts (not future happenings) relating to the agreement, the contract may be voidable by the adversely affected party if: 3

(i) The mistake concerns a basic assumption on which the contract is made (e.g., the parties think they are contracting for the sale of a diamond but in reality the stone is a cubic zirconia); (ii) The mistake has a material effect on the agreed-upon exchange (e.g., the cubic zirconia is worth only a hundredth of what a diamond is worth); and (iii) The party seeking avoidance did not assume the risk of the mistake.

Generally, taking advantage of another person's economic needs is not a defense. However, withholding something someone wants or needs will constitute economic duress if: 2

(i) The party threatens to commit a wrongful act that would seriously threaten the other contracting party's property or finances; and (ii) There are no adequate means available to prevent the threatened loss.

What contracts for more than a year do not fall under the statute of fraud? 4

1. Contracts with a possibility of completion within 1 year 2. Contracts with a right to terminate within one year 3. Lifetime Contracts 4. Performance by one party contracts

What are common instances of procedural unconscionability: 4

1. Inconspicuous risk-shifting provisions 2. Contracts of Adhesion 3. Exculpatory Clauses 4. Limitations on Remedies

What contracts for $500 or more do not fall under the statute of fraud under the UCC? 3

1. Speciality manufactured goods 2. Admissions in pleadings or court 3. Payment or delivery of goods

Agreements generally covered by the statutes of frauds:

1. Suretyship Promises 2. Promises in consideration of marriage 3. Interest in land 4. Performance not within one year from date of contract 5. Goods priced at more than $500.

What are the two types of duress:

1. a party is physically forced to sign against her will. This type of contract is void. 2. a party's assent to a contract is induced by an improper threat by the other party that leaves the victim no reasonable alternative. In these cases, the contract is voidable by the victim.

Situations where a land sale contract can be removed from statute of frauds: 2

1. full performance 2. Part performance that unequivocally indicates that the parties have contracted for the sale of land takes the contract out of the Statute of Frauds. What constitutes sufficient part performance varies among jurisdictions. Most require at least two of the following: (1) payment (in whole or in part), (2) possession, and/or (3) valuable improvements.

The essential terms normally include:

1. the identity of the parties, 2. description of the subject matter, and 3. the terms necessary to make the contract definite

The elements of undue influence are often described as: 2

1. undue susceptibility to pressure by one party and 2.excessive pressure by the other.

Parties Not in Pari Delicto

A person may successfully seek relief if he was not as culpable as the other.

If a contract is illegal solely because a party does not have a required license, whether the contract will be enforceable depends on the reason for the license: License is revenue raising? License is to protect the public?

Contract enforceable Contract unenforceable

[blank] will take the contract out of the Statute of Frauds. [blank] may also remove the contract from the Statute.

Full performance by the seller Part performance by the buyer

Merchants Confirmatory Memo

In contracts between merchants, if one party, within a reasonable time after an oral agreement has been made, sends to the other party a written confirmation of the understanding that is sufficient under the Statute of Frauds to bind the sender

Effect of noncompliance with the statute of frauds

Under the majority rule, noncompliance with the Statute of Frauds renders the contract unenforceable at the option of the party to be charged (i.e., the party being charged may raise the lack of a sufficient writing as an affirmative defense). If the Statute is not raised as a defense, it is waived.

Even if an agreement is supported by valuable consideration or a recognized substitute, contract rights may still be unenforceable because there is a defense to formation of the contract, because there is [blank, blank, or blank].

a defect in capacity (making the obligations voidable by one of the parties), or because a defense to enforcement of certain terms exists.

As is the case with mutual mistake, for the contract to be voidable, the mistake must have [blank] and the [blank] must not have borne the risk of the mistake.

a material effect on the agreed upon exchange mistaken party

An interest in land includes: 5

a) the sale of real property Leases for more than one year; b) Easements of more than one year; c) Mortgages and most other security liens; d) Fixtures; and e) Minerals (or the like) or structures if they are to be severed by the buyer.

Some of the most common areas in which problems of illegality have arisen are: 6

a. Agreements in restraint of trade; b. Gambling contracts; c. Usurious contracts; d. Agreements obstructing administration of justice; e. Agreements inducing breach of public fiduciary duties; and f. Agreements relating to torts or crimes.

In addition to rescission, remedies for material misrepresentation or fraud include [blank]

all remedies available for breach

The signature requirement is liberally construed by most courts. A signature is [blank].

any mark or symbol made with the intention to authenticate the writing as that of the signer

Unconscionability is determined by the circumstances [blank].

as they existed at the time the contract was formed

An act of concealment intended to prevent another from learning a fact is the equivalent of [blank].

asserting that the fact does not exist. Similarly, if a party frustrates an investigation by the other party or falsely denies knowledge of a fact, it can be considered a misrepresentation.

A promise to answer for the debt or default of another must be evidenced by a writing. The promise may arise as a result of a tort or contract, but it must [blank].

be collateral to another person's promise to pay, and not a primary promise to pay

If one party was aware of the ambiguity and the other party was not at the time of contracting, a contract will [blank].

be enforced according to the intention of the party who was unaware of the ambiguity

If both parties were aware of the ambiguity at the time of contracting, there is no contract unless [blank].

both parties in fact intended the same meaning

An infant may affirm, that is, choose to be bound by his contract in whole, upon reaching majority. He affirms either expressly or [blank].

by conduct, e.g., failing to disaffirm the contract within a reasonable time after reaching majority

If one of the parties was tricked into giving assent to the agreement under circumstances that prevented her from appreciating the significance of her action, the agreement [blank]

cannot be enforced; it is void

The effective date, for statute of frauds purposes, runs from the [date of the agreement/date of performance]

date of agreement

If it became illegal after a valid contract was formed, the supervening illegality operates to [blank].

discharge the contract because performance has become impossible

A promise that by its terms cannot be performed within one year is subject to the Statute of Frauds. Part performance [does/does not] satisfy the Statute of Frauds in this case.

does not

A contractual clause limiting liability for damages to property generally will not be found to be unconscionable unless it is inconspicuous. However, if a contract limits a party to a certain remedy and that remedy [blank], a court may find the limitation unconscionable and ignore it.

fails of its essential purpose

If the parties to a contract make assumptions as to the value of the subject matter, mistakes in those assumptions will [blank].

generally not be remedied—even though the value of the subject matter is generally a basic assumption and the mistake creates a material imbalance—because both parties usually assume the risk that their assumption as to value is wrong. However, it is possible for the facts to show that the adversely affected party did not assume the risk in determining value

An exculpatory clause releasing a contracting party from liability for [blank] is usually found to be unconscionable because such a clause is against public policy in most states. Exculpatory clauses for [blank] acts may be found to be unconscionable if they are inconspicuous, but commonly are upheld if they are in contracts for activities that are known to be hazardous (e.g., a contract releasing a ski hill operator for liability for negligence often will be upheld).

his own intentional wrongful acts negligent

A minor may disaffirm a contract for necessaries but [blank].

in most states will be liable in restitution for the value of benefits received

One whose mental capacity is so deficient that he [blank] may disaffirm when lucid or by a later appointed legal representative.

is incapable of understanding the nature and significance of a contract

A misrepresentation is a false assertion of fact. It is fraudulent if it [blank]

is intended to induce a party to enter into a contract and the maker knows or believes the assertion is false or knows that he does not have a basis for what he states or implies with the assertion.

A mutual mistake is generally a [blank].

mistaken assumption shared by both parties

Contract language with at least two possible meanings leads to different results depending on the awareness of the parties. Most often there is [blank].

no contract because there is no meeting of the minds

If neither party was aware of the ambiguity at the time of contracting, there is [blank].

no contract unless both parties happened to intend the same meaning

If only one of the parties is mistaken about facts relating to the agreement, the mistake will [blank].

not prevent formation of a contract.

If the main purpose or leading object of the promisor is to serve a pecuniary interest of his own, the contract is [blank].

not within the Statute of Frauds even though the effect is still to pay the debt of another

When there is a mistake in the transmission of an offer or acceptance by an intermediary, the prevailing view is that the message as transmitted is [blank].

operative unless the other party knew or should have known of the mistake

If the plaintiff contracted without knowledge that the agreement was illegal and the defendant acted with knowledge of the illegality, the innocent plaintiff may [blank].

recover on the contract

An infant may choose to disaffirm a contract any time before (or shortly after) reaching the age of majority. The contract must be disaffirmed as a whole; it cannot be affirmed in part and disaffirmed in part. If a minor chooses to disaffirm, she must [blank].

return anything that she received under the contract that still remains at the time of disaffirmance

If either the consideration or the subject matter of a contract is illegal, this will [blank].

serve as a defense to enforcement. Contracts may be illegal because they are inconsistent with the Constitution, violate a statute, or are against public policy as declared by the courts.

If a party induces another to enter into a contract by using fraudulent misrepresentation (e.g., by asserting information she knows is untrue), the contract is voidable by the innocent party if [blank].

she justifiably relied on the fraudulent misrepresentation. This is a type of fraud in the inducement

There is also modern authority indicating that a unilateral mistake that is [blank] will be a ground for cancellation of the contract

so extreme that it outweighs the other party's expectations under the agreement

The concept of unconscionability allows a court to refuse to enforce a provision or an entire contract (or to modify the contract) to avoid "unfair" terms. It is sometimes said that there are two types of unconscionability:

substantive unconscionability (i.e., unconscionability based on price alone) and procedural unconscionability (i.e., unconscionability based on unfair surprise or unequal bargaining power).

The innocent party need not wait until she is sued on the contract, but may [blank].

take affirmative action in equity to rescind the agreement. The right to rescind the agreement exists even if the terms are fair or beneficial to the misled party

If a writing does not contain [blank], it does not satisfy the Statute and the contract cannot be enforced.

the essential terms of the agreement

Whether or not a misrepresentation is fraudulent, the contract is voidable by the innocent party if [blank and blank].

the innocent party justifiably relied on the misrepresentation and the misrepresentation was material

Nondisclosure without concealment usually is not considered a misrepresentation unless [blank].

the nondisclosure is either material or fraudulent. Note, however, that a party has a duty to disclose any facts necessary to correct any prior assertions that he has made when necessary to prevent those statements from becoming misrepresentations.

There is authority in a number of cases that contracts with errors, such as mistakes in computation, may be canceled in equity, assuming that [blank].

the nonmistaken party has not relied on the contract

One who is so intoxicated that he does not understand the nature and significance of his promise may be held to have made only a voidable promise if [blank].

the other party had reason to know of the intoxication

Mutual mistake is not a defense if [blank].

the party asserting mistake as a defense bore the risk that the assumption was mistaken. This commonly occurs when one party is in a position to better know the risks than the other party (e.g., contractor vs. homeowner) or where the parties knew that their assumption was doubtful (i.e., when the parties were consciously aware of their ignorance). In other words, to be a defense it must be a mistake, not a mere uncertainty

A contract for the sale of goods for a price of $500 or more is within the Statute of Frauds and generally must be evidenced by a signed writing to be enforceable. But the contract is not enforceable beyond [blank].

the quantity of goods shown in the writing

If a contract is within the Statute of Frauds and there is noncompliance with the Statute with no applicable exception, in almost all cases a party can sue for [blank or blank]

the reasonable value of the services or part performance rendered, or the restitution of any other benefit that has been conferred. This recovery would be in quantum meruit rather than a suit on the contract.

A party's reliance on a misrepresentation must be justified for the contract to be voidable; i.e., he is not entitled to relief if [blank].

the reliance was unreasonable under the circumstances. However, the mere fact that the misrepresentation could have been revealed by the exercise of reasonable care does not mean reliance was unjustified.

If it became illegal after the offer but before acceptance, [blank].

the supervening illegality operates to revoke the offer

If the subject matter or consideration was illegal at the time of the offer, [blank].

there was no valid offer

Undue Influence

unfair persuasion of a party who is under the domination of the person exercising the persuasion or who by virtue of the relationship between them is justified in assuming that that person will not act in a manner inconsistent with his welfare.

If both parties knew of the illegal purpose and facilitated it, or knew and the purpose involves serious moral turpitude, the contract is [blank].

void and unenforceable

Illegal consideration or subject matter renders a contract [blank].

void and unenforceable. In a close case, a court may sever an illegal clause from the contract rather than striking down the entire contract.

Contracts induced by duress (e.g., "sign the contract or I'll break your legs") or undue influence are [blank]

voidable and may be rescinded as long as not affirmed

Individuals in certain protected classes are legally incapable of incurring binding contractual obligations. Timely assertion of this defense by a promisor makes the contract [blank].

voidable at his election

a contract entered into between an infant and an adult is [blank].

voidable by the infant but binding on the adult

However, if the nonmistaken party knew or had reason to know of the mistake made by the other party, the contract is [blank].

voidable by the mistaken party

An error in judgment by one of the parties as to the value or quality of the work done or goods contracted for [will/will not] result in a voidable contract, even if the nonmistaken party knows or has reason to know of the mistake made by the other party.

will not

In most instances, an oral contract is valid. However, certain agreements, by statute, must be evidenced by a [blank].

writing signed by the party sought to be bound