CONTRACTS: II. DEFENSES

In what three circumstances will a party to a contract be found to bear the risk of a mistake?

(1) EXPRESS ALLOCATION OF RISK: the terms of the contract have expressly allocated the risk to that party, (2) FACTS & CIRCUMSTANCES: a court has allocated the risk to that party because the allocation is reasonable under the circumstances, or (3) CONSCIOUS IGNORANCE: the party has conscious ignorance of the relevant facts (i.e., the party knows she has limited knowledge of the relevant facts but treats that limited knowledge as sufficient). A mistake will not excuse a party's performance if that party bears the risk of the mistake.

What are the two standards used to determine whether a mentally ill adult party may avoid an executory contract on grounds of mental incapacity?

(1) MOTIVATIONAL TEST: the motivational test focuses on the mental illness's impact on the avoiding party's rational decision-making. Under this test, the contract can be avoided if the party seeking avoidance can prove: (a) the mental illness was severe enough to render that party unable to act reasonably in relation to the transaction, and (b) the other party had reason to know of the mental illness. (2) COGNITIVE TEST: the cognitive test considers whether or not the party can understand the nature and consequences of the transaction. Under this test, because cognitive incapacity precludes even a basic understanding of the transaction, the avoiding party is not required to show that the other party had reason to know of the illness.

Under what circumstances will a mistake by one party to a contract excuse the mistaken party's performance (UNILATERAL MISTAKE)?

(1) UNCONSCIONABLE: enforcing the contract despite the mistake would be unconscionable, or (2) OTHER PARTY KNOWS: the other party had reason to know of the mistake or his fault caused the mistake.

What are the three ways in which a party lacks the capacity to enter into a contract?

(1) minority, (2) mental illness or defect, and (3) intoxication. In each case, the condition rendering the party incapable of contracting must be present at the time of the contract. Only the party that lacked capacity may avoid or disaffirm the contract.

In what circumstances does a party have a duty to disclose a known fact, such that nondisclosure of that fact would constitute a material misrepresentation or fraud?

(1) the party knows disclosure is necessary to correct a previous assertion, (2) the parties have a trust relationship, (3) one party knows that the other party is mistaken as to a basic assumption of the contract, or (4) non-disclosure of the fact would violate the party's general obligation of good faith and fair dealing. In these circumstances, a party's justified reliance upon nondisclosure of the fact can support a misrepresentation defense (if the nondisclosure goes to material facts) or fraud (if the omitter of facts intended to deceive, regardless of the omission's materiality).

Is a signed writing required for a contract for the sale of goods for $500 or more if the party against whom enforcement is sought admits there was a contract? Is so, how can the other party admit to the contract?

A contract for the sale of goods for $500 or more need not be in a signed writing if the party against whom enforcement is sought admits there was a contract (e.g., sending a letter repudiating the contract, or admitting in pleading or testimony). However, the contract is only enforceable regarding the quantity of goods sold, not as to any other contract terms.

What makes a contract procedurally unconscionable?

A contract is procedurally unconscionable if (1) a significant inequality in bargaining power prevents one of the parties from having a meaningful choice or real alternative in setting the terms of the agreement, or (2) the contract involves some aspect of unfair surprise, such as a contract with buried terms that have been purposely hidden by the other party.

What makes a contract substantively unconscionable?

A contract is substantively unconscionable if the terms are overly harsh or one-sided against a party (e.g., a customer's waiver of any right to bring a class-action suit against a retailer, which is one-sided because retailers do not typically sue their customers in class-action suits).

Under what circumstances would a court enforce a contract transferring an interest in land if the contract does not comply with the statute of frauds?

A court may fashion a limited remedy for a party to a contract transferring an interest in land that does not comply with the statute of frauds if the party (1) has reasonably relied on a promise to his detriment by (2) rendering part performance that benefits the other party. A wide range of remedial options is available if a buyer and seller have entered an unwritten contract to transfer land, such as ordering the return of the purchase price to the buyer if the seller refuses to transfer the land or ordering the seller to transfer the interest in the land to a buyer who has paid part of the purchase price and lived on the land for several years.

When may a minor disaffirm a contract due to the minor's incapacity?

A minor may generally disaffirm a contract at any point up until a reasonable time after reaching the age of majority. If a minor reaches the age of majority and does not disaffirm the contract within a reasonable amount of time, the now of-age minor has ratified the contract, and it is legally enforceable.

What is a misrepresentation?

A misrepresentation is an untrue assertion that is not in agreement with the facts. An assertion may be an express statement, or it may be implied from a person's conduct, which can include acts of concealment or nondisclosure. Whether an assertion is false depends upon the meaning of the words or conduct under the circumstances, including what may be inferred from them. In general, an assertion must relate to facts that have already occurred or are in existence at the time of the contract to be a misrepresentation. A prediction about future facts does not usually constitute an assertion that can support a misrepresentation defense. However, if a prediction implies the existence of other facts from which predicted events would follow, it may form a basis for a misrepresentation of those other facts.

For purposes of contract law, what is a mistake?

A mistake is a belief that is not in accordance with the facts as they exist at the time the contract is entered. Predictions or judgments about future events that turn out to be incorrect are not mistakes, as that term is used in contract law. A mistake need not be expressly articulated in order to provide grounds for avoiding a contract. A mistake may consist merely of an assumption about facts that a party makes without being aware of other alternatives. To provide grounds for avoiding the contract, a mistake must: (1) BASIC ASSUMPTION: go to a basic assumption on which the contract was made and (2) MATERIAL EFFECT: have a material effect on the agreed exchange of performances. (3) NO ASSUMPTION OF RISK: not expressly or implicitly impose the risk on the person seeking avoidance.

Under what circumstances can a party avoid her contractual obligations due to an untrue assertion or misrepresentation?

A party can avoid her contractual obligations if she justifiably relies upon a misrepresentation or untrue assertion made by the other party to the contract, and the misrepresentation or untrue assertion is: (1) material (i.e., likely to induce a person's assent to the contract) or (2) fraudulent (i.e., likely to induce a person's assent to the contract and known to be false by the statement's maker). If a third party makes a material or fraudulent misrepresentation, the deceived party can avoid her contractual obligations, but not if the non-deceived contracting party gave value or materially relied on the transaction in good faith and without reason to know of the deception.

Under what circumstances can a party assert a defense of illegality or public policy against enforcing a contract?

A party may assert the defense of illegality or public policy if the contract would result in a statute being broken (illegality) or if the contract violates public policy. An illegal contract violates a statute; it generally involves a serious crime or tort or endangers public welfare. A contract violates public policy if, while not contrary to a statute, judicial decisions indicate that a competing public interest outweighs any interest in enforcing the contract. Both illegality and public policy rationales render a contract unenforceable. Depending on the terms of the contract and the number of promises it contains, the entire contract can unenforceable (i.e., void), or instead a single promise or term within an agreement can be unenforceable (i.e., voidable).

Under what circumstances may a party assert the defense of unconscionability?

A party may assert the defense of unconscionability if both the bargaining process and terms of the contract are unfair. The court will consider whether the contract has a high degree of procedural and substantive unconscionability.

In what situation may a party avoid a contract on the ground of duress exerted on that party by a person who is a non-party to the contract?

A party may avoid a contract on the ground of duress by a non-party if the other party to the contract can be held accountable for, was implicated in, or knowingly took advantage of the duress exerted by the non-party. In the absence of these circumstances, a non-party's improper threat to the first contracting party should not defeat the legitimate expectations of the second contracting party, as the second party was innocent of wrongdoing and relied on the first party's manifestation of assent in good faith.

Under what circumstances does a person lack capacity to enter a contract due to intoxication?

A person lacks capacity to enter a contract due to intoxication when he or she is (1) unable to reasonably understand the nature and consequences of the transaction or (2) unable to reasonably act in relation to the transaction. In either case, the other party must have reason to know of the person's intoxication in order for intoxication to be a valid defense.

What circumstances render a threat improper, as required to support a defense that a contract is unenforceable due to duress?

A statement is improper if it threatens: (1) a crime or tort, or what would constitute a crime or tort if it results in the speaker obtaining property; (2) a criminal prosecution; (3) a bad-faith use of civil process; or (4) a breach of the duty of good faith and fair dealing under a contract with the recipient. A threat is also improper if it results in an exchange that is not made on fair terms, and: (1) the threatened act harms the recipient and does not significantly benefit the threatening party, (2) prior unfair dealing significantly increases the effectiveness of the threat in inducing the recipient's assent, or (3) the threat otherwise uses power for illegitimate ends.

Under what circumstances will a suretyship contract fall within the statute of frauds?

A suretyship contract (i.e., a contract where one party agrees to be primarily liable for another's debt or obligation) falls within the statute of frauds if a surety or guarantor promises to answer for the duty of a third person. Typically, the promise involves paying a debt owed by the third person. Under the main purpose rule, however, a contract does not fall within the statute of frauds if the surety or guarantor makes the promise for his own economic advantage, rather than for the benefit of the third person.

Under what circumstances is an untrue assertion or misrepresentation material?

An untrue assertion or misrepresentation is material if: (1) the misrepresentation or assertion is likely to induce a reasonable person's assent to a contract (i.e., substantially contributes to the person's decision to enter the contract), or (2) the maker of the misrepresentation or assertion knows it is likely to induce such assent, even if a reasonable person would not assent. An assertion is still a misrepresentation even if it is intended to be truthful. Thus, statements made carelessly or ignorantly of the true facts can still be misrepresentations, so long as they relate to a material fact.

What factors do courts use in evaluating whether a contract involving both goods and services is subject to the statute of frauds?

If a contract includes the sale of both goods and services, it is treated as a contract for either goods or services, whichever is predominant. To determine predominance, courts consider: (1) the relative price and value of the goods and services, (2) the nature of the seller's business, and (3) the apparent intent of the parties. Thus, even if a contract involves the sale of goods for $500 or more, it will not be subject to the statute of frauds, and will be enforceable without a writing signed by the party to be charged, if the provision of services was its predominant purpose.

If a party is induced to enter a contract due to a fraudulent misrepresentation about the contents or effect of the parties' written agreement, under what circumstances may a court reform the writing?

If a party's assent is induced by the other party's fraudulent misrepresentation about the contents or effect of the parties' written agreement, a court may reform the writing to set forth the party's agreement as it is asserted if the deceived party was justified in relying on the misrepresentation, to the extent the rights of third parties will not be unfairly affected. In general, reformation is more broadly available for fraudulent misrepresentation than it is for mistake. For a court to reform a contract based upon mistake, there must have been some prior agreement between the parties, and both parties must be mistaken that the writing accurately reflects their prior agreement. In contrast, only one party needs to be deceived about the contents of a writing to justify reformation.

Under what circumstances can a party justifiably rely upon another's statement of pure opinion that cannot reasonably be interpreted as an assertion of underlying facts?

If an assertion is one of opinion only, and cannot be construed as an assertion of underlying facts, a party cannot justifiably rely upon the opinion unless: (1) the party is in a relationship of trust and confidence with the person expressing the opinion; (2) the party reasonably believes that the person expressing the opinion has special skill, judgment, or objectivity on the subject; or (3) the party is otherwise particularly susceptible to this type of misrepresentation.

What factors will a court consider in determining whether a contract of adhesion is unconscionable?

In determining whether a contract of adhesion is unconscionable, a court will consider: (1) any general unfairness in the bargaining process and (2) the terms of the contract. A contract of adhesion is a contract drafted by one party and presented to the other as non-negotiable, leaving the non-drafting party no choice but to accept the contract on the proffered terms. Adhesion is particularly apparent if the drafting party has the market power to present the terms as non-negotiable. Although adhesion may be a factor in deciding whether the dominant party used its power to impose an unconscionable contract on the weaker party, it is not dispositive.

Which six classes of contracts fall within the statute of frauds?

In general, the six classes of contracts that fall within the statute of frauds are: (1) MARRIAGE: contracts for marriage, (2) YEAR: contracts that cannot be fully performed in one year, (3) LAND: contracts for land, (4) EXECUTOR: contracts by an executor to answer personally for the estate's debts, (5) GOODS: contracts for the sale of goods for $500 or more, and (6) SURETYSHIP: suretyship contracts (i.e., contracts where one party agrees to be primarily liable for another's debt or obligation). If a contract falls within one of these classes, a court will require a signed writing before enforcing the terms.

May a married minor always avoid a contract due to incapacity?

No. A married minor may not always avoid a contract due to incapacity. Many jurisdictions deem a married person under the age of majority to be an adult for purposes of enforcing a contract. In these jurisdictions, a minor may not disaffirm a contract on the basis of age.

Is a signed writing required for a contract for the sale of goods for $500 or more if there has been part performance?

No. A contract for the sale of goods for $500 or more need not be in a signed writing if there has been part performance (e.g., if goods have been received and accepted or payment has been made and accepted). But it's only enforceable to the extent of good delivered, accepted, and paid for.

If both parties to a contract are mistaken as to the meaning of a contract term, and each party ascribes a different mistaken meaning to the term, can a court use reformation as a remedy?

No. A court cannot use reformation if each party unknowingly holds a different, mistaken belief about the meaning of a contract term. If both parties ascribe different mistaken meanings to a contract term, and neither party was aware of the mistake, the contract is void because there was never any mutual assent.

Will a court always deny relief to a party under a contract that requires longer than a year to perform if the contract is not contained in a writing signed by the party to be charged?

No. A court will not always deny relief to a party under a contract that requires longer than a year to perform if the contract is not contained in a writing signed by the party to be charged. If a party renders part performance, a court may provide a limited remedy, even without a signed writing, under an agreement in which the parties know that it is impossible for the terms to be fully performed within one year of formation.

May a minor accept the benefits of a contract and then use her incapacity to disaffirm any burdens?

No. A minor cannot disaffirm only part of a contract due to incapacity while continuing to retain the benefits of the contract. A minor seeking to disaffirm a contract due to incapacity must disaffirm the entire contract. Courts reason that it would be inequitable to permit a minor to keep the benefits of a contract while disclaiming its obligations. Similarly, some jurisdictions require a minor to return any consideration received (or what is left of it), if the minor elects to disaffirm.

Is a mistaken party barred from avoiding a contract under the mistake doctrine if that party's own carelessness caused the mistake?

No. A mistaken party's fault or carelessness in failing to realize a mistake before entering a contract does not prevent the mistaken party from avoiding contractual obligations, or prevent a court from reforming the contract, so long as the mistaken party has not breached standards of good faith and fair dealing.

Will a party's negligent failure or other fault in discovering a misrepresentation always prevent that party from avoiding his contractual duties?

No. A party's fault in failing to discover a misrepresentation does not always prevent that party from avoiding his contractual duties. Rather, a party's fault in failing to discover a misrepresentation will only prevent that party from avoiding his contractual obligations if the fault amounts to a breach of the duty of good faith and fair dealing.

Must a written agreement be signed by both parties to satisfy the statute of frauds?

No. A written agreement does not need to be signed by both parties to satisfy the statute of frauds. To satisfy the statute of frauds, an agreement must be (1) evidenced by a writing sufficient to show a contract and (2) signed by the party to be charged (i.e., the party against whom the court will be enforcing the contract). Although the written agreement does not need to be signed by both parties to satisfy the statute of frauds, the enforceability of the agreement is affected by who signs it. An agreement that is signed by only one of the parties is enforceable only against the party who signed it. The agreement is not enforceable by the signing party against the party who did not sign it.

Does a written and signed contract for the sale of goods for a price of $500 or more satisfy the statute of frauds if the contract omits the quantity of goods sold?

No. A written and signed contract for the sale of goods for a price of $500 or more does not satisfy the statute of frauds if it omits the quantity of goods sold. To satisfy the statute of frauds under the UCC, a contract for the sale of goods for a price of $500 or more must be (1) evidenced by a writing sufficient to show a contract and (2) signed by the party against whom enforcement is sought. Under the UCC, the writing or record of a transaction may omit an agreed-upon term, as long as the omitted term is not the quantity of the goods.

Must a writing be in a single paper to satisfy the statute of frauds?

No. For purposes of the statute of frauds, a writing includes electronic records and does not need to be a single document; it can be a compilation of documents. The documents need not be formal and need not be delivered or received to be effective. A writing needs only to provide sufficient evidence of the contract and be signed by the party to be charged to be enforceable under the statute of frauds. The signature can be any symbol made or adopted with the signer's intent to authenticate the document. In an email document, a party's automatically generated sender name in the email header is a signature, because it is a symbol adopted by the party with the actual or apparent intent to authenticate the record.

Is an agreement involving solely the exchange of mutual promises to marry subject to the statute of frauds?

No. If an agreement involves solely an exchange of mutual promises to marry, it is not subject to the statute of frauds. A contract falls within the statute of frauds if the consideration for the contract involves marriage or a promise to marry, unless the contract consists solely of a mutual promise to marry. This rule also applies when a third party makes some promise to the marrying parties in consideration of marriage.

May a person suffering from mental illness or defect avoid a contract if the other party has partly performed and had no knowledge of the incapacity?

No. If the other party has no knowledge of the mental illness or defect and has partly performed her obligations under the contract, the person with the mental illness or defect may not disaffirm the entire contract due to incapacity. An incapacitated person's right to disaffirm a contract terminates to the extent that avoidance would be unjust, so long as the contract was made on fair terms.

Does the mistake doctrine protect a party from an incorrect prediction of the future value of the subject of the contract?

No. Mistake doctrine does not protect a party from an incorrect prediction of the future value of the subject of the contract. A mistake is a misunderstanding of factual circumstances as they exist at the time of entering the contract. To avoid a contract on grounds of mistake, a party must show, among other things, that the mistake (1) relates to a basic assumption about which the contract was made and (2) has a material effect on the exchange of performances under the agreement. Mistake doctrine is not meant to relieve a party from the risk of a wrong judgment or prediction, such as entering an agreement to buy property believing the property value will rise when instead it ends up dropping.

Under what three circumstances will a court enforce a contract for the sale of goods for $500 or more if the contract does not comply with the statute of frauds?

There are three exceptions to the general rule that a contract for the sale of goods for $500 or more is subject to the statute of frauds: (1) SPECIALLY MANUFACTURED: if the contract is for goods that are specially manufactured, (2) ADMISSION: if the party against whom enforcement of the contract is sought admits there was a contract, and (3) PART PERFORMANCE: if there has been part performance (but only to extent of goods accepted and paid for).

Under what circumstances may a party avoid a contract based upon undue influence?

There are two elements to the defense of undue influence: (1) unfair persuasion was used; and (2) the other party was vulnerable to such persuasion. The courts look at many factors to determine if undue influence occurred, including: (1) discussion of the transaction at an unusual or inappropriate time; (2) consummation of the transaction at an unusual place; (3) insistent demands that the transaction or business be finished immediately; (4) extreme emphasis on the untoward consequences of delaying the transaction; (5) the use of multiple persuaders against the target of persuasion; (6) absence of third-party advisers to the target of persuasion; and (7) statements that there is no time to consult financial advisers or attorneys.

What must a party establish to avoid a contract on grounds of duress?

To avoid a contract on grounds of duress, the party must show that his manifestation of assent was induced by (1) an improper threat by the other party (2) that left him no reasonable alternative but to enter the contract.

What is the one fact a minor must prove in order to disaffirm a contract?

To disaffirm a contract, all a minor needs to show is that he or she was a minor at the time of entering into the contract. This creates a conclusive presumption of incapacity that the other party cannot rebut by showing that the minor in fact had the sophistication to appreciate the nature and effect of the transaction. The doctrine of contractual incapacity renders minors and mentally incapacitated individuals unable to give valid legal consent in some situations. The rule of incapacity is motivated by concern about exploitation and advantage-taking of minors and mentally incapacitated adults. To escape a contract, however, a minor need not prove that an adult party to the contract exploited or took advantage of the minor's immaturity. The mere fact of minority allows a minor's contract to be voidable by the minor.

What must a plaintiff show to establish that an untrue assertion or misrepresentation is fraudulent?

To establish that an untrue assertion or misrepresentation is fraudulent, a plaintiff must show: (1) the assertion was intended to induce assent, and (2) the party making the assertion knew it was false or was not certain that it was true. Intent to mislead is seldom provable by direct evidence of the party's state of mind at the time of the untrue assertion, but intent is usually inferable from a showing of knowledge of falsity.

If a contract is made under a mutual mistake of both parties, in what circumstances may the adversely affected party disaffirm the contract?

To provide grounds for avoiding the contract, a mutual mistake must: (1) BASIC ASSUMPTION: go to a basic assumption on which the contract was made and (2) MATERIAL EFFECT: have a material effect on the agreed exchange of performances. (3) NO ASSUMPTION OF RISK: not expressly or implicitly impose the risk on the person seeking avoidance.

What information must a signed writing contain to satisfy the statute of frauds?

To satisfy the statute of frauds, a signed writing must: (1) reasonably identify the subject matter of the contract, (2) sufficiently indicate that a contract has been made between the parties, and (3) state with reasonable certainty the agreement's essential terms.

Is a letter to a third party describing the contract sufficient to satisfy the statute of frauds?

Yes, per Kaplan a letter to a third party signed by the party to be charged is a sufficient writing to satisfy the statute of frauds.

Can a dishonest opinion constitute a fraudulent misrepresentation?

Yes. A dishonest opinion can qualify as a fraudulent misrepresentation. Some expressions of opinion are reasonably understood to be based on personal belief or taste rather than on facts, and these opinions—even if insincere— do not qualify as fraudulent misrepresentations. However, if an opinion is reasonably understood to be based on fact, it can qualify as a fraudulent misrepresentation if the party expressing the opinion (1) knows that it is not supported by those facts or (2) has not ascertained the facts before expressing the opinion.

Is a minor's contract voidable?

Yes. A minor's contract is voidable. A voidable contract is legally effective but has some defect that allows one of the parties to avoid (rescind) it. Unless the party with the right of avoidance exercises it, the contract is valid and enforceable and cannot be challenged by the party without that right. In this context, a person lacks capacity due to infancy until the beginning of the day before his eighteenth birthday, which is the age of majority in most jurisdictions. A minor's lack of contractual capacity allows the minor to avoid the contract. However, if the minor does not exercise that right, the other party cannot raise the minor's incapacity to challenge the contract.

Can an untrue assertion or misrepresentation ever prevent a contract from forming in the first place?

Yes. A misrepresentation or untrue assertion as to the character or essential terms of the contract can prevent a contract from forming in the first place, if it induces assent from a party who did not know or have a reasonable opportunity to know the contract's character or essential terms. In these cases, a party is incapable of manifesting assent to the contract, and the contract never forms, regardless of whether the misrepresentation was made by another potential contracting party or a third party.

May a party ever recover upon an illegal contract?

Yes. A party may recover in equity under an illegal contract if that party is equally or less culpable than the other party. In deciding whether to give a remedy under an illegal contract, courts also consider: (1) the purpose of the violated law, (2) the extent of the violation, and the public interest. Otherwise, courts generally will not enforce illegal contracts.

May a party use promissory estoppel to enforce an oral promise that is unenforceable due to the statute of frauds?

Yes. A party may use promissory estoppel to enforce an oral promise that cannot be enforced as a contract under the statute of frauds. A plaintiff seeking to enforce an oral contract through promissory estoppel must show: (1) the defendant made a promise with the reasonable expectation that the plaintiff would rely on it, (2) the plaintiff did justifiably rely on the promise, and (3) injustice can be avoided only by enforcing the promise. It is not easy to make a case for promissory estoppel relief. The plaintiff may not be able to show that it was justifiable to rely on the oral contract, and a court may be unwilling to assist a plaintiff in enforcing a contract that should have been recorded to comply with the statute of frauds.

Can changed circumstances ever prevent a deceived party from avoiding his contractual obligations due to a material or fraudulent misrepresentation?

Yes. Changed circumstances can prevent a deceived party from avoiding his contractual obligations due to a material or fraudulent misrepresentation. Specifically, if facts come into accord with a previously untrue assertion before the deceived party provides notice of his intent to avoid the contract, the deceived party can no longer avoid his obligations under the contract, unless the deceived party has been harmed by relying upon the misrepresentation. Any effects of the misrepresentation are cured by the change in facts, and there is little likelihood of harm caused by enforcing the contract.

Do minors have the capacity to contract for necessities like food?

Yes. Contracts for necessities like food, shelter, and medical care are always enforceable against minors under quasi-contract theory. This means that the other party may recover the reasonable value of the goods and services provided to the minor (not necessarily the contract price). It serves the public-policy goal of ensuring that minors are able to obtain these necessities (as people would be reluctant to enter into such contracts with minors if they were unenforceable).

Do courts usually uphold an adult party's contractual waiver of rights to sue for negligence in relation to a recreation activity against a defense that the waiver is contrary to public policy?

Yes. Courts generally uphold conspicuous and unambiguous waivers of adult parties' rights to sue for negligence in relation to a recreational activity. Those waivers do not implicate public policy if the activity is not necessary or greatly important to the public interest. For a waiver to be unenforceable, the party must show: (1) the provision was not readily noticeable or was otherwise unfairly imposed, and (2) the insulation from liability was unusually expansive (e.g., encompassing reckless or intentional acts).

May a party to a contract avoid the contract on the ground of undue influence if a non-party's undue influence induced the party to assent to the contract?

Yes. If a non-party's undue influence induces a party to assent to a contract, the party under any undue influence may avoid the contract, unless the other party to the contract gives value or otherwise materially relies on the transaction in good faith and without reason to know of the undue influence.

If both parties to a contract are mutually mistaken as to the meaning of a contract term, may a court rewrite the contract to conform to the parties' common understanding?

Yes. If the parties are mutually mistaken as to the contents of a writing that embodies their prior agreement, a court can reform the writing to express the parties' prior agreement, unless the rights of third parties, such as good faith purchasers, would be unfairly affected. In these cases, the parties' mistake is one of expression: the parties reached a prior common agreement but committed some error in reducing it to a writing. However, a court cannot use reformation to correct a writing if the mistake is not one of expression and causes the parties to enter an agreement they otherwise would not have made. In these cases, the contract is voidable, and the parties can avoid their duties under the contract for mistake.

May a party who lacked capacity due to mental illness or defect at the time of a contract subsequently ratify the contract if he or she regains capacity?

Yes. Similar to a minor who comes of age after contracting, a party who lacked capacity to contract due to mental illness or defect may, if he or she regains capacity, elect to ratify or disaffirm the contract.

Upon avoiding the contract, must the minor return to the other party any goods received under the contract?

Yes. The minor must return to the other party any goods received under the contract. However, the minor is not liable for damage, wear and tear, or any other depreciation in value of the goods. If the minor is not in possession because he sold the goods, he must turn over any sale proceeds to the other party.

Can a mutual mistake about the law governing the contracting parties constitute a mistake of fact?

Yes. The parties' mutual mistake about the law can constitute a mistake of fact. A mistake is a misunderstanding of factual circumstances as they exist at the time of entering the contract. Although some courts will not apply mistake doctrine in cases in which the parties are motivated to enter the contract as a result of a mistake as to the law, many courts treat a mutual mistake of law as a form of factual mistake and permit it to be handled under mistake doctrine.

" Under the specially manufacturered goods exception, must the aggrieved party have started making the specially manufactured goods?

Yes. The seller must have substantially begun to manufacture the goods or made a commitment to procure the goods. Specially manufactured goods are not suitable for sale to others in the ordinary course of the seller's business.

If both parties to a contract unknowingly commit an error of expression, and the written contract does not conform to their mutually agreed-upon exchange, may a court reform the contract even if it is subject to the statute of frauds?

Yes. The statute of frauds does not bar a court from reforming a contract if the parties unknowingly commit an error in expression, such that the written agreement does not conform to their mutually agreed-upon understanding. A court may reform a contract, even one subject to the statute of frauds, if both parties are mistaken as to the meaning of a written contract term due to a mutual mistake in expressing their understanding in writing. The rule is the same for contracts not otherwise governed by the statute of frauds: a court may reform the contract to correct the mistake in expression so long as the rights of third parties, such as good faith purchasers, will not be unfairly affected.