Contracts Chapter 7

what are the exceptions for infant incapacity?

1. Necessities 2. Willfully misrepresenting age 3. Intentionally destruction of contract subject 3. Statutory Exceptions

what is an improper threat under duress?

1. a crime or tort 2. threatening criminal prosecution 3. a threat to sue made in bad faith 4. threat breaches duty of good faith and fair dealing

what are the elements to determine materiality of breach?

1. adequacy of damages 2. hardship of breaching party 3. amount of benefit received by the non-breaching party 4. negligent or willful behavior

what are the two basic ways a contract can be illegal?

1. formation involved a criminal or tortious conduct 2. the contracts subject matter is contrary to public policy.

what are the elements of misrepresentation?

1. fraudulent or material misrepresentation 2. inducement 3. justifiable reliance

how is procedural unconscionability shown?

1. gross inequality in bargaining power 2. unfair surprise

how are conditions excused?

1. hindrance or failure to operate 2. repudiation

when can a party recover from an illegal contract?

1. ignorance 2. party lacks legal purpose 3. unequal fault 4. severability

what are the elements of unilateral mistake?

1. mistake by one of the parties to the contract 2. mistake relates to basic assumption on which the contract was made. 3. mistake materially affects the terms of the agreed exchange 4. the affected party did not assume the risk of the mistake 5. the other party knew of the mistake, or it would be unconscionable to enforce the contract in light of the unilateral mistake 6. the non-mistaken party must have reason to know of the other party's mistake 7. the mistaken party's mistake was the fault of the other party

what are the elements of mutual mistake?

1. mistake of fact by both parties 2. mistake relates to a basic assumption on which the contract was made 3. mistake materially affects the terms of the agreed exchange 4. the party seeking rescission did not assume the risk of the mistake. the three bases for the allocation of risk: a. allocation by the contract b. allocation by the court c. conscious ignorance

what are the tests for mental incapacity?

1. the cognitive test - finds whether the party seeking to void the contract has insufficient mental ability to understand K and its consequences. 2. the volitional test -

what happens to unconscionable contracts?

1. the court will void the entire contract 2. enforce all but the unconscionable clause 3. limit the application to eliminate the unconscionable clause.

what are the elements to duress?

1. victim induced to enter into the contract 2. improper threat was made by the other party 3. the victim had no reasonable alternative

when can a party who does not have an illegal purpose recover?

1. when the purpose does not involve serious moral turpitude 2. when the innocent party does not act to further the illegal purpose

what is material breach?

a breach that substantially defeats the purpose of the contract, or relates to an essential element of the contract, and deprives the injured party of a benefit that he or she reasonably expected.

what are bad non-compete clauses:

a clause that is unreasonable in terms of activities, duration, and geographical. most courts apply the rule of reason

what is a promise?

a commitment to do or refrain from doing something

what is a condition precedent?

a condition that must occur before an absolute duty of immediate performance arises

what is the in pari delicto rule?

a court may grant a remedy under an illegal contract or a contract contrary to public policy if the parties are not equally guilty or if public policy considerations warrant granting a remedy. ex: cases brought by a party who the law seeks to protect by prohibiting the transaction

what are the remedies for unconscionable contracts?

a court may: 1. refuse to enforce the contract 2. refuse to enforce the unconscionable clause but enforce the rest of the contract 3. limit the application of the unconscionable term to avoid any unconscionable result

what is misrepresentation?

a false statement or material fact made by one party that affects another party's decision making in entering a contract

what is required to show a contract is unconscionable?

a sliding scale for the elements of 1. procedural unconscionability 2. substantive unconscionability

what is express affirmation?

agreement through contract or communication

what is disaffirming a contract?

allows a party to void a contract

what is a condition?

an event, occurrence, or non occurrence that creates, limits, or extinguished another party's absolute duty to perform

what is duress?

an improper threat leaving a victim no reasonable alternative

what is a condition subsequent?

an occurrence of an event that cuts off, limits, or modifies an existing duty

What is an unconscionable contract?

an oppressive contract with unfair surprise that shocks the court's conscience

what is unconscionability

an oppressive or unfair contract or clause

what is impossibility?

an unforeseen event occurs after the contract is made that makes performance impossible.

what is the principal remedy for mistake?

avoidance of the contract

how does disaffirmation occur?

by refusal to perform or denying liability under a contract

is consideration required for common law contract modifications?

common law contracts require consideration for modifications

what are express conditions?

conditions expressed in a contract

what are implied-in-fact conditions?

conditions fairly to be inferred from a parties words or conduct

is consideration required for UCC contract modifications?

consideration is not required for UCC contract modifications

what is constructive affirmation?

continuing to perform a contract for a reasonable time

does duress make a contract void or voidable?

duress generally makes a contract voidable

what are the types of affirmation?

express or constructive

what is substantive unconscionability

exteme oppressive and unfairness of the actual terms and conditions of a contract

a minor can keep part of a contract and disaffirm the other parts?

false

if an offer contemplates conduct that is illegal at the time of the offer, is the offer ever valid?

false

if a contract becomes illegal after it is formed, is there still a duty to perform?

false, the duty to perform is discharged

what are necessities?

food shelter clothes medical expenses cars

what are the types of misrepresentation?

fraudulent misrepresentation and material misrepresentation

what is required for UCC contract modifications?

good faith

are illegal contracts enforceable?

illegal contracts are generally void and unenforceable unless the contract is in furtherance of an illegal act and not itself illegal

what are constructive (implied-in-law) conditions?

implied conditions connecting contract performances together through conditional relationships implied from the agreement, thereby determining the parties' order of performance.

are single delivery contracts or installment contracts under the substantial impairment rule?

installment contracts

Will a court enforce an illegal contract or a contract that violates public policy?

it depends on the nature of the illegality.

what does a material breach allow under common law?

it entitles the non-breaching party to rescind a contract

what is fraudulent misrepresentation?

knowledge of the falsity of representation or indifference to the truth of misrepresentation

what is fraud in the factum?

misrepresentation of the essence or character of an agreement + absence of negligence makes a contract void

if a contracts consideration is damaged, must the minor make restitution?

no a minor is not liable in some jurisdictions they are if they committed an intentional tort

does election waiver require consideration?

no, non-material terms may be waived without consideration

if a party lacks the capacity to enter into a contract, is the contract void?

no, they are only voidable at the option of the incapacitated party.

what is a condition concurrent?

occurrences that happen together and parties are assumed to agree to perform them simultaneously ex: tendering goods and providing payment

who can disaffirm a contract with a minor?

only the minor

is a contract void or voidable due to duress?

only voidable

what is impracticability?

outside events allowing a contract to be enforced only in the face of unforeseen, extreme and unreasonable difficulty resulting in loss.

what are the two categories of duress?

physical duress and economic duress

what is mistake in integration?

prior to a valid agreement the parties made a mistake in putting the agreement into writing

what is procedural unconscionability?

refers to how a contract was created between parties where one party has significant advantage over another.

what is the remedy for mistakes in integration?

reformation

what is material misrepresentation

representation that has capacity to induce one to enter into a contract

are single delivery or installment contracts under the perfect tender rule?

single delivery contract

what is the standard for express conditions?

strict compliance

what is the supervening difficulties exception?

substantial and burdensome difficulty not anticipated and not within the contemplation of the parties when the contract was made.

what is the standard for constructive conditions?

substantial compliance

what is frustration of purpose?

the contract can still be performed but the value of the performance is now worth less

what happens when a contract is disaffirmed and a party already conferred a benefit?

the courts would order restitution to put the party back where they were before the contract was made

who has the burden of proof for condition subsequent?

the defendant

what is value based on?

the market worth of property or services

what is the key to rescission for misrepresentation?

the materiality of the misrepresentation, not just the state of mind of the representer?

what are the consequences of material breach?

the non-breaching party may: 1. withhold performance 2. sue for damages 3. rescind a contract

who has the burden of proof for condition precedent?

the plaintiff

what is a minors liability for necessities?

the reasonable value of the goods or services, not necessarily the contract price

What is the general rule for infant incapacity?

these contracts are voidable at the minor's discretion before the minor reaches age of majority or within a reasonable time afterward.

are mutual mistakes void or voidable?

they are voidable by the adversely affected party

What is the rule for necessities?

though a minor can disaffirm a contract, they will be liable for the value (not necessarily the price) of any necessities. the nature of a minor's necessities depends on the circumstances.

what are improper threats under duress?

threat of action that would be a crime or a tort threat of criminal prosecution threat of civil suit made in bad faith threats amounting to breach of duty of good faith and fair dealing

how is substantive unconscionability shown?

through oppressive terms like price disparity or overly harsh allocation of risks unjustified by circumstances

The common law doctrine of unconscionability has been highly influenced by UCC §2-302.

true

a mentally incapacitated person may ratify a disaffirmed contract if they recover?

true

contract ratification can be express or implied?

true

courts do not consider adequate consideration, only sufficient consideration?

true

economic duress makes a contract voidable at the option of the victim?

true

if a mistake is unilateral, the party seeking avoidance is the one who made the mistake?

true

if the mistake is mutual, the party seeking avoidance is the one who is adversely affected by the mistake?

true

mentally incapacitated people are responsible for necessities?

true

only a beneficiary of a condition may waive the condition?

true

physical duress makes a contract void as a matter of public policy?

true

the law presumes that everyone has mental capacity, so P must prove any incapacities?

true

waiver of a condition does not mean waiver of the right to damages if the condition was also a promise?

true

what are defenses to breach of contracts?

unconscionability statute of frauds impossiblility incapacity misrepresentation impracticability unilateral/mutual mistake illegality frustration of purpose affirmative defense

what is undue influence

unfair persuasion of a dominating party to another party

does undue influence make a contract void or voidable?

voidable at the instance of the victim

what is an estoppel waiver?

when a beneficiary of a condition promises to waive conditions and the other party detrimentally relies on that promise

what is an election waiver?

when a condition does not materialize, the promisee may elect to terminate their liability or continue with the contract - if they choose to continue they waive the condition

what is the exception to duress?

when manifestation of assent is physically compelled the contract is void.

what is procedural unconscionability

when parties don't freely consent to the manner in creating a contract

when does a material breach become total?

when there is no longer an opportunity to cure

if a minor disaffirms a contract, must they return its subject?

yes they must return it if they still possess it.