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114 Cards in this Set
- Front
- Back
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Defense to Contract's enforceability
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A contract can be considered unenforceable if there is "lack of genuineness of assent or voluntary consent"
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Voluntary Contest
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This is the case
a)Mistake b) Misrepresentation c) Undue influence d) Duress (No true meeting of the minds) |
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Party arguing Voluntary Consent
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If they can demonstrate that they did not truly agree to the terms of the contact. They can carry out the contract like it is, or "rescind" CANCEL it.
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Basis of Mistake
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Contract can be avoided by mistake IF
mistake of FACT. Mistake of value/quality is not a contractual mistake |
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2 Forms of "Mistake of Fact"
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1) Bilateral: It's a mutual mistake made by both the contracting parties.
2) Unilateral: It's a mistake made by only ONE of the party. |
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Bilateral Mistake
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When both the parties are mistaken about a "Material Fact" (this should be important to the subject matter of the contract).
-- It's a mutual misunderstanding concerning a basic assumption on which the contract was made. The contract is "Voidable" by the adversely affected party (can be rescinded) |
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"meeting of the minds"
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The contracting parties interpreted the wording of the contract in "Materially" different meanings"
This contract can then be "rescinded" |
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Unilateral Mistakes
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This is when only one of the contracting party. Usually the mistaken party cannot avoid/rescind the contract just because of it.
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EXCEPTION to Unilateral General Rule
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The Unilateral party may avoid/reform contract if:
1) If other party knew, or should have reasonably known that the "mistake of fact" was made. 2) If clerical error (as long as it's not too grossly negligent). This can be easily proven. Then it can be reformed to show accurate number. |
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Mistake of Value
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If the mistake concerns future market value or the quality of object in contract, the contract is Enforceable.
This can be "Unilateral" or "Bilateral" mistake of value. |
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Reasoning behind "Mistake of Value"
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Each party must assume the risk of knowing that the item's value can change or be different from what they had thought.
So all those little things can't be considered "Mistake" |
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Fraud (Def and innocent party's options)
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This is when a party is fraudulently induced to enter into a contract.
This can be avoided at the innocent party's option, be back to their original position before contract was made. Or they can enforce the contract and seek damages for any injures due to fraud. |
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4 factors for "Fraudulent Misrepresentation"
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1) Misrepresentation of material fact
2) Knowledge of falsity 3) Intent to deceive 4) Innocent party must justifiably rely on this misrepresentation |
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Misrepresentation of material fact [FACTOR 1]
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1st factor needed to prove "Fraudulent Misrepresentation"
The misrepresentation was about a material fact. A reasonable person would have taken it to be a fact. General Rule: opinions don't count This can be done with words or actions. ~Silence ~Active concealment ~ |
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Other factors that can be considered for Misrepresentation of material facts
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a) Misrepresentation by Silence
b) Misrep by Concealment c) Misrepresentation of law |
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Exception to OPINION in Factor 1
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-- If an person giving the opinion is an expert and it is said in "a very matter of definite/factual terms" -- this can be considered as "misrepresentation of material fact"
-- If the contracting party is in a "fiduciary relationship" with the other party (Lawyer-client, business partners) Since they are held to a higher degree of accountability, they are required by buyer to disclose material facts. |
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Exception to Factor 1
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-- Predictions about future cannot be fraud (weather man)
-- Sales people, not experts. So their opinions cannot be considered material fact |
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Misrepresentation by Silence
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Usually silence cannot be considered fraud because either party isn't obligated to volunteer information.
If they are asked about specific things, they are obligated to answer truthfully. Silence can be considered "misrepresentation of fact" if... a) If one party knows a fact the other party/reasonable person wouldn't think of to ask b) One party knows the other party will not go for the offer if this fact is known to them. ~Latent defects: defects that are not readily discoverable must be disclosed by the seller. -- Active concealment, Fiduciary relationship, statements that create false impressions |
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Reformation
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Equitable remedy granted by a court.
reformed to reflect true intention of the party. |
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Active Concealment
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This can also be considered as "Misrepresentation of facts"
When a party takes specific action to conceal a fact that is material to the contract. Ex. turning an odometer of a car back before selling it to someone. -- A fact was true when it was inquired by the buyer, but when the facts change, seller must inform buyer -- or "misrepresentation of facts" |
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Misrepresentation of Law
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Misrepresenting law is usually not enough to avoid contract.
However, if professional, (lawyer, real estate agent), it can be counted as "Misrepresentation of Fact" |
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Knowledge of falsity
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The 2nd factor needed for "Fraudulent Misrepresentation"
"Scienter" - guilty knowledge, the misrepresenting party knew that they were falsely representing the facts. |
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Three ways to prove Knowledge of falsity
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a) The misrepresenting party knows they are making a false statement
b) They should have known it was a false statement, reasonable person c) They were talking without regard to truth. (Didn't know what they were talking about) |
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Intent to deceive
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3rd factor needed for "Fraudulent Misrepresentation"
It is not necessary that the intention could have caused any harm. Two kinds: Innocent and Negligent |
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Innocent Misrepresentation
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Part of "Intent to Deceive"
One party makes a statement believing that it is true, when in reality it isn't true. When this happens, the affected party can rescind the contract (if misrepresentation is material) but cant seek damages. |
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Negligent Misrepresentation
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Part of "Intent to Deceive"
This misrepresentation is made through carelessness, believing the statement is true. Failed to exercise reasonable care in uncovering/disclosing facts. This is treated like "scienter" and counts for "Intent to deceive" |
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Reliance on Misrepresentation
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4th Factor needed for "Fraudulent Misrepresentation"
The deceived party had reasonably relied on the misrepresentation, and this misrepresentation was an aspect on why they entered into the contract. Reliance isn't justified on extravagant statements. ~ Duty to verify: exception |
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EXCEPTION duty to verify
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A reasonable person will verify, when it's relatively cheap, easy to do.
Not doing this can disqualify an otherwise fraud case. |
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Damages
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This isn't necessary for Fraudulent Misrepresentation.
For rescinding contracts, this isn't needed because it just returns the deceived party to its original position. But to recover damages caused by fraud, proof of injury is required. . |
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Undue Influence
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It's an influence that arises from a special kind of relationship in which one party can greatly influence another party, thus overcoming that party's free will.
Especially cautionary when it benefits the guardian So a contract that is entered under "Undue Influence" lacks "Voluntary consent" and is voidable. Must be able to prove that one party lost their freewill |
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Undue Relationship Examples
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Minor - Guardian
Old person - Guardian Fiduciary Relationships: Lawyer-client etc |
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Presumption of Undue Influence
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When the dominant person in the "Fiduciary" relationship benefits from a contract, the courts will presume that the contract was made under undue influence
This presumption needs to be rebutted by showing consideration, full disclosure. If cannot be rebutted, it is rescinded. |
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Duress
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It is not "Voluntary Consent" if one of the parties is forced into the agreement. Forcing using fear, blackmail, criminal charges.
Freewill is overcome Voidable at the option of victim |
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Freewill and Duress
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Freewill assessment in Duress is NOT according to "Reasonable Persons Standards".
The overcoming of freewill is "Subjective" terms. |
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Exceptions to Duress
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Threatening to sue in civil court is NOT duress
Economic Need - one party needs an item, but the other party is exacting a very high price for it. |
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Economic Duress
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A person does a wrongful act to put the other in a bad financial place, and then tries to take advantage of it.
Ex. Oil and Pipeline in notebook. |
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Genuineness of assent
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May come into the picture when the contract gives one party a large amount of bargaining right.
Adhesion contracts -- allows little to no negotiation. |
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2 ways a Valid Contract can be unenforceable
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a) If the parties have not voluntarily consented to its terms.
b) If it is not in its proper form. |
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Statute of Frauds
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It is required that certain agreements are required by law to be in writing, otherwise it may not be "Enforceable"
However, if it is completely executed, then it can't be void |
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5 Contracts under "Statute of Frauds"
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This is done so to prevent people from lying that there was ever a contract.
1) Land transactions 2) Promise to pay a debt of another 3) Contract of goods with price of $500 or more 4) Promise given in consideration in a marriage 5) Promise which cannot be performed in a year. |
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Land transactions
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A contract that falls under "Statute of Frauds" and thus need to be in writing
Land is real property, so this involves everything that is permanently attached to the land as well. Also includes sales, mortgages. So a oral contract to sell land cannot be enforced -- Defense to the enforcement! |
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EXCEPTION to Land Transactions
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If these exceptions are met, outside Statute of Frauds. Then the land transaction can be enforceable.
a) Admission: The contracting party admits to there being a contract, under legal court proceedings. b) Part performance: If the buyer has paid a substantial portion of the purchase price and has either taken possession of the land, or made valuable improvements to the property. [Promissory Estoppel] |
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Promise which cannot be performed in a year
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A promise, by which its own terms cannot be performed within a year.
-- From the time acceptance was made. Impossible for it to be completed in a year |
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EXCEPTION to YearRule
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a) Admission
b) Part performance: The part that has been performed is entitled to its compensatory money (it then becomes partly enforceable) |
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Promise to pay a debt of another
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Also called secondary promise/guaranty
"If _name_ doesn't pay, I will pay". If it follows the above mentioned format, it is under Statute of Frauds and needs to be in writing to be enforceable. |
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EXCEPTION to Promise to pay debt of another
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a) Admission
b) If the promisor's main motive was to secure a benefit for themselves These two exceptions would make the contract outside "Statute of Frauds' and oral contracts would then be enforceable. |
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Promise given in consideration for marriage
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Unilateral promise to make monetary payment, or to give property in exchange of marriage.
Get it in writing. (Same applies for prenuptial agreements, agreements before marriage that define rights of other person's property) |
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EXCEPTION to consideration for marriage
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Admission
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Sale of goods with a contract, worth more than $500
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Need to just state quantity of goods. Adequately reflects both party's intentions.
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EXCEPTION to Sale of goods
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a) Admission
b) Part performance: makes it partly enforceable. c) Specially manufactured goods d) Confirming memo. If this isn't objected to within 10 days, it sis outside "Statue of Frauds" |
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Specially manufactured goods
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If the goods are not suitable for sale to others in the normal course of the seller's business and the seller has EITHER
a) made substantial start to the manufacture b) made substantial commitments to procure the goods. |
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Requirements of writing
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- Identification of parties
- Subject matter - Material terms - Signature of the party (party against whom enforcement is sought must have signed the writing) Ex. Devon and Miller contract. And Devon sends Miller a letter laying out the sale, and Devon signs this letter. Now Miller can enforce the contract to Devon, but Devon can't enforce this contract to Miller because she did not sign it. |
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Parol Evidence Rule
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In a written contract, any other evidence or extrustic evidence made before/during contract formation == it cannot be used to contradict.
When a written contract doesn't include/contradicts oral understanding reached by the time or at the time of the contracting. |
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Parol Evidence Rule in court
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If the court finds that the contracting parties intended their written contract to be complete and final statement of their agreement. Neither party will be allowed to present "Parol Evidence" -- testimony/evidence of communication between the parties not contained in the contract.
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Example of Parol Evidence
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Before a lease gets signed, Betty asks even though contract says no pets, whether she can bring her cat.
The leaser agrees, and they both sign. Later leaser changes his mind. Because the lease was meant to be a complete/final statement -- no parol evidence will be allowed. Betty can't keep her cat. |
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EXCEPTION to Parol Evidence Rule
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If any of these exceptions are met, then parol/extrusive evidence can be used.
a) Proved fraud, duress b) Condition precedent not fulfilled c) ambiguous terms d) Consideration never changed hands e) Reformation because of mistake in intergration f) Collateral agreements (2nd agreements) g) Subsequent modification |
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Fraud/Duress (Exception 1)
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Extrusive evidence is needed at this point to prove at it was the case
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Condition Precedent
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Contract to buy a house, contingent upon financing.
A condition must be met for the contract to be enforceable. So outside evidence can be brought in, to prove this. |
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Ambiguous Terms
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When terms of the contract isn't clear, outside evidence can be brought in to verify, further help to determine terms
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Consideration never changes hands
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If the consideration never changed hands, NSF check.
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Reformation because of mistake in integration
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clerical error? So it is reformed to accurately reflect the parties intentions
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Collateral agreements (2nd agreement)
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Something which would not normally have been included in the original written cntract.
Contract to buy Phred's house, and the agreement to buy Phread's motorcycle. Then outside evidence can be brought in to show that Phread also agreed to buy motorcycle |
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Subsequent Modification
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If something is promised/modified (oral or written) of a written contract can be introduced to court (UNLESS UNDER STATUE OF FRAUDS)
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Integrated contracts
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They are supposed to be the final/complete statement on the terms of the agreement. If this is so, outside evidence is not allowed.
If it is partially integrated, outside evidence is allowed (as long as it doesn't contradict) |
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Privity of contract
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Principle that just the 2 contracting parties alone have the rights and liabilities (duty) under the contract.
(EXCEPTION) Assignment and Delegation. Third party beneficiary |
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Third party
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One who is not a direct party to a particular contract, normally wouldn't have rights under the contract.
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Bilateral Contract
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2 parties have corresponding rights and duties.
One has the RIGHT to require the other to perform their DUTY under the contract. |
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Assignment
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The transfer of contractual rights to a third party.
This happens after original contract was made. |
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Bank institutions and Assignments
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It is often used by banks and financial institutions. They can assign their right to collect your mortgage payment to a third party.
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Assignor
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Party assigning the rights to the 3rd party
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Assignee
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The 3rd party who is receiving rights
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Obligee
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Person whom the duty is owed to
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Obligor
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Person who's obligated to perform
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Not Assignable
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1) A contract is not assignable in which the obligation (burden) of the obligor would be changed.
Ex. assigning an insurance policy. This doesn't work because it alters the insurance company's "duty of performance". Since insurance is evaluated individually, it cannot be assigned. 2) If the statute expressly prohibits assignment. Ex. assignment of worker compensation. 3) When the contract is personal in nature. It's a personal service. 4) When the Contract prohibits that it cannot be assigned. Ex. if it states any assignment is void will effectively prohibit any assignment |
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Cannot prohibit the assignment of these
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a) An assignment of just monetary payments cannot be prohibited because that would discourage money flow
b) Cannot prohibit assignment rights in real estate (against public policy) c) Negotiable instruments d) The right to receive damages for breach of goods contract can't be prohibited. |
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Rights assigned to Assignee
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They are the same rights that the assignor would have had!
So if the assignor had misrepresented a fact, and due to that the contract was rescinded, the assignee doesn't get any money. The fraudulent misrepresentation |
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Form of assignment
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It can be either oral or written. Better to be written.
If the contract is within "Statue of Frauds", be written. Ex. assignment of an interest in land must be in writing to be enforceable. |
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Notice of assignment
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It is not legally necessary for the Obligor (the one who owes the performance) to be notified of the assignment. However, it is the assignee who would inform the obligor.
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Problems with not informing Obligor of the assignment
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1) Assignor could assign the contract to 2 different people
2) without the notification of assignment, obligor could discharge his obligation by performing to the assignor. |
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Dual Assignments and Problem [American]
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American or English
American: who gets assigned contract first, gets the assignment. The latter assignee could sue assignor for fraud. Problem: If Obligor wasn't informed of the first assignee, just the 2nd assignee, then the first assignee could sue Obligor. |
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Dual Assignments and Problem [English]
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Whoever the Obligor gets information on first, about the assignment gets to be the assignee. And then the obligor's duty of performance is to just that assignee
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Warranties from Assignor to Assignee (Terms)
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1) Rights assinged exists
2) Rights assigned is not subject to any undisclosed defects or limitations 3) Assignor will not impair the value of assignment 4) All the documents are genuine |
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Warranties from Assignor to Assignee (Explanations)
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-- If there is no contract, the assignee can sue Assignor for breach of contract
-- The Assignment should have no subject to undisclosed defects or limitations (and if there is, it should have been informed to the assignee before). Ex. the 10% of the assignment's money will be going to ex wife -- assignor assigns the contract to 2 people, and the one that gets missed out can sue the assignor -- It is a valid, geniune contract. |
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Can Assignor guaranty Obligor is going to pay?
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No, Assignor cannot guaranty that. If Obligor doesn't, Assignee can sue Obligor.
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Delegation
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Transfer of duties.
Duties are delegated |
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Delegor
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The person delegating their duty to perform to someone else. They are still held liable if their delegatee doesn't perform.
They are no longer liable if there is a "release" |
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Delagtee
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The person receiving the duty. Who's had it delegated to them.
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Valid Delegation
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To have a valid delegation, the delegator just needs to have the "intention to make the delegation".
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Duty that cannot be delegated (Terms)
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1) Duty is personal in nature
2) The performance by the 3rd party will vary materially from that expected by the obligee 3) Contracts prohibts delegation |
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Duty that cannot be delegated (Definition)
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1) It is based on a trust relationship, it becomes a personal performance, so it cannot be delegated.
2) If it was something subjective that will change materially if the artist or painter were to be delegated. It's a subjective |
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Effect of delegation
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The obligee, the one to whom the performance is owed, must accept the performance of duty made by the delegatee. It can only be refused, if it meets any of the factors of antidelegation
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Legal liability of breach (delegation)
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If delegatee fails to perform, the obligor can sue delegator.
However, if delegatee communicates to obligor and tells them they're going to perform and then fails to perform. "Assumption of duty" on delegatee's side is breached. -- Obligor can sue delegatee and or delegator. |
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Assignment of "All rights"
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This creates both assignment of rights and delegation of duties.
"I assign all the rights of the contract" The assignor can still be held liable if assignee fails to perform |
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Third Party Beneficiary
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This is an exception to "Doctrine of Privity"
The original party's intent was to benefit a 3rd party. |
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Intended beneficiary
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Is the 3rd party beneficiary, and they can sue the assignor directly for breach
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Assignor determination
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In a bilaterial contract, both the parties are promisor, as they both have promises that can be enforced.
In 3rd party beneficiary, "Assignor" is the person that made the promise that benefits the 3rd party. |
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Promisee
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The one who pays the debt that the promisee owes to the 3rd party. The son in the Mother's Day flower case.
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Donee Beneficiary (1 type of 3rd party beneficiary)
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Contract is made for purpose of giving a gift to 3rd party.
The 3rd party becomes the donee beneficiary. Can sue promisor directly to enforce the promise. Ex. life insurance. |
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Creditor beneficiary (2 type of 3rd party beneficiary)
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Can prevent contracting parties from changing contracts.
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Vesting of Intended Beneficiary's Rights
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The Intended beneficiary doesn't have any rights till the rights have taken effect (vested)
Till then the promisor and promisee can modify, resicend contract without informing the Intended beneficiary. |
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3 Requirements for Intended Beneficiary's Rights to be Vested
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1) If the 3rd party materailly changes position in reliance on the promise
2) 3rd party brings lawsuit on promise 3) 3rd party demonstrates concest to promise |
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Performance and discharge of contracts
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Assumption: There is a valid contract.
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Conditions Discharge (Terms)
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1) Condition precedent
2) Condition Subsequent 3) Concurrent condition: If one or both failed to perform. If one party is ready, willing, and able to perform, and the other party isn't -- The party that was ready can sue. |
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Conditions Discharge (Definitions)
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1) Condition precedent: If a SPECIFIED does not happen, the duty is discharged for both sides. Ex. house on the condition precedent of getting a loan
2) Condition Subsequent: If a specified thing happens, the duty is discharged. Ex. if work transferred, discharged from lease (must be written into lease) 3) Concurrent condition: If one or both failed to perform. If one party is ready, willing, and able to perform, and the other party isn't -- The party that was ready can sue. |
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Condition of satisfaction
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1) Subjective standard
2) Objective standard |
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Condition of satisfaction (Def)
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1) Subjective standard: if one party isn't satisfied then they dont have to pay. Ex. It is personal.
2) Objective standard: If a reasonable person would be satisfied, then it is discharged. Like painting a house. |
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Discharge by Performance
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Most common way discharge takes place. 2 promises are exchanged, fully executed.
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Doctrine of substantial performance
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If a party in good faith substantially performs the contract. He may collect the contract price - actual damage of breach.
You can't discharge a contract for minor breaches. 1) substantially performs contract 2) It is done in good faith: so it wasn't intentionally breached to reduce cost. |
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Complete and substanial performance
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complete performance: it is performed compeltely according to contract
substantial: small breach, but in good faith |
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Timing of the performance
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If it was supposed to be delieved on March 1st, but it wasn't till March 2nd.
Discharged? Depends It is discharged if a) time specified, b) contract specifies "Time is of the Essence" No it is not discharged if a) it is commercially reasonable, objective standard. |
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Anticipatory breach
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One party communicates future breach
1) The affected party can sue when this is communicated 2) Can sue when it's breached 3) Or they can both forget about it The party that is sueing should inform the other party. (Anticipatory breach isn't applicable to debts) |
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Material Breech
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it can either be major or minor
They can sue for both. but major can discharge performance by non breaching party |
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Anticipatory breech
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It's going to happen in the future. can be treated like present breach.
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Mutual rescission
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Parties must make another agreement that also satisfies legal requirement for contract.
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