Unenforceable Agreements

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Statute of Frauds

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Certain kinds of contracts must be memorialized in a signed writing with sufficient content to evidence the contract.

(1) Contracts for the transfer of an interest in land. This applies not only to a contract to sell land but also to any other contract in which land or an interest in it is disposed, such as the grant of a mortgage or an easement.

(2) Contracts for the sale of goods for $500 or more (UCC § 2-201)

(3) Contracts that take more than one year to perform

(4) Contracts to answer for the duty of another; A person paying someone else’s debts. (Suretyship).

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Exception to the statute of frauds is promissory estopple

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McINTOSH V. MURPHY

2d § 217A: (1) A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce the action or forbearance is enforceable notwithstanding the Statute of Frauds if injustice can be avoided only by enforcement of the promise. The remedy granted for breach is to be limited as justice requires. If a party has relied on an oral promise and rendered part performance, the other party should be estopped from asserting the Statute of Frauds.

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Fraud, Material Misrepresentation

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HALPERT V. ROSENTHAL:

There is an overwhelming weight of decisions and textual authority which has established the rule that where one induces another to enter into a contract by means of a material misrepresentation, the latter may rescind the contract.

An innocent misrepresentation of a material fact warrants a granting of a claim for rescission. A misrepresentation may be made innocently, negligently or fraudulently but in any case rescission is an appropriate remedy.

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Misrepresentation

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2d § 159 (1981); Misrepresentation Defined
A misrepresentation is an assertion that is not in accord with the facts.

2d § 167 (1981); When a misrepresentation is an inducing cause
A misrepresentation induces a party's manifestation of assent if it substantially contributes to his decision to manifest his assent.

2d § 164 (1981); When A Misrepresentation Makes A Contract Voidable
(1) If a party's manifestation of assent is induced by either a fraudulent or a material misrepresentation by the other party upon which the recipient is justified in relying, the contract is voidable by the recipient.

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Concealment

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Concealment of a material fact by nondisclosure is fraud. This applies to material facts which you are in good faith bound to disclose.


2d § 160 (1981); When Action Is Equivalent To An Assertion (Concealment)
Action intended or known to be likely to prevent another from learning a fact is equivalent to an assertion (concealment) that the fact does not exist.

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Duress and Undue Influence

Incapacity of Minors

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Incapacity: Protected Parties-under guardianship, infants, mentally impaired, intoxicated individuals.

Minors
Disaffirmance: a minor or a party protected under incapacity declares he will not abide by the contract.

Exceptions: Misrepresentation of age, Necessaries-food, clothing, shelter, medical treatment
Ratification: surrender the ability to disaffirm

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Duress and Undue Influence

Mental Incapacity: Two Tests

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Barbee v. Johnson: Undue Influence- Undue influence is the exercise of an improper influence over the mind and will of another to such an extent that the action is not that of a free agent.

Cognitive test-does the person understand the nature of the consequences of entering into the contract at the time it was made?

Volitional Test-does the person have the ability to act in a reasonable manner in relation to the transaction.

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Duress and Undue Influence

Intoxicated Persons

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2d § 16 (1981). Intoxicated Persons
A person incurs only voidable contractual duties by entering into a transaction if the other party has reason to know that by reason of intoxication

(a) he is unable to understand in a reasonable manner the nature and consequences of the transaction, or

(b) he is unable to act in a reasonable manner in relation to the transaction.

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Duress and Undue Influence

Economic Duress

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A contract modification under economic duress is not enforceable against a party if the duress is created by a party to that contract through wrongful threats precluding the exercise of free will.

A threat to breach a contract is the most common type of contract duress. There will be duress in such an instance if and 1) when the (wrongful) threat is carried out 2) it would result in irreparable injury.

TOTEM MARINE TUG & BARGE, INC. V. ALYESKA PIPELINE SERVICE: Economic duress requires that the party not only be the victim of a wrongful act but that the victim has no other reasonable choice available but to agree to the terms of the wrongful act.

Duress exists where (1) one party involuntarily accepted the terms of another, (2) circumstances permitted no other alternative, and (3) such circumstances were the result of coercive acts of the other party.

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Duress and Undue Influence

Physical Duress

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2d § 174. When Duress By Physical Compulsion Prevents Formation Of A Contract
If conduct that appears to be a manifestation of assent by a party who does not intend to engage in that conduct is physically compelled by duress, the conduct is not effective as a manifestation of assent.

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Duress and Undue Influence

Threats

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2d § 176. When A Threat Is Improper

(d) the threat is a breach of the duty of good faith and fair dealing under a contract with the recipient.