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What are the 6 categories of all defenses available to a party in both CL and UCC cases?
- (1) incapacity
- (2) misrepresentation
- (3) duress
- (4) undue influence
- (5) unconscionability
- (6) public policy
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What is infancy?
the time period before a person reaches the age of majority
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Who is an infant?
any person who is under the age of 18
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What is the modern rule regarding infancy and K?
minors may enter into a K but the K is voidable at the option of the minor
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What is the majority rule regarding minors who are married or emancipated?
minors still enjoy the power of avoidance even if they are emanicipated or married
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What is the minority rule regarding minors who are married or emancipated?
marriage or emanicipation eliminates the power of avoidance
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Upon exercising the right to disaffirm a K, what is the minor obligated to do under the majority rule?
return the goods if they are in his possesion but not liable for any damage, wear and tear, or any other depreciation in value of the goods
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If the K b/t a minor and another party is for something that can't be returned, what is the minor obligated to do upon exercising his power of avoidance?
minor is under no further obligation to compensate the other party
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In a minority of jurisdictions, a minor can only disaffirm a K by making the other party whole and he is liable for what?
depreciation, damages as well as compensating the other party for the services received
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What is ratification in the context of minor K?
once a minor turns 18 they may expressly or impliedly ratify the K entered during minority and thus bind himself to the obligations they may have otherwise disaffirmed
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Is silence sufficient for the ratification of a minor K?
no
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A minor's K for necessaries are voidable but what does the merchant have?
a quasi-K right to recover the reasonable value of the goods/services
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What are necessaries?
food, clothing, shelter, and medical care
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On what 2 things are courts split regarding whether they are necessaries for minors?
education & automobiles
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What is the rule in a minority of jurisdictions if a minor has misrepresented his age to the K party in order to obatin the goods/services?
he may be equitably estopped from proving his real age in court and thus prevented from invoking the defense of infancy
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Under modern rules, a person lacks capacity to K if he is what?
mentally incompetent at the time of K
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A person will be deemed mentally incompetent if what?
he is unable to understand in a reasonable manner the nature and consequences of the X
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Regarding volitional defects, in many jurisdictions mental incompetence can be established if what?
- (1) a person is unable to act in a reasonable manner in relation to the X; and
- (2) other person has reason to know of this condition
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What are the legal consequences of the mental incompetence defense if there's been an adjudication of mental incompetence?
the K is altogether void as a matter of public policy
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What is the legal consequence of the mental incompetence defense if there's been no adjudication of mental incompetence?
K is voidable at the option of the incompetent party
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May a party who was mentally incompetent at the time of K later ratify the K?
yes if he becomes mentally competent at a later time
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If the mentally incompetent party exercises his power of avoidance and has received some value under the K what is he required to do in way of restitution?
to make the other party whole by paying the reasonable value of the goods/services rendered
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What is the exception to the mentally incompetent party's duty of restitution?
if the other party takes unfair advantage of the mentally incompetent person by being aware of his incompetence then he is only entitled to return of hte benefits still in the possession of the mentally incompetent party
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What is the rule regarding a mentally incompetent party's right to avoidance if the K is for necessaries?
may disaffirm the K but the provider of the necessaries can recover in quasi-K for the reaosnable value of the goods/services rendered
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What is the additional necessary when dealing with a mentally incompetent party?
legal representation in connection with incompetency proceedings
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What are the 4 elements for fraudulent misrepresentation?
- (1) a misrepresentation
- (2) wrongful state of mind
- (3) materiality of the misrepresentation
- (4) reasonable reliance on the misrepresentation
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What is sufficient to prove the misrepresentation element of fraudulent misrepresentation?
- (1) oral or written misrepresentations
- (2) fraudulent conduct such as concealment
- (3) half-truth
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Are broken promises or opinions/guesses misrepresentations?
no
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Are professional opinions treated as representations?
yes about the facts of the matter
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The requirement of scienter in fraudulent misrepresentation is satisfied if the D makes the assertion either:
- (1) knowing it to be false; or
- (2) knowing he had no idea whether it was true or false
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The "intent to mislead" requirement in fraudulent misrepresentation is satisfied if the D made the assertion either:
- (1) for the purpose of misleading the aggreived party; or
- (2) knowing there was a substantial likelihood that the aggreived party would be misled
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What is objective materiality regarding misrepresentation?
where such an assertion is likely to induce a reasonable person to enter into a K
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What is subjective materiality regarding misrepresentation?
where the party making the assertion had reason to know it was likely to induce the particular aggrieved party to enter into the K
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What are the 2 types of non-fraudulent misrepresentation?
- (1) negligent misrepresentation
- (2) innocent misrepresentation
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What are the 4 elements for negligent misrepresentation?
- (1) a misrepresentation
- (2) materiality of the misrepresentation
- (3) reasonable reliance on the misrepresentation
- (4) D would have known the assertion was false had he exercised reasonable care
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What are the 4 elements for innocent misrepresentation?
- (1) a misrepresentation
- (2) materiality of the misrepresentation
- (3) reasonable reliance on the misrepresentation
- (4) D simply made an assertion not in accordance with existing facts
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What does the fraud in fraudulent nondisclosure consist of?
D silence where there is a duty to disclose
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What are the 3 elements for fraudulent nondisclosure?
- (1) nondisclosure was material to the K
- (2) reasonable reliance on the nondisclosure
- (3) duty of disclosure and a failure to fulfill it
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If a party is aware of material facts that are unlikely to be discovered by the other party in the exercise of ordinary care and diligence, the duty to disclose will arise in what circumstances?
- (1) where parties enjoy a relationship of trust and confidence
- (2) where a party has made an assertion that was true at the time but as since been rendered untrue by intervening events
- (3) if the obligation of GF would require the party to disclose the information
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What's available for fraudulent and non-fraudulent misrepresentation but not fraudulent nondisclosure?
may live with the K and sue for the benefit of the bargain
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What's available for fraudulent misrepresentation but not to the other 2 types of misrepresentation?
a party can seek punitive damages since it is an intentional tort
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What are the 3 elements for a defense of duress?
- (1) a threat
- (2) threat is wrongful in nature
- (3) no reasonable choice but to succumb to the threat
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What is the definition of a threat regarding duress?
a manifestation of an intent to inflict harm on the other person made in words or by conduct
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In what 3 circumstances is a threat wrongful in nature under a duress defense?
- (1) what is threatened is a crime or tort
- (2) what is threatened is a criminal prosecution or a BF civil process
- (3) what is threatened is a BF breach of K
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How do you distinguish b/t a BF threat of breach of K and a GF demand?
if the demand is due to some increased benefit by unanticipated circumstances then there is no duress
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In what 3 situations does economic duress arise?
- (1) when there are no adequate and reasonable price substitutes for the services/goods that are threatened to be w/held
- (2) when the threatened breach would cause the aggrieved party to breach his own Ks
- (3) when the alternative to acquiescing to the threat and then suing for damages is inadequate to address the harm caused
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What is the additional element that a minority of jurisdictions add to the requirements for economic duress?
aggrieved party must protest the threatened breach rather than acquiesce w/o protest
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What are the legal consequences for duress?
- (1) avoidance
- (2) restitution
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What are the 2 elements for undue influence?
- (1) unfair persuasion is used
- (2) the other party was vulnerable to such persuasion
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What are the factors used to determine if the unfair persuasion element of undue influence has been satisfied?
- (1) discussion of the X at an unusual or inappropriate time
- (2) consummation of the X at an unusual time
- (3) insistent demands that the X or business be finished immediately
- (4) extreme emphasis on the untoward consequences of delaying the X
- (5) use of multiple persuaders against the target of persuasion
- (6) absence of 3P advisors to the target of persausion
- (7) statements that there is no time to consult advisors or attorneys
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In a defense of undue influence, a vulnerable party can be established if one of the following circumstances exists:
- (1) where the mental infirmity is due to age or illness
- (2) where the vulnerability is due to some recent trauma or event
- (3) where there is a relationship of trust or confidence
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What are the legal consequences of undue influence?
- (1) K is voidable at the option of the aggrieved party
- (2) aggrieved party is entitled to restitution for any benefits conferred so long as he likewise returns any benefits received
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What are the elements for a unconscionability defense?
- (1) procedural unconscionability
- (2) substantive unconscionability
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What is the definition of procedural unconscionability?
where the bargaining process created an absence of meaningful choice for the aggrieved party
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In what circumstances can procedural unconscionability be found?
- (1) near-miss cases
- (2) absence of bargaining power
- (3) fine print terms
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What is the definition of substantive unconscionability?
K terms are unreasonably favorable to one party of the K
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In what circumstances can substantive unconscionability be found?
- (1) grossly excessive price
- (2) grossly disproportional consequences for a minor breach
- (3) provisions binding on one party but not the other
- (4) grossly unfair provisions
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Upon a finding of unconscionability, what 3 things may the court do?
- (1) refuse to enforce the K
- (2) excise the offending clause and enforce the remainder of the K
- (3) limit the application of the offending clause so as to avoid an unconscionable result
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In what 4 contexts may public policy be raised as a defense to the enforcement of a K?
- (1) where the subject matter of the K itself is specifically prohibited by law
- (2) where a K is formed for the purpose of committing a crime or violating a legal regulation
- (3) where the K performance would constitute a tort
- (4) where the K performance would violate certain values/freedoms designated by the state
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What are the sources of public policies?
- (1) legislation
- (2) judicial decisions
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Where the subject matter of the K isn't specifically prohibited under law, then judge-made public policies may be invoked, which may include policies based on what?
- (1) moral and social values
- (2) economic considerations
- (3) protection of governmental processes and institutions
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When is the public policy defense almost invariably invoked?
in an action by one of the parties seeking enforcement of a K against the other
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What is the result when the public policy defense is successful?
the D wins irrespective of whether he was the party who promised to perform the public policy violation or the one paying for it
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Generally courts will play no role in enforcing K which violate public policy except in what circumstance?
where one of the parties is much more egregiously in the wrong than the other party it may be possible for the more innocent party to secure restitution of benefits conferred on the guiltier party
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Is a K that is subject to the defense of public policy clearly voidable?
yes at the option of the defending party
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If a K for the sale of goods is based on bribery of one party by the other, does the victim of the bribe have a public policy defense?
yes
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Are covenants not to compete generally enforceable?
yes
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What types of K are likely contexts for public policy defenses?
- (1) noncompete agreements
- (2) sales of goods via bribery
- (3) sale of goods intended for unlawful use
- (4) liability limitation provisions
- (5) unlicensed goods or services
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