CONTRACTS 2
Templin – Fall 2014
Thomas Jefferson School of Law
A) Mini Road map:
1. Defenses
2. Non-performance
a. Breach
b. Conditions
c. Anticipatory Repudiation
3. Remedies
4. 3rd Parties.
B) DEFENSES
1. INCAPACITY
a. MENTAL INCAPACITY
Transactions are voidable by a party by reason of mental illness or defect, incompetent at the time of contract formation and the other party knew/should have known. Exceptions are when the person becomes lucid or contract is for a necessity.
b. MINOR INCAPACITY
Due to age, a contract may be voidable by a minor at the minor's discretion. However, upon reaching the age of majority the minor can re-affirm the contract with conduct, if the contract is no terminated in a reasonable amount of time. Exception to this rule occur when the contract is for necessities, minor misrepresents their age, there is willful destruction of property contracted for, and statutory exceptions such as insurance and student loans.
c. INTOXICATION
This defense occurs when the contract party is unable to understand in a reasonable manner the nature and consequences of the transaction at the time of contract formation. The other party knew or had reason to know of the intoxication. An exception if when the contract is for necessity.
2. DURESS
a. PHYSICAL
If at the time of K formation, the party was experience any form of physical duress, they can void the contract.
b. ECONOMIC
A party experience duress at the time of K formation can voice the K. For economic duress, the party is induced by an improper threat and there is no reasonable alternative. Improper threats are crime or tort, criminal prosecution, bad faith, breach of good faith. No reasonable alternative can be when there is immediate and irreparable loss to economic, business interest, and litigation is not an alternative to the situation.
3. UNDUE INFLUENCE
A K may be void if there is excessive pressure by the dominant party on vulnerable person. Excessive pressure is a high pressure that works on mental and moral weakness of a vulnerable person. Courts use the Odorizzi factors to determine over-persuasion, (1) unusual time, (2) unusual place, (3) insistent demand on urgency, (4) Extreme emphasis on bad outcome, (5) Multiple persuaders against a servient party (6) No 3rd party advisors, (7) No financial or legal advice.
A vulnerable person is unduly susceptible when that party is (1) totally incapacity because they do not understand the transaction, or (2) there was a relationship of trust between the parties that destroys one party's capacity making them weak.
4. NON-DISCLOSURE
This defense occurs when a non-disclosure if equivalent to an assertion and materially affects the value of the property and the facts are non-known to the buyer, the contract may be voided out.
The non-disclosure must materially affect the value of the property and must not be readily observable and not known to the buyer.
5. UNCONSCIONABILITY
Courts find that any contract or clause to be unconscionable at the time it was made can refuse to enforce the K or limit unconscionable clause to avoid an unconscionable result. It requires both procedural and substantive.
There is a sliding scale used to determine the degree of elements. Procedural unconscionability may be demonstrated by inequality in bargaining power or unfair surprise.
Substantive may be shown by 1) overly harsh allocation of risk not justified by the circumstances, or 2) great price disparity (i.e. gross inadequacy of consideration, unduly favorable to another party). Courts take into account all of the facts and circumstances including the commercial needs of the particular trade or case.
6. MATERIAL/FRAUD MISREP
A contract is voidable if a party if induced by the other by material or fraudulent misrep and justifiably relied on that misrep.
Fraudulent misrep occurs when the party intentionally induces the other by either know/should have known the assertion was false, or no confidence in the truth or knows/should know there is no basis for the assertion.
Material misrep occurs when the party had no knowledge the statement or assertion was false, (innocent) but a reasonable person would likely have been induced, or the party knew the receipt would be induced.
7. POLICY
A court may declare that a contract or a provision of a contract is void if the subject matter or consideration of the K is either illegal or
terial breach may ripen into Total Breach.
ii. SUBSTANTIAL PERFORMANCE FACTORS
· Rule: If party isn’t performing in material way, then N-BP is not required to continue performance. Consider factors to determine whether breach is material or minor:
1. Amount of benefit received/deprived
2. Adequacy of damages
3. BP will suffer forfeiture
· Hardship to breaching party
4. Likelihood will cure breach
5. Performed with good faith/faire dealing
c. TOTAL
i. Rule: Total Breach is an unjustified or unexcused failure to perform all or any part of what is promised in a K. To reach level of total breach, the breach must be both material and uncured.
