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Contracts II
University of South Carolina School of Law
Crystal, Nathan M.

Contracts II Outline
Prof. Crystal
Spring, 2006
(Excuses for the Non-Performance of a K – these are defensive doctrines, but there are ways they can be used Affirmatively )
Exist at the Time the K was Made – Flawed Bargaining
1. Incapacity
2. Duress
3. Undue Influence
4. Unconscionability
5. Public Policy
6. Misrepresentation
7. Non-Disclosure
8. Mistake
–         Restitution (R 376) – If some benefit has been conferred on the promisee by way of party performance or reliance, then the promisor is entitled to restitution.
Come into Existence AFTER the K was made – Changes in the object of the K
9. Frustration of Purpose
10. Impracticability of Performance
11. Contractual Modification
         – Restitution (R 377)
These defenses against enforcement of a K are based on 2 principles of K Law:
1) Protection of voluntarily entered into agreements – the reasonable expectations of the parties.
2) Fairness Principle
– Issue in these cases is whether if for one of the parties a circumstance not expressly provided for in the contract has adversely affected either performance itself or the value thereof, should that party be permitted as a result to escape the obligation of performance of the contract would otherwise impose.
– While these defenses sometimes involve an element of misconduct by one of the parties, they rest on the value of protection of reasonable expectations. – Contracts that look to performance in the future (executory contracts) create expectations in each of the parties. If those expectations are disappointed, the law will sometimes provide relief to the disappointed party. 
Policy Arguments:
Duress, undue influence, misrepresentation, & Fraud are based on the principle that courts should refuse to enforce a contract if the conduct of one of the parties prevents or undermines the voluntariness of the other party’s agreement.  
When a person lacks mental capacity, a contract that is formed results from illness not rational, voluntary action. 

ss special circumstances exist (the other party did not act in good faith)
If Minor has given consideration, he is usually not entitled to pay it back
The presumption of K law if that all adults are competent, Certified Mental Incapacity is like minority. The presumption shifts. BOP – Uncertified mental incapacity has to be proven by the incompetent person. If proven, it can be a bar to enforcement of K
The Bank could always try to put forth a Restitution recovery, even if the B finds the K void. In this case court says, NO, because it is an equitable remedy and you didn’t act in good faith. For example, if a K is entered into by a guardian, even if the K is found void, the bank could still probably recover on a restitutionary basis.
2 Tests for Incapacity:R 15 recognizes both a cognitive test and a volitional test.