Law 122: Contractual Defects-
Questions and All Correct Answers.
Misrepresentation - Answer a false statement of an existing fact that causes recipient to
enter into a contract.
misrepresentation legal test - Answer False Statement of Fact + Inducement to Contract
misrepresentation legal consequences - Answer - Contract: Rescission + Restitution (unless
this is impossible)
- Tort: Damages for fraudulent misrepresentation or negligent misrepresentation (unless
innocent)
capacity - Answer legal power to give consent
incapacity to contract - Answer remedy: Voiding a Contract (i.e., Avoid the legal obligations
that the contract would otherwise create)
groups with limited power to give consent: Minors - Answer - Some contracts with minors are
voidable, minors may elect to avoid contractual liability
- Minor who choose to avoid contractual liability should do so as soon as possible; delay can be
treated as affirmation
- Minors who elect to avoid contracts must give back any benefits that they receive under them
Contract is voidable even if the other party was unaware of the age issue
groups with limited power to give consent: Mentally incapacitated people - Answer A person
may lack capacity because of deficient intellect. Two situations:
- Court declared person to be lacking in mental capacity: VOID
- No Court declaration, but person still lacks mental capacity to contract at the time the contract
is formed: VOIDABLE
Contract is voidable only if the other party did/should have recognized the problem
groups with limited power to give consent: intoxicated people - Answer The agreement is
voidable if two conditions are met:
1. The person must have been so drunk that they could not know or appreciate what they were
doing
, 2. The other party to the contract must have been alerted to that fact of intoxication
immediate action - Answer To set aside a contract the intoxicated party must make a prompt
election to avoid the contract once sober
Unfairness During Bargaining - Answer If a disadvantaged party is pressured into an
agreement or placed in an unfair position during the bargaining process, the contract may be
ineffective
Unfairness: duress - Answer Problems with the circumstances around the creation of the
contract
unfairness: undue influence - Answer problems with the relationship between the parties
unfairness: unconscionability - Answer Problems with the way agreement has been formed
as well as with content of the agreement itself.
duress person - Answer Refers to physical violence or the threat of violence
duress of goods - Answer threat to detain, damage, or destroy goods
Economic Duress - Answer Threats to a person's business or income
consequences of duress - Answer - If a contract is the product of duress, it may be voidable
- If avoided, the innocent party may choose not to perform, and to recover any payments they
made under the agreements
- They have to prove that the pressure was practically irresistible
- The innocent party can, alternatively, affirm the contract
economic duress vs. economic pressure - Answer Economic pressure can amount to duress if
two elements are present:
1. Pressure amounts to compulsion of the will
2. Illegitimacy of the pressure exerted
bad faith - Answer It is one thing for a party to honestly say that it cannot perform without
more money; it is another to intentionally apply pressure on someone simply because they are
vulnerable. The latter constitutes bad faith.
Questions and All Correct Answers.
Misrepresentation - Answer a false statement of an existing fact that causes recipient to
enter into a contract.
misrepresentation legal test - Answer False Statement of Fact + Inducement to Contract
misrepresentation legal consequences - Answer - Contract: Rescission + Restitution (unless
this is impossible)
- Tort: Damages for fraudulent misrepresentation or negligent misrepresentation (unless
innocent)
capacity - Answer legal power to give consent
incapacity to contract - Answer remedy: Voiding a Contract (i.e., Avoid the legal obligations
that the contract would otherwise create)
groups with limited power to give consent: Minors - Answer - Some contracts with minors are
voidable, minors may elect to avoid contractual liability
- Minor who choose to avoid contractual liability should do so as soon as possible; delay can be
treated as affirmation
- Minors who elect to avoid contracts must give back any benefits that they receive under them
Contract is voidable even if the other party was unaware of the age issue
groups with limited power to give consent: Mentally incapacitated people - Answer A person
may lack capacity because of deficient intellect. Two situations:
- Court declared person to be lacking in mental capacity: VOID
- No Court declaration, but person still lacks mental capacity to contract at the time the contract
is formed: VOIDABLE
Contract is voidable only if the other party did/should have recognized the problem
groups with limited power to give consent: intoxicated people - Answer The agreement is
voidable if two conditions are met:
1. The person must have been so drunk that they could not know or appreciate what they were
doing
, 2. The other party to the contract must have been alerted to that fact of intoxication
immediate action - Answer To set aside a contract the intoxicated party must make a prompt
election to avoid the contract once sober
Unfairness During Bargaining - Answer If a disadvantaged party is pressured into an
agreement or placed in an unfair position during the bargaining process, the contract may be
ineffective
Unfairness: duress - Answer Problems with the circumstances around the creation of the
contract
unfairness: undue influence - Answer problems with the relationship between the parties
unfairness: unconscionability - Answer Problems with the way agreement has been formed
as well as with content of the agreement itself.
duress person - Answer Refers to physical violence or the threat of violence
duress of goods - Answer threat to detain, damage, or destroy goods
Economic Duress - Answer Threats to a person's business or income
consequences of duress - Answer - If a contract is the product of duress, it may be voidable
- If avoided, the innocent party may choose not to perform, and to recover any payments they
made under the agreements
- They have to prove that the pressure was practically irresistible
- The innocent party can, alternatively, affirm the contract
economic duress vs. economic pressure - Answer Economic pressure can amount to duress if
two elements are present:
1. Pressure amounts to compulsion of the will
2. Illegitimacy of the pressure exerted
bad faith - Answer It is one thing for a party to honestly say that it cannot perform without
more money; it is another to intentionally apply pressure on someone simply because they are
vulnerable. The latter constitutes bad faith.
