Unformatted text preview: Chapter 11
Defenses to Contract Enforcement Overview Defense allows a party to avoid its obligations under a contract 4 Basic reqs. Of a contract are present, but something allows one party to avoid the contract Mistakes Unilateral--One party has a mistaken impression Mistaken party cannot avoid Exception: If the nonmistaken party knows of the mistake and takes advantage of it Car a/c example Subcontractor bidding Bilateral Mistakes Both parties are wrong Either party can void Both hold same mistaken belief or Two different beliefs, no way to know which is correct Peerless case (p. 304) Mistakes of Value Not really a mistake Contract for general item that is actually a special item: no mistake Rembrandt at yard sale Contract is for a painting, and it is in fact a painting. Mistakes of Value Contract for special item that is not the special item, but a general item. Contract for Elvis's Cadillac that turns out not to be his It is NOT Elvis's Cadillac, thus a mistake What is the basis of the bargain? Fraud Inducement Lie about the subject matter of the contract e.g., a car's mileage Execution/inception/in factum Lie about the document being signed e.g., tell someone he is signing maintenance agreement, but actually is a deed Fraud in the inducement Involves a "bad guy" Contract is voidable by the deceived party Must meet all six requirements Note: Text lists 3 reqs., some in text are 2 in list on next slide Fraud overlaps tort and contract law Fraud in the Inducement All 6 must exist Misrepresentation Of a material fact Intent to deceive (known to be false) Relied upon The reliance was justifiable Injury (any kind, physical, monetary, etc.) to the victim Undue influence Must be a pre-existing relationship (family or legal) Victim has trusted perpetrator Victim can void contract Parent trusting child Client trusting attorney Merely trusting other party is not enough Duress Physical threat forcing agreement Victim's "agreement" is not voluntary Economic duress can be recognized, but seldom is Statute of Frauds Totally separate concept from fraud Merely a writing requirement Certain contracts are enforceable only if in writing Originally designed to prevent the courts from being defrauded If oral only, unenforceable Statute of frauds examples Land Part performance exception Cannot be performed in one year Measure from date contract formed Lifetime contracts--oral OK Prenuptial agreements Collateral Promises What writing is enough? Formality not required Ok if several different documents Signature needed of party being sued Parol Evidence Rule If a written contract, no evidence admitted about statements, writing from before the contract. Evidence of later statements can be admitted Exceptions To resolve ambiguities or gaps To prove fraud Parol Evidence Rule Examples Used car sales "as-is" Earlier statement during negotiations Sale of my "Honda" when I own two Hondas (ambiguity) Promise to repair car made after sale Promise to not enforce a clause Parol Evidence Rule Consequences Earlier statements cannot be brought into court If someone says they will do something different from contract, put it into the contract The rule addresses if you can tell story in court...not if you win ...
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- Contract Law, Parol evidence rule, special item, Fraud overlaps tort