You are on page 1of 13

c  

 

Gen I: Is there a Contract?


R: The Parol Evidence Rule allows any and all evidence in order to determine any invalidating cause to
the agreement. Therefore, it is not a block for us here. (Rest. 214).

   
Gen I: Did D have the capacity to contract?
Gen R: A natural person who enters a contract has full legal capacity to incur contractual duties UNLESS
he is: under guardianship, an infant, mentally ill or defective, OR intoxicated. (Rest. 12).

  
I: Is D under guardianship?
R: A person has no capacity to enter contracts if his property is under guardianship by reason of
adjudication of mental illness or defect. (Rest. 13)
A:
C:

I: Is D a minor?
R: Unless statute says otherwise, a natural person has the capacity to incur ONLY VOIDABLE contractual
duties until the beginning of his 18th birthday. (Rest. 14).
A:
C:
I: Are there any circumstances that make the contract NOT fully voidable?
R: All contracts with minors are fully voidable UNLESS: the minor has misrepresented the contract or a
term or the minor has willfully destructed the item purchased. (c  
 , Lecture)
I: Has the minor misrepresented the contract or a term?
A:
C:
I: Has the minor willfully destructed the item?
A:
C:
I: How much can the minor still recover?
R: The ͞use rule͟ states that the minor͛s recovery is subject to use, depreciation, and negligent
damages. (c  , Lecture)
A:
C:
I: Has the minor properly revoked the contract?
R: When voiding/disaffirming a contract, the minor must act within a reasonable time of turning 18 AND
return the purchased good. (c   Lecture).
A:
C:
I: Does the seller deserve reasonable compensation?
R: In order for the seller to get reasonable compensation, the deal must meet certain criteria: (c  ,
Lecture).
I: Does the deal meet the following criteria?
R: The minor cannot have been overreached
A:
C:
R: The deal must be fair and reasonable
A:
C:
R: There was no undue influence.
A:
C:
R: There was no fraud.
A:
C:
R: The minor paid cash.
A:
C:
R: The minor took and used the product.
A:
C:
Gen Minor Conclustion:

Gen I: Is D suffering from a mental illness or defect?


Gen R: A person͛s contracts are voidable if by reason of mental illness or defect at the time of the
contract he is either: 1. (cognitive test) Unable to understand in a reasonable manner the nature and
consequences of the transaction OR 2. (volitional test) Unable to act in a reasonable manner in relation
to the transaction and the other party has reason to know of his condition. (Rest. 15).
I: Does D pass the cognitive test?
A:
I: At the time of the contract?
C:
I: Does D pass the volitional test?
I: Was D unable to act in a reasonable manner in relation to the contract?
A:
I: At the time of the contract?
C:
I: Did the other party have reason to know of D͛s condition?
A:
I: At the time of the contract?
A:
C:
Gen C:
Gen I: Is D able to avoid the contract?
Gen R: The contract is voidable if D voids it within a reasonable time and restitution can be made to the
other party to the contract based on fairness and performance UNLESS the other party had reason to
know of D͛s mental condition at the time of the contract.
I: Did D void the contract in a reasonable time?
A:
C:
I: Can restitution be made based on fairness and performance?
A:
C:
I: Did the other party have reason to know of D͛s mental condition, thus revoking restitution?
A:
C:
Gen Insanity Conclusion:

I: Was D intoxicated?
R: A person͛s contracts are voidable if the other party has reason to know that by reason of
intoxication: 1. He is unable to understand in a reasonable manner the nature and consequences of the
transaction OR 2. He is unable to act in a reasonable manner in relation to the transaction.
A:
C:

  
I: Even if the entire deal seems like it should be off due to lack of capacity to contract, is it still
enforceable under quasi-contract for necessaries?
R: If incapacitated persons enter contracts for necessaries, they are liable for the contractual duties
under the principal of quasi-contract.
A:
C:

c
Gen Issue: A contract was entered into, but are there any defenses that will prevent its enforcement?

c

DURESS BY PHYSICAL COMPULSION

Gen I: Does the defense of duress of physical compulsion apply?


Gen R: If conduct that appears to be a manifestation of assent by a party, who doesn͛t intend to engage
in such conduct, is physically compelled by duress, then the conduct is not effective. (Rest. 174).
I: Was D physically compelled to consent?
A:
C:
I: Did D intend to consent to the contract?
A:
C:
Gen Duress by Physical Compulsion Conclusion:

DURESS BY THREAT

Gen I: Does the defense of duress by threat apply?


Gen R: If a party͛s manifestation of assent is induced by an improper threat by the other party, leaving
the victim no reasonable alternative, then the contract is voidable by the victim. (Rest. 175).
I: Was there an improper threat?
R: A threat is improper if it fits one of four categories stated in Rest. 176:
R: If what is threatened is a crime or tort, and the threat itself would be a crime or tort if it resulted in
obtaining property.
A:
R: If what is threatened is criminal prosecution
A:
R: If what is threatened is the use of civil processes and the threat is made in bad faith.
A:
R: If what is threatened is a breach of the duty of good faith and fair dealing under the contract.
A:
C:
I: Did the threat induce D to enter the contract?
A:
C:
I: Did D have any reasonable alternative that wouldn͛t result in irreparable or immediate hardship?
R: Some alternatives may be legal remedies, utilizing a similar, alternative method, or even toleration.
(Rest. 175).
A:
C:
Gen Duress by Threat Conclusion:

c 
Gen I: Is the contract voidable from undue influence?
Gen R: Undue influence is a contract that involves one party of lesser weakness or undue susceptibility,
who is excessively pressured by the other, dominant party to the agreement as a means of gaining
assent. (¢     c  ).
I: Is there a party of lesqser weakness or undue susceptibility?
R: Consider characteristics such as age, emotional, physical condition, intelligence, and special
relationships based on trust.
A:
C:
I: Is there a dominant party?
A:
I: Did the dominant party exert excessive force upon the subservient party?
R: Consider several factors as stated in ¢  
I: Was there discussion of the transaction at an unusual place or an inappropriate time?
A:
I: Was the consummation of the transaction in an unusual place?
A:
I: Was insistent demanding that the transaction be completed at once?
A:
I: Was there an extreme emphasis of consequences if delayed?
A:
I: Was there the use of multiple persuaders by the dominant side against the single subservient party?
A:
I: Was there an absence of third-party advisors to the servient party?
A:
I: Were there any statements that there is no time to consult financial advisors or attornies?
A:
I: Are there any other fact-specific things that suggest pressure?
A:
Gen. Undue Influence Conclusion:

   
Gen I: Is there a defense of unconscionability?
Gen R: If a contract or term is unconscionable at the time the contract was made, a court can refuse to
enforce the contract, may enforce the remainder of the contract without the unconscionable term, or
limit the application of any unconscionable term so as to avoid unconscionable results. (Rest. 208, UCC
2-302).
I: Is the contract or a term unconscionable?
R: Unconscionability must take two forms. Procedural Unconscionability is an unfair surprise or a lack
of meaningful choice. Substantive Unconscionability is oppression, where the contract is unfavorable to
one party. (lecture).
I: Is there Procedural Unconscionability?
R: Consider all relevant circumstances, especially the following (from lecture):
I: Is there is an adhesion contract?
A:
C:
I: Is there gross inequality of bargaining power?
A:
C:
I: Are there hidden terms or fine print?
A:
C:
I: Was there no reasonable opportunity to understand terms?
A:
C:
I: Are there incomprehensible terms?
A:
C:
I: Were there any other deceptive practices above and beyond the ones above?
A:
C:
Gen procedural unconscionability conclusion:
I: Is there substantial unconscionability?
R: Consider the following factors (from lecture):
I: What was the commercial background of the agreement?
A:
C:
I: What were the moral standards and practices of the time, place, and industry of the contract?
A:
C:
I: Are there any limitations on remedies?
A:
C:
Gen substantial unconscionability conclusion:
I: Did the unconscionability occur at the time the contract was made?
R: Unconscionability must occur at the time the contract was made (Rest. 208).
A:
C:
I: Does the unconscionable terms involve arbitration?
R: Plaintiffs must either attack the entire contract as wholly unconscionable, or attack only a specific
term as unconscionable. IF the entire contract is attacked, arbitration must be used. If only a term is
used, the court can decide whether the term is unconscionable without arbitration. (Higgins, lecture).
A:
C:
I: How much limitation should the court apply to the unconscionable contract or term?
R: The court can refuse to enforce the contract, may enforce the remainder of the contract without the
unconscionable term, or limit the application of any unconscionable term so as to avoid unconscionable
results. (Rest. 208).
A:
C:
Gen. Unconscionability Conclusion:

  

Gen I: Is there a defense of public policy?


Gen R: If a contract clearly conflicts with public policy, the courts will refuse to enforce it.
I: Is the contract against public policy?
A:
C:
Gen public policy Conclusion:

 

Gen I: Is there a defense of mistake?


Gen R: A mistake is a belief of fact that is not in accord with the facts at the time the contract was made
as to a basic assumption of the contract. (Rest. 151).
I: Was there a mistake?
A:
C:
I: Was the mistake made at the time the contract was made?
A:
C:
I: Was the mistake with regards to a fact?
R: There are two types of mistakes: 1. Mistakes of value/quality/collateral are NOT mistakes of fact and
not sufficient to rescind a contract. 2. Mistakes of essence are mistakes of fact since they involve the
consideration of the agreement. (lecture)
A:
C:
I: Does the mistake concern a basic assumption to the contract?
A:
C:
I: Has the mistake had a material effect on the agreed exchange?
R: The mistake must materially affect the agreed exchange (Rest. 152, 153).
A:
C:
I: Is the mistake mutual or unilateral?
R: Mutual mistakes involve both parties. Unilateral mistakes involve only one party. (lecture)
A:
C:

    



  

Gen I: Can the mutual mistake allow the contract to be rescinded?


Gen R: If both parties to the contract make a mistake at the time the contract was made as to a basic
assumption on which the contract was made, having a material effect on the agreed exchange of
performances, then the contract is voidable by the adversely affected party unless he bears the risk or
was grossly negligent. (Rest. 152).
I: Did the adversely affected party bear the risk?
R: A party bears the risk of mistake when he meets one of three factors listed in Rest. 154:
I: Was the risk allocated by agreement?
A:
C:
I: Was he aware, at the time the contract was made, that he had limited knowledge with respect to the
facts relating to the mistake, but treated his limited knowledge as sufficient?
A:
C:
I: Should the risk be allocated to him by the court on grounds that it is reasonable under the
circumstances?
A:
C:
I: Was one party grossly negligent in making the mistake?
A:
C:
Gen. Mutual Mistake Conclusion:

   

Gen I: Can the unilateral mistake allow the contract to be rescinded?


Gen R: If one party makes a mistake at the time the contract was made on a basic assumption to the
contract, having a material effect on the agreed exchange of performances that is adverse to him, the
contract is voidable by him if he does not bear the risk, was not grossly negligent, AND the effect of the
mistake is such that enforcement of the contract would be unconscionable OR the other party had
reason to know of the mistake or his fault caused the mistake.
I: Did he bear the risk?
R: A party bears the risk of mistake when he meets one of three factors listed in Rest. 154:
I: Was the risk allocated by agreement?
A:
C:
I: Was he aware, at the time the contract was made, that he had limited knowledge with respect to the
facts relating to the mistake, but treated his limited knowledge as sufficient?
A:
C:
I: Should the risk be allocated to him by the court on grounds that it is reasonable under the
circumstances?
A:
C:
I: Was he grossly negligent in making the mistake?
A:
C:
I: Is the effect of the mistake such that enforcement would be unconscionable?
A:
C:
I: Did the other party have reason to know of the mistake?
A:
C:
I: Was the mistake caused by the other party?
A:
C:
Gen Unilateral Mistake Conclusion:

 

Gen I: Is there a defense of misrepresentation?
Gen R: If a party͛s manifestation of assent is induced by either fraudulent or material misrepresentation
by the other party upon which the recipient is justified in relying, the contract is voidable by the
recipient. (Rest. 164).
I: Was there a misrepresentation?
R: A misrepresentation is an assertion that is not in accord with the facts. (Rest 159).
R: A person͛s state of mind (opinion, intention) is a fact, and a false assertion as to this state of mind OR
of an intention is a misrepresentation. (Rest. 159).
R: Opinions themselves are NOT assertions of fact UNLESS: 1. The opinion implies facts about the
maker͛s state of mind and the recipient either interprets the assertion to mean that the maker has no
knowledge of contrary facts OR that the maker has facts sufficient to justify his assertion; or 2. There is a
͞pure͟ opinion that is treated as a fact where: the recipient stands in a relation of trust and confidence;
OR the recipient reasonably believes that the maker has special skills or judgments; OR the recipient if
particularly susceptible to a misrepresentation. (Rest. 169).
R: Non-disclosure of a fact can amount to a misrepresentation when: he knows that disclosure is
necessary to prevent a previous assertion from being material, fraudulent, or a misrepresentation; he
knows that disclosure would correct a mistake of the other party AND he is failing to act in good faith
and fair dealing; he knows that disclosure would correct of the other party as to the contents of the
agreement; OR if the other party is entitled to know that fact because of a relation of trust and
confidence between them. (Rest. 161).
R: There is also a duty to disclose under the Florida Rule (where the seller of a home knows of facts
materially affecting the value of the property which are not readily observable and are not known to the
buyer, the seller is under a duty to disclose them to the buyer) and under the Inquiry Rule (where the
buyer makes an inquiry of the seller regardless of whether or not the fact is material). (v   ).
I: Was there an assertion?
A:
C:
I: Was the assertion of opinion?
A:
C:
I: Are there exceptions allowing the assertion of opinion to be a misrepresentation?
R: Exceptions: the recipient stands in a relation of trust and confidence; OR the recipient reasonably
believes that the maker has special skills or judgments; OR the recipient if particularly susceptible to a
misrepresentation (Rest. 169)
A:
C:
I: Was the assertion of the maker͛s state of mind?
A:
C:
I: Was the assertion an intention?
A:
C:
I: Was the assertion inconsistent with the facts?
R:
A:
C:
I: Was the misrepresentation fraudulent OR material?
R: A misrepresentation is fraudulent if the maker intends his assertion to induce a party to manifest
assent and the maker: knows or believes that the assertion is not in accord with the facts; OR does not
have the confidence that he states or implies in the truth of his assertion; OR knows that he does not
have the basis he states or implies for the assertion. (Rest. 162).
I: Was the misrepresentation fraudulent?
I: Did the maker intent the assertion to induce D to agree to contract?
A:
C:
I: Did the maker knows or believes that the assertion is not in accord with the facts; OR does not have
the confidence that he states or implies in the truth of his assertion; OR knows that he does not have
the basis he states or implies for the assertion?
A:
C:
I: Was the misrepresentation material?
R: A misrepresentation is material if it would be likely to induce a reasonable person to manifest his
assent, OR if the maker knows that it would be likely to induce the recipient to do so. (Rest. 162)
I: Was the assertion likely to induce a reasonable person to agree?
A:
C:
I: Did the maker know that it would induce D to agree?
A:
C:
I: Did the misrepresentation induce D to enter the contract?
R: A party͛s manifestation of assent is induced by either a fraudulent or material misrepresentation by
the other party. (Rest. 164)
A:
C:
I: Was D justified in relying on the misrepresentation?
R: A party may reasonably expect the other to take normal steps to inform himself and draw his own
conclusions. Reasonable diligence is required. (v   ).
R: There are three approaches to reasonable diligence: 1. Objective - Would the average, reasonable
person believe and rely on the misrepresentation; 2. Subjective - Would a person believe and rely on the
misrepresentation if he suffers from the ͞vulnerabilities͟ that the recipient suffers from; 3: Combination
ʹ Use both and rely on the totality of the circumstances. (Outline).
I: The combo will be used since it͛s the approach for our class.
I: Was the recipient objectively reasonable?
A:
C:
I: Was the recipient subjectively reasonable?
A:
C:
Gen Misrepresentation Conclusion:

Even though there is a civil contract case for misrepresentation, there are often tort routes as well. Only
one option can be utilized, but the following analysis will be for if the plaintiff decides to pursue
misrepresentation in tort rather than in contract.

 
Gen I: Is there a case for tortious misrepresentation?
Gen R: Tortious misrepresentation is when there is a material misrepresentation, where the maker
knows it is false, the recipient relies on the misrepresentation, which causes damages. (outline)
I: Was there a misrepresentation?
R: Same as above.
A:
C:
I: Was the misrepresentation material?
R: A misrepresentation is material if it would be likely to induce a reasonable person to manifest his
assent, OR if the maker knows that it would be likely to induce the recipient to do so. (Rest. 162)
A:
C:
I: Did the maker know the assertion was false?
A:
C:
I: Did the recipient rely on the misrepresentation?
A:
C:
I: Did damages occur?
R: There are two types of damages: 1. ͞out of pocket͟ ʹ damages are the difference between what the
injured party parted with and what he received, plus consequential damages suffered before discovery
of the fraud; and 2.͟benefit of the bargain͟ ʹ damages are the difference between what he would have
received had the misrepresentation been true and what he actually received. (outline)
A:
C:
I: Did the reliance cause those damages?
A:
C:
Gen. tortious misrepresentation conclusion:

 
Gen I: Is there a case for negligent misrepresentation?
Gen R: Negligent misrepresentation is when there is a material misrepresentation, where the maker has
reason to know that it is false and has a duty to the recipient, and the recipient relies on the
misrepresentation, which causes damages. (outline)
I: Since negligent misrepresentation is basically the same as tortious, only the differences between the
rules are at issue here. Did the maker have reason to know that the misrepresentation was false?
A:
C:
I: Did the maker have a duty to the recipient?
R: These types of duty relationships generally arise when the maker is in the business of providing
information (i.e. accountants). (Outline).
A:
C:
Gen. negligent misrepresentation conclusion:

Gen I: There was a misrepresentation, but is it actionable due to a disclaimer in the contract?
Gen R: There are two types of misrepresentation to deal with, and five approaches to deal with them.
I: What type of misrepresentation is it?
R: Fraud in the execution is a lie told about the character or terms of the document OR fraudulent
activity surrounding the execution of a document. Fraud in the inducement is a misrepresentation as to
something other than the character of the documents that induces assent. (outline)
A:
C:
I: What type of disclaimer is it?
R: General disclaimers do not specify any particular type of oral statement whose impact the clause
purports to negate. Specific disclaimers identify the precise type of oral promise or representation that
is to be negated. (Outline).
A:
C:
I: Does the disclaimer negate the misrepresentation?
R: There are five approaches (outline)
I: Does it survive the ͞fraud in the execution͟ approach?
R: Parol evidence rule bars all claims for fraud in the inducement; after the parties sign a completely
integrated written agreement, they may only assert claims for fraud in the execution. (outline)
A:
C:
I: Does it survive the ͞Any type of Disclaimer͟ approach?
R: Any type of disclaimer negates justifiable reliance as a matter of law, so all claims for fraud in the
inducement are barred.
A:
C:
I: Does it survive the ͞New York Specific Disclaimer͟ approach?
R: Only specific disclaimers negate justifiable reliance as a matter of law; claims for fraud in the
inducement are barred. (outline)
A:
C:
I: Does it survive the ͞Illinois Disclaimer + Contradiction͟ approach?
R: If the agreement contains any type of disclaimer and the oral misrepresentation conflicts with
language in the contract, then the recipient of the misrepresentation may NOT justifiably rely on the
oral misrepresentation as a matter of law. (outline)
A:
C:
I: Does it survive the ͞Arizona Anything Goes͟ approach?
R: Parol evidence is always admissible to show fraud; disclaimers and other contractual language are
merely items to be considered. (outline)

Gen. Misrepresentation Conclusion:

Gen I: Since there is an actionable misrepresentation, is rescission available?


Gen R: Rescission is available under voidable contracts UNLESS the defrauded party is unable to return
the property received from the wrongdoer because it has been transferred to a third person. However,
rescission may still be available if the defrauded party can provide the wrongdoer with the economic
equivalent of the property. (Knapp, Outline).
I: Is the property available for return?
A:
C:
I: Is the economic equivalent available for exchange instead?
A:
C:
Gen rescission Conclusion:

  



I: Since it is established that we do have a contract, what type of contract is it?
R: The UCC applies to goods. The Common Law applies to services and real estate. If it is a mixture of
the two contracts, one must look at the contract͛s predominate purpose by using the language of the
contract, the nature of the business of the supplier, and the intrinsic worth of the materials. (2  
   ).
I: Is the contract for goods or services/real estate?
R: Goods are all things moveable upon sale. (UCC 2-105)
A:
C:
I: Since the contract is for both goods and services/real estate, we will use the predominate purpose
test from 2  . What is the contract͛s predominate purpose?
I: What does the language contend?
A:
I: What does the nature of the parties to the contract contend?
A:
I: What does the value of the goods contend?
A:
Gen. type of contract conclusion:
R: Output/Requirements Contracts are agreements by the seller or buyer to supply or purchase all
goods produced or needed. (UCC 2-306).

R: ͞Sale on approvals͟ are contracts are where the seller provides goods to the buyer conditional on the
buyer͛s satisfaction. ͞Sale or returns͟ are contracts where a seller allows a merchant buyer to return
goods in lieu of payment if they fail to be resold. UCC (2-326).