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Contracts, Fall 2008

Contracts, Fall 2008. Class 20.

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Contracts, Fall 2008

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  1. Contracts, Fall 2008 Class 20

  2. a) Equitable Grounds not to Enforce a Contract 1. Problems with the Parties: Capacity to Contract Minority Incompetence 2. Problems with the Process Duress and Undue Influence Misrepresentation and Nondisclosure 3. Problems with the Substance of the Contract Unconscionability Public Policy Enforcement Issues

  3. Equitable Grounds not to Enforce a Contract 1. Problems with the Parties: Capacity to Contract Minority

  4. Minority • Traditional rule: minor can disaffirm or void • Typically has to return what she acquired • More recently: if major acted in good faith, minor to make restitution for • Diminution of value to other party • Less often, benefit to minor • Good faith=didn’t overreach/no undue influence, and contract is fair

  5. Minority • Minor can be liable for tort of misrepresenting his age and maybe gross negligence with “his” property that he later seeks to return • Misrep or negligence can also limit ability to disaffirm • Minor liable for reasonable value of “necessaries” • Can affirm or reject upon reaching majority • Must disaffirm shortly after reaching majority or risk being treated as affirming

  6. Hypos • If a minor contracts to get meals every day from Charlie Trotter’s (fanciest restaurant in Chicago) and then refuses to pay, what result? • “Boy Smith,” 17, buys a car a few days before his 18th birthday. He’s not the world’s best shopper, and overpays. When he’s about to turn 20, somebody points out to him what a bad deal he got, and he tries to give back the car and get his money back. What result? (Assume the age of majority is 18)

  7. Hypos • Boy George, 16, is injured in an accident, and signs, together with his parents, a release in exchange for some money. He gets the money and spends it (foolishly). A moment after he turns 18, he tries to void the contract. What result?

  8. Incapacity • Contract with incompetent may be voidable • burden on incompetent to show incompetence. • Incompetent has to make restoration except if there’s special circumstances • other party knowing or having reason to know of mental defect • Especially if restoration isn’t possible • Not voidable if parties can’t be restored to pre-contracting positions if: • contract made on fair terms AND • other party has no reason to know of incompetency

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