Chapter 10: Defenses to Contract Enforceability

1. Chapter 10: Defenses toContract Enforceability

2. Learning Objectives • In what types of situations might voluntary consent to a contract’s terms be lacking? • What is the difference between a mistake of value or quality and a mistake of fact? • What are the elements of fraudulent misrepresentation?

3. Learning Objectives • What contracts must be in writing to be enforceable? • What is parole evidence? When is it admissible to clarify the terms of a written contract?

4. Voluntary Consent • A contract may be unenforceable if the parties have not genuinely assented to its terms by: • Mistake.  • Misrepresentation.  • Undue Influence.  • Duress. 

5. Voluntary Consent • Mistakes. • Mistakes of Fact vs. Mistakes of Value (or Quality). • Only a mistake of fact allows a contract to be voided. 

6. Voluntary Consent • Mistakes. • Unilateral Mistakes of fact cannot be canceled unless: • Other party to the contract knows or should have known, OR • Mistake was due to an inadvertent mathematical mistake and was not gross negligence.

7. Voluntary Consent • Mistakes. • Bilateral(Mutual) Mistakes: concerns the same material fact, and can be rescinded by either party. • CASE 10.1 L&H Construction Co. v. Circle Redmont, Inc. (2011). Do you agree the parties made a mutual mistake?

8. Ex. 10-1 Mistake of Fact

9. Voluntary Consent • Fraudulent Misrepresentation. • Contract is Voidable by Innocent Party. • Consists of the following Elements: • Misrepresentation of Material Fact. • Intent to Deceive. • Reliance on Misrepresentation. • Injury to the Innocent Party.

10. Voluntary Consent • Undue Influence. • Contract lacks voluntary consent and is voidable. • Confidentiality, Fiduciary, or Relationship of Dependence. • Undue Influence or Persuasion is presumed if a weaker party talked into doing something not beneficial to him or herself.

11. Voluntary Consent • Duress. • Forcing a party to enter into a contract under fear or threat makes the contract voidable. • Threatened act must be wrongful or illegal and render person incapable of exercising free will. • Threat of civil suit is not duress.

12. Statute of Frauds—Writing Requirement • Statute of Frauds requires certain contracts to be in writing and signed to be enforceable. • Contracts involving Interests in Land. • The One-Year Rule. • A contract that by its terms cannot be performed within 1 year of execution. 

13. Ex. 10-2 One Year Rule

14. Statute of Frauds—Writing Requirement • Collateral Promises. • Contracts to answer for the debt of another. • Primary vs. Secondary Obligations. • Exception: The “Main Purpose” Rule: Oral promise is covered by Statute of Frauds unless guarantor is seeking a personal benefit.

15. Statute of Frauds—Writing Requirement • Promises Made in Consideration of Marriage. • Prenuptial agreements are “more” enforceable if consideration is involved. • Contracts for Sale of Goods over $500. • See Chapter 13, UCC Article 2.

16. Contracts Subject to the Statute of Frauds

17. Statute of Frauds—Writing Requirement • Exceptions to the Statute of Frauds. • Partial performance. • Purchaser has paid part of purchase price, taken possession and made valuable improvements to property. • Admissions. • Party admits in court records contract exists. • Promissory Estoppel/Detrimental Reliance. • Promisee justifiably relies.

18. Sufficiency of the Writing • What Must Be Contained. • “Writing” includes memorandum, invoice, fax, check, email. • Essential terms sufficient. • Signed by party against whom enforcement is sought. • CASE 10.2 Beneficial Homeowner Service Corp. v. Steele (2011).

19. Parol Evidence Rule

20. Parol Evidence Rule • Prohibits the introduction at trial of evidence of the parties prior communications that contradicts the written contract.

21. Parol Evidence • Exceptions (allow parol evidence): • Evidence of subsequent contract modifications • Oral evidence to show contract was void or voidable. • Show meaning of ambiguous Terms. • To “fill in the gaps.”

22. Parol Evidence • Exceptions (allow parol evidence): • Prior Dealings, course of performance, usage in trade. • Obvious Clerical Error. • CASE 10.3 Watkins v. Schexnider (2010). What exception to the parol evidence rule applied in this case?

23. Parol Evidence • Integrated Contracts. • Is the written contract intended to be a complete and final statement of the terms of the agreement? • If “yes”, then the contract is “integrated.” • Can be fully or partially integrated. • Courts exclude any parol evidence that contradicts the writing.