Fundamentals of Business Law

1. 6th Edition Fundamentalsof Business Law Chapter 10Contracts: Defenses AgainstContract Enforceability

2. Genuineness of Assent • Contract may be unenforceable if the parties have not genuinely assented to its terms by: • Mistake. • Misrepresentation. • Undue Influence. • Duress.

3. Unilateral Mistakes • One party mistaken as to some material fact. • Does not afford the mistaken party any right to relief from the contract unless: • If other party to the contract knew or should have known that a mistake of fact was made, or • If there was a gross clerical error.

4. Mutual Mistakes • If both parties have made a mistake about a material fact, the contract can be rescinded by either party.

5. Mistakes of Value • Contract enforceable by either party. • Unilateral or Bilateral mistake are not basis for avoiding a contract. • Exception: • Mistake of value because of a mistake of material fact.

6. Fraudulent Misrepresentation • Contract is Voidable by Innocent Party. • Elements: • Misrepresentation of Material Fact. • Case 10.1 Vokes v. Arthur Murry (1968). • Intent to Deceive. • Reliance on Misrepresentation. • Case 10.2 Foley v. Parker (2002). • Injury to the Innocent Party.

7. Fraudulent Misrepresentation • Concealment. • Misrepresentation of future facts and statements of opinion are not fraud, unless person professes to be an expert. • Misrepresentation of Law is not fraud, unless person has greater knowledge of the law. • Silence is not fraud, unless serious problem or defect known or asked and person lied.

8. Undue Influence Contract is Voidable. • Confidential or Fiduciary Relationship. • Relationship of dependence. • Influence or Persuasion. • Weak party talked into doing something not beneficial to him or herself.

9. Duress • Forcing a party to enter into a contract under fear or threat (voidable contract) • Threatened act must be wrongful or illegal. • Improper Threat. • Threat to exercise legal rights (criminal or civil suit). • Economic or physical.

10. The Statute of Frauds To be enforceable, the following types of contracts must be in writing and signed: • Contracts involving interest in land. • Contracts involving “One year rule.” • Collateral or Secondary Contracts. • Promise made in consideration of marriage. • Contracts for the sale of goods priced at $500 or more.

11. Contracts Involving Interest in Land • Land includes all physical objects that are permanently attached to the soil: buildings, fences, trees, and the soil itself. • All contracts for the transfer of other interest in land: mortgages and leases. • Must be in writing signed by party against whom enforcement is sought.

12. The One-Year Rule • A contract that cannot, by its own terms, be performed within one year from formation must be in writing to be enforceable. • One-year period begins to run the day after the contract is made. Test:Is performance possible (although unlikely) within one year.

13. Collateral Promises • Secondary promise to a transaction. • Primary vs. Secondary obligations. • Secondary obligation must be in writing. • Exception: “Main Purpose” Rule.

14. Promises Made in Consideration of Marriage • Unilateral promise for money or property must be in writing. • Pre-nuptials must be in writing. • Courts give more weight to pre-nups based on consideration.

15. Contracts for the Sale of Goods • UCC requires a writing or memorandum for the sale of goods priced at $500 or more. • Exceptions to the Statute of Frauds: • Partial Performance. • Case 10.3 Spears v. Warr (2002). • Admissions. • Promissory Estoppel. • Special Exceptions under the UCC.

16. Statute of Frauds-Sufficiency of the Writing • Written Memorandum. • Signed by the Party against whom enforcement is sought. • Writing can be email, fax.

17. Parol Evidence Rule • Court Rule: Prohibits introduction of communications that contradict the written agreement. • If the court finds that the parties intended their written contract to be a complete and final embodiment of their agreement, a party cannot introduce evidence of any oral agreement or promise made prior to the contract’s formation or at the time the contract was created. • Case 10.4 APJ Associates, Inc. v. North American Philips Co. (2003).

18. Exceptions to the Parol Evidence Rule • Contracts subsequently modified. • Voidable or Void contracts. • Contracts containing ambiguous terms. • Prior dealing, course of performance, or usage of trade. • Contracts subject to orally agreed-on conditions. • Contracts with an obvious or gross clerical error that clearly would not represent the agreement of the parties.