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Questions and Answers
Which of the following is the most accurate description of 'undue influence' in contract law?
Which of the following is the most accurate description of 'undue influence' in contract law?
- The act of misleading someone with false information to induce them into a contract.
- Overpowering the will of another person through moral or social force, often seen with the elderly in will and testament settings. (correct)
- The use of one's economic power to force another party to agree to unfair contract terms.
- Physical threats or coercion used to force someone into an agreement.
What is the primary distinction between 'mistake of fact' and 'mistake of value' in contract law?
What is the primary distinction between 'mistake of fact' and 'mistake of value' in contract law?
- Mistake of fact is always a defense against contract enforcement, while mistake of value is never a defense.
- Mistake of fact only allows for rescission of the contract, while mistake of value always results in damages.
- Mistake of fact concerns an incorrect belief about a material aspect of the contract, while mistake of value concerns an incorrect assessment of the worth of an item or service. (correct)
- Mistake of fact involves a misunderstanding of the law, while mistake of value involves a misunderstanding of the factual circumstances.
Which situation exemplifies 'duress' in the context of contract formation?
Which situation exemplifies 'duress' in the context of contract formation?
- A party entering a contract without fully understanding its implications.
- A party being persuaded to enter a contract by a trusted advisor.
- A party agreeing to contract terms to avoid threats to their person or property. (correct)
- A party entering a contract due to confusing or misleading information.
How do courts typically interpret an 'adhesion contract' in the event of a dispute?
How do courts typically interpret an 'adhesion contract' in the event of a dispute?
Which of the following best describes the function of a 'merger clause' in a contract?
Which of the following best describes the function of a 'merger clause' in a contract?
In the context of contract law, what circumstances would permit the remedy of 'reformation'?
In the context of contract law, what circumstances would permit the remedy of 'reformation'?
Which of the following scenarios best illustrates the application of the 'Parol Evidence Rule'?
Which of the following scenarios best illustrates the application of the 'Parol Evidence Rule'?
A construction company and a client have a contract that specifies damages of $500 per day for each day completion is delayed. What type of damages does this BEST describe?
A construction company and a client have a contract that specifies damages of $500 per day for each day completion is delayed. What type of damages does this BEST describe?
A landlord rents commercial space to a tenant for a percentage of the tenant's sales. The tenant then intentionally stops selling any product, resulting in no rent being paid. Which concept does this BEST represent?
A landlord rents commercial space to a tenant for a percentage of the tenant's sales. The tenant then intentionally stops selling any product, resulting in no rent being paid. Which concept does this BEST represent?
A contract specifies 'Time is of the essence'. Which legal concept does this exemplify?
A contract specifies 'Time is of the essence'. Which legal concept does this exemplify?
Flashcards
Mistake of Fact
Mistake of Fact
An incorrect belief about a material fact relevant to a contract or agreement.
Mistake of Value
Mistake of Value
When one or both parties misjudge the worth of an item or service.
Innocent Misrepresentation
Innocent Misrepresentation
A false statement of material fact by the defendant without awareness of its untruth at the time of contract signing.
Puffing
Puffing
Not a material existing fact, but rather an opinion or subjective statement; not legally binding.
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Scienter
Scienter
Intent to mislead or deceive.
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Latent Defect
Latent Defect
A hidden or concealed defect.
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Fiduciary
Fiduciary
A person or entity entrusted to act in another's best interest.
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Reformation
Reformation
Courts rewrite the contract as a fair solution, often in cases involving deeds, contracts, or non-compete agreements.
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Rescission
Rescission
One party seeks to get out of the contract, effectively annulling it; voidable contracts can be rescinded.
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Undue Influence
Undue Influence
Overpowering the will of another through moral or social influence; often seen in elderly individuals' last will and testament settings.
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- Mistake of Fact is misbelief about a material fact relevant to a contract
- Mistake of Value is when one or both parties have a basic misbelief about how much an item or service is worth
- Fraud constitutes exact legal work of art and is a tort
- Innocent Misrepresentation is a false statement of material fact by the defendant, who was unaware that the statement was untrue at the time of contract signing
- Puffing is not a material existing fact; it is an opinion and subjective
- For example, a salesperson lies about gas mileage involving many variables
- Scienter is the intent to mislead or deceive
- Latent Defect is a hidden or concealed defect
- Fiduciary is a person or entity entrusted with the responsibility to act in the best interests of another
- Reformation is when courts rewrite the contract as an equitable remedy
- This is used for deeds and contracts like covenant-not-to-compete, mistakes
- Rescission - Equitable remedy is when one party wants to get out of the contract
- Voidable contracts can be rescinded
- Punitive Damages are exemplary damages and teach a lesson
- They rarely appear in contract breaches but are used to make an example of a person
- Punitive damages punish the guilty party and are triggered by intentional torts and gross negligence
- Undue Influence is when one overpowers the will of another by moral or social force with subtle pressure
- It is often seen when the elderly are involved in last will and testament settings
- Duress is a threat to a person, relative, or property involving bodily injury, imprisonment, criminal prosecution, physical or economic force
- Adhesion Contract is when one cannot modify the contract in a "take it or leave it" scenario
- Because the contract favors the party who wrote it, the courts narrowly construe it in the event of a dispute,
- This benefits the party that did not draft the contract because of unequal bargaining power.
- Examples include car dealers, sales people, insurance, and rental agreements.
- Patent Defect is a flaw or deficiency in a product, property, or document that is obvious and easily noticeable upon reasonable inspection
- Suretyship is a promise to pay for the debt of another
- It must be a secondary promise to pay to fall under the Statute of Frauds
- Parol Evidence Rule states if a written contract exists, oral evidence cannot be used to show that the written terms were different from what the terms should have been.
- No prior written or oral evidence that contradicts the present, existing written contract can be introduced.
- Exceptions to Parol Evidence Rule include ambiguity of contract, merchant's dealings with prior usage and custom considered under the UCC, sneaking it in without objection at court, and judicial admissions
- Merger Clause states, "This contract contains the final agreement and it represents the contract in its entirety so it is usually enforceable and overrides the Parol Evidence Rule and exceptions.
- Statute of Frauds states certain contracts must be in writing to be enforceable
- Indefinite Employment Contract is a contract where the employment relationship has no predetermined end date
- Prenuptial Agreement (marriage) is a legally binding contract signed by a couple before marriage, outlining how their assets, debts, and spousal support will be handled in the event of divorce or death
- Condition Precedent states “A” must do something before "B" is bound.
- Example: paint house before getting paid or obtaining financing before buying house.
- Condition Concurrent states that “A” and “B” must do something at the same time.
- Examples include real estate deed for money or payment upon delivery of goods.
- Condition Subsequent outlines what one must do to preserve one's rights and bind the other party
- Examples include insurance, file a claim when storm damage incurred or law license maintained to stay employed
- Expressed Condition is written out in the contract, such as "Time is of the essence" or "Perform to satisfaction."
- "In a workmanlike manner" means strict, complete, and 100% performance
- Tender showcases readiness, willingness, and ability to perform, which can lead to a remedy for a breach
- It will stop interest from accruing (IRS) and extinguish any security interest (UCC Article 9 Secured Transactions).
- It is an offer to perform and deliver the goods, with the question, "where is my payment?"
- Anticipatory Repudiation is when the other party says it is unable to perform
- Then, one can immediately sue for damages and get the goods somewhere else (cover) while getting the difference between the fair market value (cover price) and the original contract price (French fries for cafeteria).
- Cover v. no cover
- Impossibility is not additional hardship but physical and objective impossibility to perform
- Example: house burns down, so one cannot sell
- Write in contract who bears the risk of loss because insurance is available
- Frustration is economic frustration as is the case when one signs a contract for a fixed price, like to build a house, and the cost to perform goes up significantly, like increases due to spotted owl protection
- A solution is a cost plus consisting of profit [10%] and overhead [10%] contract
- Novation is when one discharges a prior contract and enters into a new contract with one or more new parties
- It is not an assignment, which is the transfer of rights and requires the consent of all because if not, then the assignor is not relieved of his/her duty.
- Accord of Satisfaction involves unliquidated debts and accepts less than full amount due
- Prevention is wrongful prevention and prevention of normal/anticipated performance
- For example, as a landlord, one rents an ice cream parlor to a tenant where the monthly rent is to be a percentage of the ice cream sales, but the tenant does not sell ice cream from the shop.
- Compensatory Damages are incidental damages, foreseeable damages, and dollars to make whole as seen in tort cases since it is a remedy if a contract is breached
- They consist of direct losses and costs
- Consequential Damages ($) are special damages in special circumstances consisting of indirect losses, lost profits, and delays, referring to Hadley v. Baxendale (1854, England).
- A mill with a broken crankshaft only had one when most mills had more than one spare
- A repair company delivered an imperative part (crankshaft) late, which caused no notice of quick need and no spare
- The breaching party (repair company) is only liable for foreseeable damages if not given notice of quick need as there is no recovery for unforeseeable damages.
- Nominal Damages ($) are $1.00, consisting of a breach with no damages suffered
- Cover reflects cover price less than contract price
- $3.00 is a form of damage equating to treble damages (bad breach)
- USFL v. NFL (1985, US District Court, NY, Sherman Act, monopolistic practices and [NFL] saw poor management [USFL] and anti-trust laws equated to > $3
- Liquidated Damages ($) is when parties agree what damages will be when a contract is drawn up
- For example, $12,000 per day for every day after the agreed completion date that the job (construction of new student center) is not completed (certificate of occupancy).
- This is not a penalty
- Specific Performance reflects real estate, unique items, and custom-made goods
- Must perform as promised/expected
- Quasi Contract is not a contract, but a remedy which is implied in law
- This is to prevent unjustifiable enrichment when someone gets the shaft, and one thinks he/she should recover
- Example: overpaying credit card bill (credit account or refund excess).
- Waiver is an excuse for non-performance.
- Waive (surrender) is a right on the contract by prior course of dealings
- Example: John Rubisch putt-putt golf course rent on 15-501 in Chapel Hill, NC, had a contract that called for rent to be paid on 1st of each month, but John (tenant) paid landlord (and landlord accepted) on the 15th for years, and when the landlord sued, John prevailed since the landlord waived his right to collect on the 1st under the contract
- Slander is a false statement, usually made orally, which defames another person
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