Defenses
How many defenses are there and name them
8 Defenses
1. Illegality
2. Public Policy
3. Mistake
4. Incapacity
5. Duress
6. Undue Influence
7. Misrepresentation
8. Unconscionability
What are the types of Warranties
Express
Particular Purpose
Implied
Name the parts of a contract
1. Offer
2. Acceptance
3. Consideration
What is a waiver
Intentional relinquishment of a known right
what's the difference between excuses and defenses.
DEFENSES - Why contracts are voidable from the moment you get into it
EXCUSES - Reasons why can can get out of a contract - something unforeseen occurs and completing it would be impossible
Infancy (Under 18)
R.2d § 14 – all contract with infants are voidable
Mental Incapactiy (always mention both test and state which one is satisfied)
R.2d § 15 – contract is voidable if party is:
Cognitive Test – a person is unable to understand the nature and consequences of transaction,
OR
Attitudinal Test – a person is unable to act reasonably in relation to transaction and other party has reason to know
What is the UCC Standard Warranty
Merchantability
What is the CISG (BONUS: what does it not apply to)
CISG:
It’s Supreme
Meaning the CISG governs unless parties' contract around it.
Only applies to the international sale of goods
Between parties whose places of business are in different states (countries)
And both states (countries) signed the CISG
CISG doesn't apply to:
intangibles,
electricity,
ships,
vessels or
aircrafts
distributorship agreements
What is the rule for Good Faith
To breach a duty of good faith and fair dealing a party must intend to ‘mess with’ the other party.
When you use excuse, what type of damages do you get?
No, but you can seek restitution
Name the types of Mistake and their elements
Unilateral Mistake
Where there was a mistake of one party at the time of the K
Error concerns a fact
The fact is the basic assumption on which the mistaken party made the contract
The mistake has a material effect on the exchange
The mistaken party must not have borne the risk
Enforcement of the contract would b unconscionable
Mistaken party does no bear the risk if other party caused, knew or should have known of the mistake
Remedy: Unilateral mistake renders the contract voidable, but only if the mistaken party did not bear the risk
Mutual Mistake
Where both parties have made a mistake at the time of the K
Parties must have shared an error of fact
The fact is the basic assumption on which the contract was made
The mistake has a material effect on the agreed exchange of performance
The adversely affected party must not have borne the risk
Remedy: Mutual mistake renders the contract voidable by the party that did not bear the risk of mistake
Scrivener’s error (people who wrote out things out before copy machines existed)
Rescission or Reformation (to fix mistake)
What are the elements of Particular Purpose
Three-part inquiry:
Was there a particular purpose?
Purpose has to be unusual, and that purpose made known to the seller
Did seller have reason to know of particular purpose?
Did buyer rely on seller’s skill or judgment?
Types of Extrinsic Evidence
Parol Evidence
oral or written
Conduct
Course of dealing
Parties conduct under previous contract
Course of performance
Parties conduct under current contract
More important that trade usage
Trade Usage
how do you calculate damages
Full K price – diminution in value (the difference between the value you got and the value you want)
What are the types of Excusee
2. Impracticability
3. Frustration of Purpose
Describe the Different types of Misrepresentation
Affirmative Misrepresentation
Misrepresentation (must be material or intentional)
Scienter (i.e., knowledge of falsity)
Intent to deceive and defraud
Belief and reliance on the misrepresentation
Damages
Omission Misrepresentation
Is there a duty to disclose material facts relating to latent defects
Material facts must disclosed when:
Necessary to prevent previous assertion from being fruadulent
Necessary to correct a mistaken basic assumption of buyer where failure to disclose would be bad faith
Necesssary to correct a mistaken assumption of buyer as to a writing
Based on a relationship of trust and confidence
Misrepresentation (must be material or intentional)
Scienter (i.e., knowledge of falsity)
Intent to deceive and defraud
Belief and reliance on the misrepresentation
Damages
How do you disclaim warranties?
Disclaimers UCC § 2-316
Express Warranties
You can’t really disclaim an express warranty
But you can limit it by:
Putting a time limit on it
Or a condition on it
But beware of Parol Warranties and the PER
Not going to come in unless you can get the exception of frauds
But seller may just claim mistake
Merchantability
Disclaimers must be express and conspicuous and must mention “merchantability”, or
Just say “as is” or
“with all faults”
In consumer contracts, must be given in advance of purchase
Particular purpose
Relatively easy – just say “no warranties other than those contained herein”
Describe the Parol Evidence Rule and the different approaches
CL Parol Evidence Rule
PER bars evidence of prior or simultaneous agreements, whether written or oral; if that evidence is being introduced to bury the terms of a written integrated agreement
Willistonian Approach
If a contract can have only one reasonable meaning, the court decides the dispute as a matter of law
Extrinsic evidence:
Doesn’t not come in if the contract is clear
Even if there is a latent ambiguity
Corbinian Approach
Even if a contract seems clear on its facts, it may have a latent ambiguity
Court may use extrinsic evidence to determine the nature of the agreement:
The parties’ negotiations
Their course of dealing, post-contractual conduct & course of performance
Usages of trades relevant to the interpretation of ambiguous terms
A business-interruption insurance contract includes the following provision labeled Epidemic Exclusion: “The Insurer excludes from coverage all losses arising from or relating to any epidemic or pandemic, including but not limited to: influenza, typhoid, cholera, measles, mumps, rubella, or chicken pocks outbreaks that require the Insured to temporarily close its business until the epidemic passes.” The insured seeks to recover after a municipal order required that it close for three months during the COVID-19 pandemic. Which canon of construction is most helpful to the insurer if it seeks to rely on the policy’s Epidemic Exclusion?
a. Expressio unius (lists are assumed to be complete).
b. Ejusdem generis (non-exclusive lists are presumed like things).
c. Contra proferentem (contracts are construed against the drafter).
d. Courts should give effect to each contractual provision.
a. Expressio unius (lists are assumed to be complete).
Selma Seller owned two saws that she used in her woodworking business. Butch Buyer noticed the saws one day when he was in Selma’s warehouse picking up a load of cut wood. Selma explained that he second saw was a spare that was not in working order and that she just kept around in case the saw she was using broke. Butch explained that he had been looking for that exact type of saw because he needed it for a very particular type of work that he did. Selma agreed that the saw was suitable for that work. However, she reminded him that it was not in working order. She told him that it just needed some parts and she suggested where he might get the parts and how he could repair the saw. Nonetheless, she said that she had not used the saw in years and that she would have to sell it to him “as is.” They agreed on a price. She wrote out a receipt and wrote on it in hand in bold capital letters: “SOLD AS IS.”
Butch took the saw back to his business. He got the parts and repaired the saw himself. Nonetheless, when he tried to use it, it violently malfunctioned, doing harm to its internal mechanics and rendering it permanently unusable.
Which of the following statements is TRUE?
a. Butch could sue for a breach of the implied warranty of merchantability.
b. Butch could sue for a breach of the implied warranty of fitness for a particular purpose.
c. Butch could sue for breaches of both implied warranties.
d. Butch could not sue for a breach of either implied warranty.
b. Butch could sue for a breach of the implied warranty of fitness for a particular purpose.
In which of the following circumstances can an infant avoid a contract and not have her recovery adjusted for damage or depreciation?
a. Mary Minor, age 16, wants to disaffirm a contract in which she bought a car that she drove while intoxicated, and the car cannot be salvaged.
b. Melanie Minor, age 16, wants to disaffirm a contract in which she bought a car, which was damaged when a drunk driver smashed into it while it was parked, and the car cannot be salvaged.
c. Madelyn Minor, age 17 years, 10 months, entered into a one-year lease agreement and wanted to disaffirm after six months.
d. Melissa Minor, age 16, wants to disaffirm a one-year lease agreement that she entered into by presenting a fake driver’s license and claiming to be 21.
b. Melanie Minor, age 16, wants to disaffirm a contract in which she bought a car, which was damaged when a drunk driver smashed into it while it was parked, and the car cannot be salvaged.
Which of the following statements by a salesman regarding a car for sale would MOST LIKELY constitute an express warranty of quality?
a. “This is a great car!”
b. “You’re going to love it!”
c. “The car is mechanically in perfect condition.”
d. “This car once belonged to Jon Voight.”
d. “This car once belonged to Jon Voight.”
Which of the following contracts would be governed by the UN Convention on the International Sale of Goods (CISG)? Assume all transactions involve states that are parties to the CISG.
a. A purchase for personal use by a California wine grower of a laptop computer manufactured in and shipped from South Carolina.
b. A purchase for use for business purposes by a German tourism business of three tour boats manufactured in and shipped from South Carolina.
c. A purchase by a California power company of electricity produced at a Canadian power plant.
d. A purchase for business purposes by a German wine grower of a laptop computer manufactured in and shipped from South Carolina.
d. A purchase for business purposes by a German wine grower of a laptop computer manufactured in and shipped from South Carolina.
Difference between expressed and implied condition [in regards to performance]
Express Conditions
Act or event which unless excused must occur for the other party’s duty of performance arises
Implied Conditions
failure of one of these conditions is a breach, and if it is a material breach, you can avoid contract
Common Law
Unexpected event
Risk not allocated to party seeking excuse of performance
Unexpected event renders performance commercially impracticable
UCC (seems to only apply to sellers)
Was there a supervening event the non-occurrence of which was a basic assumption
Would performance impose a serious hardship?
Allocation of risk?
To avoid risk, you can add a force majeure clause (clause that removes liability from both parties for catastrophic events, such as natural disasters and warfare)