Transcript Slide 1

Chapter 12: Defenses to Contract
Enforceability
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Learning Objectives
• In what types of situations might
genuineness of assent to a contract’s
terms be lacking?
• What is the difference between a mistake
of value or quality and mistake of fact?
• What elements must exist for fraud to
occur?
• What contracts must be in writing to be
enforceable?
• What is parole evidence? When is it
admissible?
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Mistakes
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Mistakes
• Mistake of Value (or Quality).
– Contract is enforceable.
• Unilateral Mistake (of Fact).
– Party does not have the right to cancel
contract unless:
• (1) the non-mistaken party knew or should
have known about the mistake, or
• (2) there is a clerical error.
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Mistakes
• Bilateral (Mutual) Mistakes—if both are
mistaken, either one can cancel the
contract.
Case 12.1 Inkel v. Pride ChevroletPontiac, Inc.
For mutual mistake to occur, both parties
must have been mistaken about a material
fact. This was a matter of fact for a jury.
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Fraudulent Misrepresentation
• Contract is voidable by innocent party.
Injured party must show:
– Misrepresentation of a material fact (not
opinion) by conduct, of law, silence, or
words. Opinion is not fact (unless it is an
expert opinion).
Case 12.2 Rosenweig v. Givens.
Whether fraud was committed in the context
of a fiduciary relationship between the parties
were questions of fact for a jury.
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Fraudulent Misrepresentation
• Injured party must show (cont’d):
– Intent to deceive. Also known as “scienter.”
– Innocent party must have justifiably relied on
the misrepresentation.
– Plaintiff must have suffered a legal injury.
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Undue Influence & Duress
• Undue Influence.
– Arises from a special relationship of trust.
– A stronger party overcomes a weaker party’s
free will by exerting psychological influence.
• Duress.
– Threat of physical force or extortion.
– Can serve as basis for rescission of contract.
– Economic need, by itself, is not duress.
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Statute of Frauds—Writing Requirement
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Statute of Frauds—Writing Requirement
• Requires certain contracts to be in
writing and signed to be enforceable,
as follows:
– Interest in Land: A contract involving an
interest in land. Includes sales, fixtures,
leases, mortgages, and easements.
– One Year Rule: A contract that by its terms
cannot be performed within 1 year of
execution. 
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‘One Year Rule’
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Statute of Frauds
• Collateral Promises: answer for the
debt of another.
– Contracts with Primary vs. Secondary
Obligations. Only secondary obligations must
be in writing.
– Exception – “Main Purpose” Rule: guarantor
seeks to secure personal benefit.
• Promises Made in Consideration of
Marriage.
– Unilateral promise for money or property must
be in writing.
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Statute of Frauds
• Contracts for the Sale of Goods
over $500.
• Exceptions:
– Partial performance, detrimental reliance.
Case 12.3 School-Link Technologies,
Inc. v Applied Resources, Inc.
Whether fraud was committed in the context
of a fiduciary relationship between the parties
were questions of fact for a jury.
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Statute of Frauds--Exceptions
• Exceptions to Statute of Frauds:
– Admissions by party against whom
enforcement is sought.
– Promissory Estoppel (or Detrimental
Reliance).
• Special UCC Exceptions.
– Oral contracts for sale of customized goods
may be enforced.
– Oral contracts between merchants may be
enforced.
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Statute of Frauds—Sufficiency of the Writing
• What Constitutes a Writing?
– Written contract(s) or memorandum(s) (paper or
electronic) SIGNED by the party against whom
enforcement is sought (typically the defendant in the
case).
– Documents can be “incorporated” into each other.
• What Must be Contained in the Writing?
– Essential terms only.
– Must name parties.
– Be signed by party against whom enforcement is
sought (usually the Defendant). Proving an “esignature” is a matter for trial.
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Parol Evidence Rule
• Prohibits the introduction at trial of evidence of
the parties prior communications that contradicts
the written contract. The question is whether the
contract is “integrated” (the final agreement
between the parties).
• Exceptions:
–
–
–
–
–
To Show Fraud or Mistake.
Subsequent modifications.
Ambiguous Terms.
Prior Dealings.
Obvious or gross clerical errors.
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Parol Evidence
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