Contract Law
Contracts are the basis of almost all business dealings and are governed by
either the Uniform Commercial Code (UCC) or Common Law (case law).
What is a Contract? How do we Know One Exists?
A promise or exchange of promises to form an agreement enforceable
by a court
The intent of the parties to be bound to an agreement is base-line of
determining existence of contract
Objective Theory of Contracts is an objective standard based on a reasonable
person standard (look to what the party said, acted and appeared while
entering contract) & totality of circumstances.
Underlying Motive (profit motive is not necessary) is not the key.
Elements required of All Contracts:
Agreement, Consideration, Contractual Capacity & Legality
Agreement: Parties to a contract must agree to the terms of the contract
through mutual assent (agreement) or a meeting of the minds. Pan
Handle Realty, v Olinx.
Manifestation of agreement to the same bargain is seen through offer and
acceptance often determined by a reasonable person in the offerees position
would think the meaning to be.
Offer: A promise to do or refrain from doing something in the future.
Offeror must have seriousness of intent – (anger, jest, or moment of excitement or fear,
future intent, opinions, ), Lucy v. Zehmer., Hawkins v. McGee., Basis Technology v. Amazon.,
Terms of offer must be reasonable certain and definite.
Offer must be communicated to offeree
Elements required of All Contracts:
Agreement, Consideration, Contractual Capacity & Legality
Manifestation of agreement to the same bargain is seen through offer and
acceptance often determined by a reasonable person in the offerees position
would think the meaning to be.
Offer: A promise to do or refrain from doing something in the future.
Definiteness of Terms: So as to determine breach and remedies terms must be definite, and
include;
Parties
Object or subject of contract
Consideration or price to be paid
Time of payment, delivery or performance
Elements required of All Contracts:
Agreement (offer and acceptance), Consideration, Contractual
Capacity & Legality
Manifestation of agreement to the same bargain is seen through offer and
acceptance often determined by a reasonable person in the offerees position
would think the meaning to be.
Offer: A promise to do or refrain from doing something in the future.
Offer must be communicated to offeree, (Gyabaah v. Rivlab Transportation).
Can an Offer be Terminated?
Read this question carefully – here we are considering the “offer,”
not the contract
Communicated offer empowers an offeree the power of
acceptance, forming a legally enforceable contract. The Power of
acceptance (or the offer) can be terminated in limited situations.
Revocation: Offeror may withdraw an offer prior to acceptance, with notice to
offeree.
Offer must not be an irrevocable offer
Revocation is effective upon receipt
Rejection: communicated by offeree and effective when received by offeror
Can an Offer be Terminated?
Read this question carefully – here we are considering the “offer,” not the
contract
Communicated offer empowers an offeree the power of acceptance,
forming a legally enforceable contract. The Power of acceptance (or the offer)
can be terminated in limited situations.
Rejection: communicated by offeree and effective when received by offeror
Differentiate between inquiry of firmness of offer and counteroffer ( rejection of
original offer and offeree making a new offer and thus becoming the offeror of
the new offer)
Mirror image rule requires at common law that the acceptance is for the exact
terms of the offer, and change or additions will constitute a rejection and
counteroffer. UCC is more liberal in allowing acceptance modifies or add terms
Can an Offer be Terminated?
Read this question carefully – here we are considering the “offer,” not the
contract
Communicated offer empowers an offeree the power of acceptance,
forming a legally enforceable contract. The Power of acceptance (or the offer)
can be terminated in limited situations.
Termination by operation of law through lapse of time, destruction of subject matter
of offer, death or incompetence of offeror or offeree, supervening illegality of
contract matter.
Lapse of time is time specified in offer (after receipt) or a reasonableness standard if not
stated
Destruction of subject matter automatically terminates an offer
Death or incompetence of either party to an open contract (not irrevocable) terminates offer
Supervening illegality of proposed contract terminates the offer. (not be to confused with
unenforceability of accepted contract due to illegality).
How is an Offer Accepted?
Acceptance is the offeree’s voluntary act (and in bilateral contracts), which
unequivocally communicates to the offeror assent (agreement) to the terms
of the offer. Powerhouse Custom Homes v. 84 Lumber Co.
Unequivocal? This is the mirror image rule discussed earlier. Additional requests by
offeree in acceptance if not a condition of acceptance are OK.
When can silence be acceptance?
If offeree takes the benefit of services offered with expectation of compensation & had
the opportunity to reject but did not.
Offeree has prior dealings with offeror and alters habits of acceptance (notifies supplier of
defects in shipments as rejection & then fails to notify – acceptance is inferred)
When & how does an offeree accept and offer?
Acceptance of offers in bilateral contracts must occur prior to termination and in a timely
manor.
How is an Offer Accepted?
Acceptance is the offeree’s voluntary act, which unequivocally
communicates to the offeror assent (agreement) to the terms of the
offer
When & how does an offeree accept and offer?
Acceptance occurs when communication is in the mail (Mailbox Rule) or for
electronic communication of offer, when acceptance leaves the control of the
offeree or is received by recipient.
Means of acceptance can be expressed or limited in offer, but if it is not acceptance
by any means as fast or faster than means of offer is reasonable.
Before moving on to Consideration,
Consider…Types of Contracts
Contracts are categorized based on formation, performance and
enforceability distinctions
Bilateral v. Unilateral Contracts are distinguished by what an offeree must do
to accept the contract.
Bilateral contracts are mutual promises to perform at future point in time. No
performance occurs at point of promise rather promises are exchanged for
performance in the future either party may enforce the contract promise.
Unilateral contracts are based on a promise for an act. The performance of the act
binds the parties to the terms of the contract.
When then can a unilateral contract be revoked? Traditionally contracts can be revoked until
accepted and if acceptance occurs on completion of an act for a unilateral contract, where a
long term act is required it would be unfair to allow revocation to occur after the act started
(I will pay you $5,000 is you ride this innovative bike across the country, 3,000 miles, When
reaching half way the offeree received a revocation). Thus substantial undertaking is modern
test.
Before moving on to Consideration,
Consider…Types of Contracts
Contracts are categorized based on formation, performance and enforceability
distinctions
Formal v. Informal, oral v. written, express v. implied
Certain types of contracts, usually notes or negotiable instruments, bills of lading, require
specific forms to be used and are considered formal. All other contracts are informal and
require no special format.
Contracts may be oral or in writing (except for contracts which must be in writing and we will
discuss later). Written contracts may be scribbled on napkins or more detailed on letterhead;
either are as acceptable as oral contracts.
Most contracts are express, fully stating in words the terms to be followed, but some may be
implied or have some terms expressed and some terms implied.
Implied Contracts require a plaintiff furnish some service or property
Plaintiff expected to be paid for service or property and defendant knew or should have known payment
was expected.
Defendant had opportunity to reject service or property, but did not.
Before moving on to Consideration,
Consider…Types of Contracts
Contracts are categorized based on, performance and enforceability distinctions
Contracts are often identified by their degree of performance. When fully performed
by both parties the contract is an executed contract.
When neither party has performed the contracts is referred to as executory
Contracts may be executed as to one party and executory as to another.
A Valid Contract’s enforceability may be voidable, unenforceable.
One or both parties may have the right to avoid a contract in which case they also
have the right to ratify a voidable contract. If a voidable contract is ratified both
parties are bound by the terms of the contract.
A contract may be unenforceable by operation of law (statute)
A proposed contract may be void with no legal obligation due to capacity or illegality
of purpose.
Quasi Contracts or Contracts implied
in law
A legal fiction to avoid unjust enrichment at expense of another Seawest
Services Association v. Copenhaver
Not used in place of existing contract
Consideration
Promises made by parties forming an agreement must be supported by
legally sufficient and bargained for consideration
Legally sufficient value may be a promise to do something one has no prior
legal duty to do, to perform an action not otherwise obligated to do, or to
refrain from an action one has a legal right to undertake (forbearance).
Hamer v. Sidway
Consideration must be the product of bargain between the contracting
parties, which distinguishes it from a gift.
Adequacy of consideration is not of concern to the courts, unless it is so
shockingly inadequate (unconscionable) as to suggest fraud, duress, or
undue influence was involved.
Consideration
Promises which do not qualify as contractual Consideration include
preexisting duty, past consideration, and illusory promises.
Preexisting duty: By law or contract, if a party has already agreed to do or
refrain from doing something that same act can not be the basis for additional
consideration, thus avoiding acts of extortion.
If circumstances arise to dramatically change the risks of the contract, contract
modification may be acceptable. These circumstances must have been unforeseen
and not anticipated by the parties.
Rescission of an old contract and concurrently entering into a new contract may be
acceptable if parties can be returned to their original positions and then the promises
represent new consideration (sometimes hard to distinguish from a preexisting duty.
Consideration
Promises which do not qualify as contractual Consideration include
preexisting duty, past consideration, and illusory promises.
Past Consideration: Promises are only enforceable if they are in return for
actions or events to take place currently or in the future. If promises are given
for something which has already occurred it is referred to as Past
Consideration and is therefore no consideration. Blackman v. Iverson., Baugh v.
Columbia Heart Clinic
Illusory promises: A promise worded so vaguely that its execution is
dependent solely upon the discretion of another is considered illusory and
unenforceable.
Exceptions to Consideration
Requirement
Promissory Estoppel or detrimental reliance: Distinguished from quasi
contract in that Promissory Estoppel involves a promise having been
made and then relied upon, whereas quasi contract involved no
promises and con contract.
Used when necessary to avoid injustices arising due to lack of consideration,
even those promises were made and relied upon. Reliance should have been
expected and reliance resulted in substantial detriment to the promise. Harvey
v. Dow
Capacity & Legality
(the final two requirements for
Contract Formation)
Capacity to enter into a contract is generally presumed with the exceptions for
youth, intoxication, and mental incompetence.
Youth: Minors (usually age 18) may enter into contracts allowed by law, but those
contracts are voidable at option of the minor.
Disaffirmance is the avoidance of an contractual obligation and must be expressed in words or
conduct not to be bound by any part of the contract ( Kelly v. United States)
Disaffirmance must be done while a minor or within a reasonable time period following age of majority.
Minor must restore the adult party to precontract position (possession, but not necessarily
quality) on disaffirmance (Dodson v. Shrader).
Disaffirmance is not allowed in some circumstances including misrepresentation of age and
contracts for necessities (food, clothing, shelter & medical).
State by State policies vary on issue of misrepresentation of age, but increasingly misrepresentation of
age will bar disaffirmance.
Contracts for Necessities may be disaffirmed, but minor remains liable for reasonable value received.
Capacity & Legality (the final two
requirements for Contract Formation)
Ratification or accepting the obligation of contract not otherwise enforceable, can
be done by minor after reaching age of majority by either express or implied
conditions.
An implied ratification based on failure to disaffirm within reasonable time is a question of
fact based on conduct to determine if conduct is one of disaffirmance or ratification.
Capacity of an intoxicant (a person whose normal capacity to think is inhibited by any
substance) will determine whether a contract, entered into while under the
influence, is valid or is voidable.
Question of fact to determine whether condition was voluntary or involuntary, and if
condition was sufficiently sever to prevent the intoxicant from understanding the
legal consequences of their agreement.
Contracts made in an intoxicated state, if voidable must be disaffirmed within a reasonable,
time, consideration must be returned unless involving necessities, which will be treated as a
quasi contract. If ratified must do so in reasonable time and subject to factual scrutiny.
Capacity & Legality (the final two
requirements for Contract Formation)
Mental Incompetence allows for a contract to be void, voidable, or valid based
on facts of circumstances.
Generally, contracts made by a person previously judged by a court to be
incompetent are void.
A contract entered into be a person not knowing they were incompetent at the time
of the contract formation, or lacked the capacity to comprehend the nature, purpose
and consequences of the contract has entered into a voidable contract. Voidable or
subject to ratification of the incompetent.
A contract will be considered valid it a person not previously judged to be
incompetent had capacity at time of contract, even if person slips in and out of a
state of capacity.
Capacity & Legality (the final two
requirements for Contract Formation
Contracts must be formed for a legal purpose and a contract to do
something prohibited by federal or state statute is void and
unenforceable, as are contracts to commit an act contrary to public
policy
Voluntary Consent Extinguished by
Mistake or Fraud
Mistake of Material Fact makes a contract voidable. Distinguish between
mistake of fact and mistake of Value.
Bilateral Mistakes (both parties were mistaken as to same material fact) or
mutual mistakes are rescindable by either party. L&H Constructin v. Circle
Redmont
Unilateral Mistake ( mistake of one party) is generally enforceable unless the
other party knows or should have know the mistake was made or the error
was due to significant mathematical mistake. In those circumstances the
mistaken party may avoid the contract.
Voluntary Consent Extinguished by
Mistake or Fraud or Undue Influence
Fraudulent inducement to enter a contract may be avoided by innocent
party because it takes away the “voluntary” nature of consent.
Misrepresentation must be of material fact ( Fazio v. Cyprus)
There must be an intent to deceive (Sarvis v. Vermont State College)
Innocent party relies on misrepresentation ( Cronkelton v. Guaranteed
Construction)
Harm must occur due to misrepresentation
Undue Influence arising from a relationship can take away voluntary
consent and a contract entered into could be voidable
Purchase answer to see full
attachment
Contracts are the basis of almost all business dealings and are governed by
either the Uniform Commercial Code (UCC) or Common Law (case law).
What is a Contract? How do we Know One Exists?
A promise or exchange of promises to form an agreement enforceable
by a court
The intent of the parties to be bound to an agreement is base-line of
determining existence of contract
Objective Theory of Contracts is an objective standard based on a reasonable
person standard (look to what the party said, acted and appeared while
entering contract) & totality of circumstances.
Underlying Motive (profit motive is not necessary) is not the key.
Elements required of All Contracts:
Agreement, Consideration, Contractual Capacity & Legality
Agreement: Parties to a contract must agree to the terms of the contract
through mutual assent (agreement) or a meeting of the minds. Pan
Handle Realty, v Olinx.
Manifestation of agreement to the same bargain is seen through offer and
acceptance often determined by a reasonable person in the offerees position
would think the meaning to be.
Offer: A promise to do or refrain from doing something in the future.
Offeror must have seriousness of intent – (anger, jest, or moment of excitement or fear,
future intent, opinions, ), Lucy v. Zehmer., Hawkins v. McGee., Basis Technology v. Amazon.,
Terms of offer must be reasonable certain and definite.
Offer must be communicated to offeree
Elements required of All Contracts:
Agreement, Consideration, Contractual Capacity & Legality
Manifestation of agreement to the same bargain is seen through offer and
acceptance often determined by a reasonable person in the offerees position
would think the meaning to be.
Offer: A promise to do or refrain from doing something in the future.
Definiteness of Terms: So as to determine breach and remedies terms must be definite, and
include;
Parties
Object or subject of contract
Consideration or price to be paid
Time of payment, delivery or performance
Elements required of All Contracts:
Agreement (offer and acceptance), Consideration, Contractual
Capacity & Legality
Manifestation of agreement to the same bargain is seen through offer and
acceptance often determined by a reasonable person in the offerees position
would think the meaning to be.
Offer: A promise to do or refrain from doing something in the future.
Offer must be communicated to offeree, (Gyabaah v. Rivlab Transportation).
Can an Offer be Terminated?
Read this question carefully – here we are considering the “offer,”
not the contract
Communicated offer empowers an offeree the power of
acceptance, forming a legally enforceable contract. The Power of
acceptance (or the offer) can be terminated in limited situations.
Revocation: Offeror may withdraw an offer prior to acceptance, with notice to
offeree.
Offer must not be an irrevocable offer
Revocation is effective upon receipt
Rejection: communicated by offeree and effective when received by offeror
Can an Offer be Terminated?
Read this question carefully – here we are considering the “offer,” not the
contract
Communicated offer empowers an offeree the power of acceptance,
forming a legally enforceable contract. The Power of acceptance (or the offer)
can be terminated in limited situations.
Rejection: communicated by offeree and effective when received by offeror
Differentiate between inquiry of firmness of offer and counteroffer ( rejection of
original offer and offeree making a new offer and thus becoming the offeror of
the new offer)
Mirror image rule requires at common law that the acceptance is for the exact
terms of the offer, and change or additions will constitute a rejection and
counteroffer. UCC is more liberal in allowing acceptance modifies or add terms
Can an Offer be Terminated?
Read this question carefully – here we are considering the “offer,” not the
contract
Communicated offer empowers an offeree the power of acceptance,
forming a legally enforceable contract. The Power of acceptance (or the offer)
can be terminated in limited situations.
Termination by operation of law through lapse of time, destruction of subject matter
of offer, death or incompetence of offeror or offeree, supervening illegality of
contract matter.
Lapse of time is time specified in offer (after receipt) or a reasonableness standard if not
stated
Destruction of subject matter automatically terminates an offer
Death or incompetence of either party to an open contract (not irrevocable) terminates offer
Supervening illegality of proposed contract terminates the offer. (not be to confused with
unenforceability of accepted contract due to illegality).
How is an Offer Accepted?
Acceptance is the offeree’s voluntary act (and in bilateral contracts), which
unequivocally communicates to the offeror assent (agreement) to the terms
of the offer. Powerhouse Custom Homes v. 84 Lumber Co.
Unequivocal? This is the mirror image rule discussed earlier. Additional requests by
offeree in acceptance if not a condition of acceptance are OK.
When can silence be acceptance?
If offeree takes the benefit of services offered with expectation of compensation & had
the opportunity to reject but did not.
Offeree has prior dealings with offeror and alters habits of acceptance (notifies supplier of
defects in shipments as rejection & then fails to notify – acceptance is inferred)
When & how does an offeree accept and offer?
Acceptance of offers in bilateral contracts must occur prior to termination and in a timely
manor.
How is an Offer Accepted?
Acceptance is the offeree’s voluntary act, which unequivocally
communicates to the offeror assent (agreement) to the terms of the
offer
When & how does an offeree accept and offer?
Acceptance occurs when communication is in the mail (Mailbox Rule) or for
electronic communication of offer, when acceptance leaves the control of the
offeree or is received by recipient.
Means of acceptance can be expressed or limited in offer, but if it is not acceptance
by any means as fast or faster than means of offer is reasonable.
Before moving on to Consideration,
Consider…Types of Contracts
Contracts are categorized based on formation, performance and
enforceability distinctions
Bilateral v. Unilateral Contracts are distinguished by what an offeree must do
to accept the contract.
Bilateral contracts are mutual promises to perform at future point in time. No
performance occurs at point of promise rather promises are exchanged for
performance in the future either party may enforce the contract promise.
Unilateral contracts are based on a promise for an act. The performance of the act
binds the parties to the terms of the contract.
When then can a unilateral contract be revoked? Traditionally contracts can be revoked until
accepted and if acceptance occurs on completion of an act for a unilateral contract, where a
long term act is required it would be unfair to allow revocation to occur after the act started
(I will pay you $5,000 is you ride this innovative bike across the country, 3,000 miles, When
reaching half way the offeree received a revocation). Thus substantial undertaking is modern
test.
Before moving on to Consideration,
Consider…Types of Contracts
Contracts are categorized based on formation, performance and enforceability
distinctions
Formal v. Informal, oral v. written, express v. implied
Certain types of contracts, usually notes or negotiable instruments, bills of lading, require
specific forms to be used and are considered formal. All other contracts are informal and
require no special format.
Contracts may be oral or in writing (except for contracts which must be in writing and we will
discuss later). Written contracts may be scribbled on napkins or more detailed on letterhead;
either are as acceptable as oral contracts.
Most contracts are express, fully stating in words the terms to be followed, but some may be
implied or have some terms expressed and some terms implied.
Implied Contracts require a plaintiff furnish some service or property
Plaintiff expected to be paid for service or property and defendant knew or should have known payment
was expected.
Defendant had opportunity to reject service or property, but did not.
Before moving on to Consideration,
Consider…Types of Contracts
Contracts are categorized based on, performance and enforceability distinctions
Contracts are often identified by their degree of performance. When fully performed
by both parties the contract is an executed contract.
When neither party has performed the contracts is referred to as executory
Contracts may be executed as to one party and executory as to another.
A Valid Contract’s enforceability may be voidable, unenforceable.
One or both parties may have the right to avoid a contract in which case they also
have the right to ratify a voidable contract. If a voidable contract is ratified both
parties are bound by the terms of the contract.
A contract may be unenforceable by operation of law (statute)
A proposed contract may be void with no legal obligation due to capacity or illegality
of purpose.
Quasi Contracts or Contracts implied
in law
A legal fiction to avoid unjust enrichment at expense of another Seawest
Services Association v. Copenhaver
Not used in place of existing contract
Consideration
Promises made by parties forming an agreement must be supported by
legally sufficient and bargained for consideration
Legally sufficient value may be a promise to do something one has no prior
legal duty to do, to perform an action not otherwise obligated to do, or to
refrain from an action one has a legal right to undertake (forbearance).
Hamer v. Sidway
Consideration must be the product of bargain between the contracting
parties, which distinguishes it from a gift.
Adequacy of consideration is not of concern to the courts, unless it is so
shockingly inadequate (unconscionable) as to suggest fraud, duress, or
undue influence was involved.
Consideration
Promises which do not qualify as contractual Consideration include
preexisting duty, past consideration, and illusory promises.
Preexisting duty: By law or contract, if a party has already agreed to do or
refrain from doing something that same act can not be the basis for additional
consideration, thus avoiding acts of extortion.
If circumstances arise to dramatically change the risks of the contract, contract
modification may be acceptable. These circumstances must have been unforeseen
and not anticipated by the parties.
Rescission of an old contract and concurrently entering into a new contract may be
acceptable if parties can be returned to their original positions and then the promises
represent new consideration (sometimes hard to distinguish from a preexisting duty.
Consideration
Promises which do not qualify as contractual Consideration include
preexisting duty, past consideration, and illusory promises.
Past Consideration: Promises are only enforceable if they are in return for
actions or events to take place currently or in the future. If promises are given
for something which has already occurred it is referred to as Past
Consideration and is therefore no consideration. Blackman v. Iverson., Baugh v.
Columbia Heart Clinic
Illusory promises: A promise worded so vaguely that its execution is
dependent solely upon the discretion of another is considered illusory and
unenforceable.
Exceptions to Consideration
Requirement
Promissory Estoppel or detrimental reliance: Distinguished from quasi
contract in that Promissory Estoppel involves a promise having been
made and then relied upon, whereas quasi contract involved no
promises and con contract.
Used when necessary to avoid injustices arising due to lack of consideration,
even those promises were made and relied upon. Reliance should have been
expected and reliance resulted in substantial detriment to the promise. Harvey
v. Dow
Capacity & Legality
(the final two requirements for
Contract Formation)
Capacity to enter into a contract is generally presumed with the exceptions for
youth, intoxication, and mental incompetence.
Youth: Minors (usually age 18) may enter into contracts allowed by law, but those
contracts are voidable at option of the minor.
Disaffirmance is the avoidance of an contractual obligation and must be expressed in words or
conduct not to be bound by any part of the contract ( Kelly v. United States)
Disaffirmance must be done while a minor or within a reasonable time period following age of majority.
Minor must restore the adult party to precontract position (possession, but not necessarily
quality) on disaffirmance (Dodson v. Shrader).
Disaffirmance is not allowed in some circumstances including misrepresentation of age and
contracts for necessities (food, clothing, shelter & medical).
State by State policies vary on issue of misrepresentation of age, but increasingly misrepresentation of
age will bar disaffirmance.
Contracts for Necessities may be disaffirmed, but minor remains liable for reasonable value received.
Capacity & Legality (the final two
requirements for Contract Formation)
Ratification or accepting the obligation of contract not otherwise enforceable, can
be done by minor after reaching age of majority by either express or implied
conditions.
An implied ratification based on failure to disaffirm within reasonable time is a question of
fact based on conduct to determine if conduct is one of disaffirmance or ratification.
Capacity of an intoxicant (a person whose normal capacity to think is inhibited by any
substance) will determine whether a contract, entered into while under the
influence, is valid or is voidable.
Question of fact to determine whether condition was voluntary or involuntary, and if
condition was sufficiently sever to prevent the intoxicant from understanding the
legal consequences of their agreement.
Contracts made in an intoxicated state, if voidable must be disaffirmed within a reasonable,
time, consideration must be returned unless involving necessities, which will be treated as a
quasi contract. If ratified must do so in reasonable time and subject to factual scrutiny.
Capacity & Legality (the final two
requirements for Contract Formation)
Mental Incompetence allows for a contract to be void, voidable, or valid based
on facts of circumstances.
Generally, contracts made by a person previously judged by a court to be
incompetent are void.
A contract entered into be a person not knowing they were incompetent at the time
of the contract formation, or lacked the capacity to comprehend the nature, purpose
and consequences of the contract has entered into a voidable contract. Voidable or
subject to ratification of the incompetent.
A contract will be considered valid it a person not previously judged to be
incompetent had capacity at time of contract, even if person slips in and out of a
state of capacity.
Capacity & Legality (the final two
requirements for Contract Formation
Contracts must be formed for a legal purpose and a contract to do
something prohibited by federal or state statute is void and
unenforceable, as are contracts to commit an act contrary to public
policy
Voluntary Consent Extinguished by
Mistake or Fraud
Mistake of Material Fact makes a contract voidable. Distinguish between
mistake of fact and mistake of Value.
Bilateral Mistakes (both parties were mistaken as to same material fact) or
mutual mistakes are rescindable by either party. L&H Constructin v. Circle
Redmont
Unilateral Mistake ( mistake of one party) is generally enforceable unless the
other party knows or should have know the mistake was made or the error
was due to significant mathematical mistake. In those circumstances the
mistaken party may avoid the contract.
Voluntary Consent Extinguished by
Mistake or Fraud or Undue Influence
Fraudulent inducement to enter a contract may be avoided by innocent
party because it takes away the “voluntary” nature of consent.
Misrepresentation must be of material fact ( Fazio v. Cyprus)
There must be an intent to deceive (Sarvis v. Vermont State College)
Innocent party relies on misrepresentation ( Cronkelton v. Guaranteed
Construction)
Harm must occur due to misrepresentation
Undue Influence arising from a relationship can take away voluntary
consent and a contract entered into could be voidable
Purchase answer to see full
attachment
