REG_7_03

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  1. When is a contract void?
    • When the contract is not enforceable by either party.
    • This is NOT the same as voidable by one party only because of a defense.
  2. When is a contract voidable?
    The contract may be avoided at the option of the party adversely affected. Voidable because of a defense.
  3. What does the defense of Fraud involve? Is this contract void or voidable?
    • ALL FIVE MUST EXIST FOR FRAUD
    • M - A - I - D - S
    • (1) There is a misrepresentation of material fact by the defrauding party. Opinions only count if made by an expert.
    • (2) Actual and reasonable reliance occurred – the victim relied on the misrepresentation
    • (3) There is an intent to induce reliance on the misrepresentation
    • (4) Damages (a loss) occurred.
    • (5) There is an intent to deceive (aka scienter). This act is performed knowingly, or with a reckless disregard for the truth (aka gross negligence or constructive fraud).
    • This contract is VOIDABLE
  4. Once a party has a defense of fraud, what damages are available to the defrauded party?
    • He may request that the contract be rescinded OR
    • Sue for money damages
    • BUT NOT BOTH
  5. What is Fraud in Execution? Is this contract void or voidable?
    • When the party is deceived into signing something that he does not know is a contract.
    • This contract is VOID
  6. What is Fraud in Inducement? Is this contract void or voidable?
    • When the party knows it’s a contract, but the terms are materially misrepresented.
    • This is the prominent type of fraud
    • This contract is VOIDABLE
  7. What is the defense of Innocent Misrepresentation? Is this contract void or voidable?
    • This is a misrepresentation of the facts, but not on purpose.
    • This contract is VOIDABLE by the party who relied on the information.
  8. What is the defense of Duress? Is this contract void or voidable?
    • The use of an unlawful threat of harm to force the contract
    • This contract is VOID if there is a threat of physical force.
    • This contract is VOIDABLE if the threat is economic (“I’ll fire you”) or social (“I’ll divorce you.”)
  9. What is the defense of Undue Influence?
    • The abuse of a position of a relationship trust or influence that takes advantage of the other’s weakness, infirmity or distress to force the contract.
    • This contract is VOIDABLE.
  10. What is the defense of Mutual Mistake? Is this contract void or voidable?
    • When both parties get the facts wrong.
    • This does not apply to mistakes of VALUE because value is a matter of opinion.
    • This contract is VOID
  11. What is the defense of a Unilateral Mistake. Is this contract void or voidable?
    • A unilateral CAN'T be voidable unless
    • the other party knew or should have known of the mistake.
    • This could be defensible if a bid for the contract was involved. If your bid is significantly lower than the others, their would appear to be an error and the first party should recognize that discrepancy.
    • This contract is VOIDABLE
  12. What is the defense of Illegality? Is this contract void or voidable?
    • This isn’t a defense.
    • A contract cannot be made for an illegal act or to purchase/sell an illegal product.
    • A contract never existed and thus is VOID.
  13. What is the defense of being a Minority? Is this contract void or voidable?
    • A minor cannot enter into a contract. The minor may disaffirm the contract at any time.
    • Only the MINOR may claim this defense. The other party cannot use this as defense to get out of the contract.
    • This contract is neither void or voidable, the minor disaffirms and is thus cancelled.
  14. What is the defense of Intoxication? Is this contract void or voidable?
    • Two conditions must be present: (1) the promisor must be unable to understand the nature and significant of the contract, AND (2) the other party has to know about the impairment due to intoxication.
    • This contract is VOIDABLE
  15. What is the defense of Mental Incompetency. Is this contract void or voidable?
    • A party adjudicated as mentally incompetent is incapable of entering into a contract.
    • The contract never existed and is VOID.
  16. What occurs when a statute of limitations expires? How long is the typical limitation?
    • It bars access to judicial remedies
    • Typically 4-6 years from the date of breach
  17. [HEAVILY TESTED!!] What are the 6 contracts requiring a writing due to the Statute of Frauds
    • M – Y -- -- L – E – G – S
    • Marriage proposal in exchange for an item (“If you marry me, I’ll give you…”)
    • Longer than a Year
    • Land including sale or leases of more than a year
    • Involving Executors to pay estate debt out of personal funds
    • Sale of Goods worth $500 or more
    • To act as Surety (to pay the debt of another)
  18. The one year timeframe on a contract, to determine if a writing is necessary due to Statute of Frauds, begins when?
    The date of the contract
  19. True / False: Leases for land that are less than a year in length require a writing.
    False
  20. Watch for trick questions involving the $500 limit. A land contract always requires a writing regardless of monetary amount.
    • A 3-year service contract requires a writing regardless of the monetary amount.
    • Only goods with a value over $500 require a writing.
  21. What is meant by “a writing”?
    • It doesn’t have to be a complete contract.
    • It needs to be some type of evidence of the material terms of the contract. It can be a memo, email, handwritten note.
    • THAT CONTAINS THE SIGNATURE OF THE PERSON BEING SUED.
    • For the sale of goods, only the quantity need be mentioned.
  22. True / False: Failure to satisfy the Statute of Frauds means the contract is void, or never occurred.
    • False
    • It means it isn’t enforceable by one or both parties, but the contract may still exist.
  23. What is the defense of Impossibility?
    • When the contract would be impossible for anyone to perform, OR
    • When it is impossible for a party in the contract to perform due to death or incapacity.
    • The contracted is VOIDABLE
  24. What is a Novation? What are the requirements? What are the effects? Who can use it as a defense?
    • Another party is substituted for one of the original parties in a contract.
    • All parties must agree to the release of the original party.
    • The party who was released can use this as a defense.
  25. When do Conditions exist? What is their effect on a contract?
    • Terms such as “if,” “subject to,” or similar indicate that one party must do something before the other party is obligated.
    • If the condition doesn’t occur, the other party is relieved of his responsibility.
  26. [HIGHLY TESTED] True / False: Oral and written evidence exists that occurred prior to a full written contract being signed. If one party sues the other, this evidence may be admitted in court.
    • False
    • The contract execution makes all the pre-work inadmissible. BUT
    • If evidence exists of changes to the contract that occurred after the original contract was signed, this is admissible in court.
  27. What is the intent of damages for a contract remedy?
    To put the non-breaching party in as good a position as he would have been had there been no breach.
  28. What are Compensatory Damages (Benefit of the Bargain)?
    Used for personal service contracts, the non-breaching party can collect enough money from the other party to pay for a substitute to fulfill the contract. (The difference between the original agreement and the new substitute price)
  29. What are Consequential Damages if Foreseeable?
    An amount to compensate for damages that could have been avoided and were foreseeable.
  30. What are Specific Performance Damages and for what items are these remedies used?
    • Used for land or unique items.
    • The courts generally force the turnover of land or the unique item. Monetary compensation is typically not used as a unique item is sometimes invaluable.
  31. What is a Liquidated Damage and when is this enforceable?
    • When the contract itself specifies damages for a breach.
    • Enforceable if the damages are (1) reasonable in relation to the actual harm done, and (2) not a penalty.
  32. What are Punitive Damages? When can these be used?
    Used for fraud because this is a tort, but cannot be used for breach of contract.

Card Set Information

Author:
BethG
ID:
335601
Filename:
REG_7_03
Updated:
2017-11-18 01:55:09
Tags:
REG TAX
Folders:

Description:
Becker Review 2017
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