Avoiding Enforcement & Justifying Nonperformance: Review
Assuming that a has been formed, how can we get out of it? contract
1. Minority & Mental Incapacity
a. What are the two tests for mental incapacity?
i. _cognitive test – focuses on lack of understanding of the
transaction_________
1. Sparrow – cts seem to just require a mental illness diagnosis
ii. _volitional test – still worried abt understanding, but adds that it’s an
agreement a reasonably competent person wouldn’t make _______
2. (Economic) Duress
a. What are the three elements of economic duress?
i. _wrongful/improper threat____________
1. Kelsey-Hayes
ii. _lack of a reasonable alternative_______
1. Can’t sue, can’t replace workers/get goods somewhere else
iii. __threat must actually induce the making of the contract____
3. Undue Influence:
a. What are the two elements of undue influence?
i. Person being influenced must be unduly susceptible to influence_
ii. Influencer must be exerting excessive pressure
The more evidence you have for one, less you need for other
4. Misrepresentation/Nondisclosure
a. If two parties are negotiating at arm’s-length, must they disclose material
information to each other?
No – gen rule is similar to buyer beware – we expect both will do due diligence
b. Rest. (2d) § _____ tells us when a duty to disclose material information is 161
imposed.
Fiduciary/confidential relationship, material mistake, failure to disclose would result in
fraud
5. Unconscionability
i. Procedural unconscionability refers to:
Something went wrong w bargaining process
Lack of reasonable choice due to circumstances of bargaining process
ii. Substantive unconscionability refers to:
Relates to fairness of the exchange itself
Is this a fair term? Why does this term exist and what harm does it do?
Most cts want to see both subs and proc
6. Disappointed Expectations (mistake):
a. Elements of : mutual mistake
i. Mistake of both parties abt basic assumptoino of contract
ii. __mistake must be material (go to heart of deal)
iii. _party seeking rescission must not have borne the risk of the mistake
b. Elements of unilateral mistake:
i. _one party must’ve made mustake abt basic assumption of contract
_________________________________________
ii. _mistake must be material (must have material adverse effect on
party)_________________________________________
iii. _ party seeking rescission must not have borne the risk of the mistake
_________________________________________
iv. _either mistake is obvious or palpable OR enforcement of contract would
have an unconscionable effect on the mistaken party______
7. Changed Circumstances
a. When can a party bring a claim for impossibility?
Performance is literally impossible (death, destruction)
b. When can a party bring a claim for impracticability or frustration of purpose?
Impractical
Contract’s principle purpose is frustrated (contract is worthless)
Without fault
Party seeking relief cannot have borne risk
Assuming that a contract has been formed, when can we modify it?
8. The preexisting duty rule:
Any contractual modification for inc conpensation for performance you’re already
required to do is unenforceable
No modification w/o compensation
9. 89 Rest. (2d) § lists exceptions to the preexisting duty rule.
Unforeseen circumstances, detrimental reliance, statutory exception
mutual release (enter into new contract)
10. An important statutory exception to know is UCC §2- _________. 209
