B Law review exam 3 11 19 2014 Chapter 12 Reality of consent Reality of consent concept that there is a defense to a contract unless the parties consent is real and voluntary ROC present in 5 types of situations 1 Mutual mistake of material fact o mutual mistake 3 requirements to prove mistake by both parties mistake is material must be a true mistake of fact o remedy rescission o Unilateral mistake mistake by one party In order for rescission it must be of material fact and non mistaken party is aware of mistake Mistaken party can avoid contract if other party had reason to be aware of the mistake 2 Material misrepresentation Innocent or Negligent o Innocent misrepresentation without fault Only remedy is rescission o Negligent misrepresentation due to lack of care to ensure that the statement is true Remedies sue for damages or rescission o Fraudulent false statement of fact intent to deceive reasonably relied on and cause damages Fraud in the execution lying about the nature of a document in order to obtain a person s signature Fraud in the inducement misrepresentation as to the subject matter of the contract Remedy rescission or actual damages plus punitive damages 4 elements prove misrepresentation of material fact intent to deceive by the defendant reliance on statement by plaintif must show that misrepresentation cause damages 3 Duress force party into contract through fear of wrongful threats o 4 elements required to prove lack or reality of consent 1 Defendant threatened plaintif in some way 2 Threat is wrongfully or unlawfully made threat which one has legal right to do isn t duress 3 Threat caused involuntary acceptance by plaintif 4 Acceptance b c circumstances permit no alternative 4 Undue Influence abuse of a position of trust to take advantage of a person who lacks freedom of will b c of a trusting relationship o duress coercion o undue influence wrongful persuasion by a trusted party o to prove must be a confidential family or trust relationship between parties weaker party must lack free will b c of influence of other party contract or gift must result between parties 5 Unconscionability defense that allows one to avoid a contract if they were pressured into acceptance and is grossly unfair o to prove must be unequal bargaining power between parties there must be a contract of adhesion contract in which terms are dictated by stronger party no real negotiation allowed terms of contract must be obviously unfair Chapter 13 Contract Performance 6 ways to discharge contractual duties 1 Complete performance performance up to the reasonable expectations of the other party o substantial performance breach of contract by performer but is minor in the light of the entire contract allows performing party to recover the contract price minus any damages caused on the other party 2 Material breach failure to complete a contractual obligation that is important to the deal o immaterial breach substantial performance unimportant in the light of the entire contract o satisfaction clause perform duties to the satisfaction of the other party o time is of the essence clause time of performance is essential to the contract ANY time delays material breach o Anticipatory repudiation material breach occurs when prior to time of performance one party informs other that it will not perform the contract Other party has immediate right to obtain substitute performance and sue for breach of contract 3 Occurrence or Failure of a condition o condition precedent condition that must be fulfilled prior to a duty arising under the contract Ex employee bonuses o Condition subsequent relieves contractual duty after a certain event occurs o Concurrent condition both parties performance is conditioned on the others simultaneous performance Ex cash on delivery 4 Agreement of Parties 4 ways o 1 voluntary rescission all parties agree to cancel the contract o 2 Novation Parties agree to cancel old contract and enter into a new one o 3 Accord and satisfaction agreement by one party to accept performance diferent from contract followed by completion of performance by the other party o 4 Waiver voluntary acceptance by one party of the inadequate performance of the other 5 Discharge by operation of Law o bankruptcy statute of limitations expires intentional material alteration impossibility happens 4 ways death or incapacity of an ESSENTIAL party destruction of subject matter intervening illegality unforeseeable drastic change Common law commercial frustration UCC sale of goods commercial impracticability Declared impossible to perform if performing costs are 10 times more b c of the drastic change 6 Compliance with a court order remedy breach of contract resolved in court remedy decided by court and must be paid by defendant in order to be discharged from the contract Chapter 14 Contract Remedies Expectations interests Types of interest of NON BREACHING parties Expectation interest interest to receive benefit of the bargain same situation the party would have been in if there was no breach Reliance interest repaid for the cost of partial performance or preparation to perform Restitution interest receive value of the benefit he she supplied to the other party 6 categories of money damages 1 Compensatory damages direct damages naturally flow from breach of contract meet expectation interest of the non breaching party o receive benefit of the bargain he she made o SELLER breaches contract damages cover price contract price Cover price cost of substitute goods or performance No monetary damages if cover price contract price o BUYER breaches contract damages contract price fair market value o Provider of services breach Damages cost of partial performance lost profit 2 Consequential Damages indirect damages recoverable if damages are foreseeable and specifically proven 3 Incidental damages costs of finding substitute performance cost of mitigation damages o mitigation of damages require non breaching party to use reasonable eforts to lesson the damages of breaching party 4 Punitive damages exemplary awarded to punish defendant and to deter other from similar conduct o defraud someone into a contract punitive damages 5 Nominal Damages small amounts given to winning party but show no monetary injury 6 Liquidated damages fixed amount agreed on by both parties prior to any breach of contract To be enforceable o damages must be difficult to estimate o damages must be a reasonable amount Equitable remedies where