Chapter 10: Defenses to Contract Enforceability

Chapter 1: Legal EthicsCHAPTER 10: DEFENSES

TOCONTRACT

ENFORCEABILITY

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Learning Objectives1. In what types of situations might voluntary

consent to a contract’s terms be lacking? 2. What is the difference between a mistake of

value or quality and a mistake of fact?3. What are the elements of fraudulent

misrepresentation?


Learning Objectives4. What contracts must be in writing to be

enforceable?5. What is parole evidence? When is it

admissible to clarify the terms of a written contract?


Voluntary Consent• A contract may be unenforceable if the parties

have not genuinely assented to its terms by:–Mistake. –Misrepresentation. –Undue Influence. –Duress.


• Mistakes.– Mistakes of Fact vs. Mistakes of Value (or Quality).• Only a mistake of fact allows a contract to be voided.

Voluntary Consent


• Mistakes.– Unilateral Mistakes of fact cannot be canceled

unless: • Other party to the contract knows or should have

known, OR• Mistake was due to an inadvertent mathematical

mistake and was not gross negligence.

Voluntary Consent


• Mistakes.– Bilateral (Mutual) Mistakes: concerns the same

material fact, and can be rescinded by either party.• CASE 10.1 L&H CONSTRUCTION CO. V. CIRCLE

REDMONT, INC. (2011). Do you agree the parties made a mutual mistake?

Voluntary Consent


Ex. 10-1 Mistake of Fact


Voluntary Consent Fraudulent Misrepresentation.–Contract is Voidable by Innocent Party.–Consists of the following Elements:•Misrepresentation of Material Fact.• Intent to Deceive.• Reliance on Misrepresentation.• Injury to the Innocent Party.


Voluntary Consent Undue Influence. –Contract lacks voluntary consent and is

voidable.• Confidentiality, Fiduciary, or Relationship of

Dependence.• Undue Influence or Persuasion is presumed

if a weaker party talked into doing something not beneficial to him or herself.


Voluntary Consent Duress.–Forcing a party to enter into a contract

under fear or threat makes the contract voidable.–Threatened act must be wrongful or

illegal and render person incapable of exercising free will.–Threat of civil suit is not duress.


Statute of Frauds—Writing Requirement

Statute of Frauds requires certain contracts to be in writing and signed to be enforceable.

Contracts involving Interests in Land. The One-Year Rule.–A contract that by its terms cannot be

performed within 1 year of execution.


Ex. 10-2 One Year Rule



Collateral Promises.–Contracts to answer for the debt of

another. –Primary vs. Secondary Obligations.–Exception: The “Main Purpose” Rule:

Oral promise is covered by Statute of Frauds unless guarantor is seeking a personal benefit.



Promises Made in Consideration of Marriage.–Prenuptial agreements are “more”

enforceable if consideration is involved. Contracts for Sale of Goods over

$500.–See Chapter 13, UCC Article 2.


Contracts Subject to the Statute of Frauds



Exceptions to the Statute of Frauds.–Partial performance. • Purchaser has paid part of purchase price,

taken possession and made valuable improvements to property.

–Admissions.• Party admits in court records contract exists.

–Promissory Estoppel/Detrimental Reliance.• Promisee justifiably relies.


Sufficiency of the Writing What Must Be Contained.–“Writing” includes memorandum,

invoice, fax, check, email.–Essential terms sufficient.–Signed by party against whom

enforcement is sought.• CASE 10.2 BENEFICIAL HOMEOWNER

SERVICE CORP. V. STEELE (2011).


Parol Evidence Rule


Parol Evidence Rule• Prohibits the introduction at trial of evidence of

the parties prior communications that contradicts the written contract.


Parol Evidence• Exceptions (allow parol evidence):

– Evidence of subsequent contract modifications– Oral evidence to show contract was void or

voidable. – Show meaning of ambiguous Terms.– To “fill in the gaps.”


Parol Evidence• Exceptions (allow parol evidence):

– Prior Dealings, course of performance, usage in trade.

– Obvious Clerical Error.• CASE 10.3 WATKINS V. SCHEXNIDER (2010). What

exception to the parol evidence rule applied in this case?


Parol Evidence• Integrated Contracts.– Is the written contract intended to be a complete and

final statement of the terms of the agreement?– If “yes”, then the contract is “integrated.”– Can be fully or partially integrated.– Courts exclude any parol evidence that contradicts

the writing.

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Chapter 10: Defenses to Contract Enforceability