L-201 Final

Review Session Sun. 12th BU-109 (tentative)

Liquidated and Un-Liquidated debt

- Liquidated debt is existing debt

o Amount set
o No dispute
o Debtor can pay lesser amount to satisfy the debt if there is new consideration (value)
o Early payment can be paid less if bartered for (not given right)
o
- Un-liquidated debt
o If amount not been set or there is a “good faith dispute” then is un-liquidated debt
o If debt has not been set and dispute exists
o Both have a detriment it is a binding contract, if the debtor does something he is not
obligated to do in exchange for paying a lesser sum it is binding
o Must be clear intent to give a gift by the creditor for a debt to be paid in full, need a
receipt of gift
o If have “good faith dispute” and one of the parties offers to settle, and the other party
agrees to settle then you have an accord of satisfaction
o (Payment in full. If you are not willing to accept this as payment in full then please
return my check.)
o Kraft Cheese case
 Received shipment of cheese that had part of shipment spoiled
 Kraft said she must not have taken care of the cheese
 Quit dealing with Kraft and sent check with “Payment in Full” with balance less
the amount spoiled
o If creditor cashes check saying payment in full then this is an acceptance and can not sue
debtor for any remaining balance
 Chapter Thirteen
Real Consent

- Agreement must be voluntary

- Lack of voluntary consent - misrepresentation, fraud, mistake, duress, undue influence.
- If defrauded reasonable fact that could cause you harm
o voidable
 May be disregarded as a contract
 May become valid
 One or both parties have choice to void or validate contract
 Equitable remedy
 Must be exercised within reasonable time
 You must act to make void
 Void
o Automatically disregarded as a contract
o Will never be valid
 Effect of - voidable contract, rescission (equitable remedy - reasonable time to
act)
 Misrepresentation - misstatement of a material fact that is actually and
justifiably relied upon. Not intentional
o Allows buyer to rescind or void contract on the basis of misrepresentation
- Fraud - same except must be intentional (scienter) and misstatement of fact (doesn't need to be
material)
- In tort law, fraud recovery requires harm. Some courts do not allow both, contract and tort
remedy.
- Silence can be fraud if concealment or duty to disclosure - real estate and insurance cases,
especially if latent defect or fact, statement of expert.
- Mistake - unilateral or mutual - parties operating under a misconception that the contract is
based on. Destruction of subject matter before contract formed. Floor case, oil on property.
- Unilateral - cannot rescind unless makes contract unconscionable or nonmistaken party knew or
should have known, cannot take advantage of.
- Duress - wrongful act that induces action, wrongful is illegal or misuse of right can include
economic duress, if physical it is void.
o Bad faith and/or
 If you have a legal right to do something but don’t intend to use it then can be
bad faith
o Acting in manner legally possessed to do
o Simple feeling of coercion is not sufficient
o If duress is of the nature of being violent, then voidable
- Undue Influence - misuse of power of persuasion in a special relationship were one has
dominance or influence.
o Voidable
- Bi-lateral
o Both parties mistaken
o Not due to ignorance/negligence
o Must be a basis of the bargain
- Unilateral
o Cannot rescind unless makes contract unconscionable or non-mistaken party knew or
should have known, cannot take advantage of
o Silence can be fraud if concealment or duty to disclosure- real estate and insurance
cases, especially if latent defect or fact, statement of expert
o One party mistaken
o Must be a basis of the bargain
- A bad deal is not a basis for a mistake
- Reformation as a remedy if
o Obvious mistake
o Drafting final document.
- Lack of capacity
o Not void but voidable
o Law gives best protection due to age
 Usually entitled to full return of the amount you gave out
 Must return whatever value you still possess
- Entrusting provision of the UCC - can pass good title to innocent person if have voidable title or
possession and normally sell goods of the kind. Sell book for bad check. Leave TV at store for
repair and sells used TVs.
- Lack of capacity determined by
o Minority
o Insanity
o Under the influence
- Return of consideration
o Right to get back, obligation to return- traditional, modern if fair contract
o Ratification- when, how- words, actions within reasonable time or lack of either Ex.
Continuing to make payments after the4y have become of legal ages of signing a
contract stating they will be bound to agreement. Also failing to respond within a
reasonable time (usually a few months) ratifies the contract.
- Exceptions
o Misrepresentation of age- traditional, modern- estoppel of fraud
 Consequences
 Some say don’t understand bc stil a minor so no problem
 Others may say you are not able to rescind contract
  Others say you can rescind contract but can be sued in violation of tort
law
 Emancipation- happens when you turn 18, can occur before if your parents
allow you to retain your income and you’re under 18
 Necessity- (items provided to a minor necessary for survival) food , shelter, etc.)
determined by criteria station in live, not available. Recovery based on quasi
contract so value of benefits received
Law of necessity was developed to protect minors, not adults
Exception by law- insurance
o Insanity (mental illness): cannot comprehend transaction, disaffirm, return of
consideration and fair bargain ratification. Pary can resend contract if other party knew
of their mental illness or if contract was unfair. This type of protection is typically not as
good as it is for minors.
o Under the influence- drugs or alcohol, least protected, could not comprehend, other
party knew or should have known and unfair. This is the least amount of protection
 Disaffirm- status quo unless grossly unfair
 Ratified- sober
- If party of a contract is void, the court will enforce the legal portion of the agreement to be
avided by, not the illegal part
- In some cases no legal issue to be enforced

- Lacks a legal purpose, violates statutory law or public policy (statutory, common law or
unconscionable)

- Requires illegal performance- still a valid contract if the act could not have been done legally,
however you could sue for breach of contract

- Statutory- usury

- Wagering (creating a risk for purpose of assuming it)

o Cannot go to small claims court to sue unless provided for by statute

o Cannot buy life insurance on someone who you have nothing at stake (can buy on key
executive, family member, business partner, etc.)
o Same with car insurance
- License requirements
o If regulatory then can void contract
 Regulates who can have a licence
 Determines who is qualified

 o Revenue raising (does not void contract)
- Public Policy
o Competition: agreement not to compete is legal if contracts in restraint of trade,
ancillary, reasonable as to time and area, necessary to protect goodwill. (employment
contracts, sale of a business)
 Public service- bribes FCPA
 Exculpatory clause- even if negligent you wont be liable- absence of reasonable
choice, unreasonable advantage. Walker case: aircraft sale agreement (not
liable for any damages due to plane issues, while test-driving landing gear failed,
but court held that not responsible due to exculpatory clause. If there were
damage to crew then in public interest so then liable)
 Not legal if interferes with public interest
 Doesn’t cover intentional negligence
 Contracts to commit crime or tort
 Unconscionable:
 Shocking to one’s conscience
 Grossly unfair
 William’s Case
o Woman bought items on credit
o Effectively paid for 3 items but not yet the 4 th
o 8th grade ed and low income (single parent)
o Until paid for company still had reasonable right to property
o Court said blatantly unfair
o Court can deem unconscionable or rewrite to fair contract
o Employee at will- can be fired whenever without cause unless entered into employment
contract with you specifying you are employed for an amount of time
- Effects of illegality- nullity, divisible contracts, leaves parties as the court finds them- lottery case
- Exceptions- person reasonably unaware
- Parole evidence rule
o Courts will not admit outside evidence that adds to or contradicts written contract
o If not in writing not likely to be enforced
o Will allow outside evidence to explain ambiguous terms

Chapter 16

Writing and Form

Statute of Frauds - history, defense only, when writing required (Interest in land, collateral promise, not
performable within one year, promises of marriage, sale of goods for $500 or more)
If contract required to be in writing then modification must be in writing. Also if contract requires a
writing.

Interpretation of Contract- court tries to determine intent of parties. (specific controls the general)

Handwritten takes precedent over printed, printed over preprinted with typed in (sign or initial and date
to show intentional change)

Contract btw words and numbers words control

Much harder to determine a number than a word

Transfer of interest in real estate land needs to be in writing

Oral contracts- man admitted under oath that he agreed orally to sell the land, buy decided not to and it
wasn’t in writing, but orally agreed to the contract. As it was under oath he was required to pay

Interest in Land - Sale or transfer of an interest, easement, mortgage but usually not a lease.

Partial performance exception, admission in legal proceedings

Collateral Promise – must be in writing, ill pay if they don’t, compared to original promise

Three parties, two promises, to answer if other party fails to perform.

Marriage - Prenuptial agreements

Not performable within one year - from time of contracting not performance. Not time period of
contract but whether or not it could be completed within a year. Project example

Contracts for the Sale of Goods - (UCC2-201) General rule, exceptions - specially made goods, partial
performance, admission
Writing requirement - UCC v. Common Law, contents, signature

Parol Evidence Rule - define, not admissible if outside writing unless to clarify, fill gaps, obvious error, to
show fraud, duress, etc.

Interpretation of Contract - court tries to determine intent of parties. Plain Meaning Rule (ordinary
words, technical words)

Specific v. General, Words v. Numbers, Handwritten, Typewritten, Pre-printed form contract.

Interpreted against drafter

Course of Performance, Course of Dealings, Usage of Trade,