Legal Lecture week 3 (Contracts 2)

What is the difference between void, voidable, and unenforceable contracts?

Void: invalid from the beginning; Voidable: valid unless the innocent party chooses to avoid it; Unenforceable: valid but courts will not enforce it.

Who may lack capacity to contract?

Minors, mentally incapacitated persons, intoxicated persons, corporations, associations, public authorities.

What is a minor and how does age of majority matter?

A minor is a person under the age of majority (18 or 19 depending on jurisdiction). Contracts with minors are generally voidable.

Why are most minors' contracts voidable?

To protect minors from exploitation and their own immaturity.

How does a minor avoid a contract?

By accepting or avoiding it shortly after reaching majority and returning benefits received.

Which contracts with minors are enforceable and why?

Necessaries of life and employment contracts if beneficial to the minor.

What is the contractual capacity of mentally incapacitated persons?

Judicially declared incompetent contracts are void; otherwise, contracts are voidable if the other party knew of incapacity.

When is a contract involving intoxication voidable?

If the person was too intoxicated to understand the transaction and the other party knew of the intoxication.

How are corporations treated in contract law?

Corporations are legal persons with contractual capacity.

What is the capacity of statutory corporations?

Limited to powers granted by statute; contracts outside those powers are ultra vires and void.

Why do unincorporated associations usually lack capacity?

Only legal persons (humans and corporations) have capacity.

What is the risk of contracting with an association?

Contract is not enforceable against other members; individuals bear full responsibility.

What is the contractual capacity of Indian Bands?

They have capacity similar to corporations: can contract and sue or be sued.

Are contracts generally required to be in writing?

No, most contracts are enforceable orally unless legislation requires writing.

What contracts fall under the Statute of Frauds?

Guarantees of debt, sale of interest in land, contracts not performable within one year.

What is required to satisfy the Statute of Frauds?

Written contract or memorandum with essential terms and signature.

What is the effect of non-compliance with the Statute of Frauds?

The contract is unenforceable, not void.

What kinds of mistake prevent contract formation?

Mistaken identity and mutual mistake about subject matter.

How does mistake differ from frustration?

Mistake occurs before contract formation; frustration occurs after.

What is the defence of non est factum?

A defence where a person signs a document fundamentally different from what they believed.

When is a contract frustrated?

When an unforeseen event makes performance impossible or radically undermines the contract's purpose.

What is insufficient to establish frustration?

Performance becoming merely more difficult or expensive.

What are the three doctrines addressing unfairness in bargaining?

Duress, undue influence, unconscionable transactions.

What is duress and its legal effect?

Illegitimate threat of harm; contract is voidable at victim's option.

What factors support a finding of economic duress?

Bad faith threat, no reasonable alternative, prompt protest, lack of legal advice.

What is undue influence?

Overpowering of one party's will through internal manipulation.

How does a fiduciary relationship affect undue influence?

Undue influence is presumed; fiduciary must prove fairness.

What is an unconscionable transaction?

A bargain no fair-minded person would offer and no right-minded person would accept.

What creates a presumption of unconscionability?

Improvident bargain and inequality of bargaining power.

When is a contract illegal by statute?

When it violates regulatory legislation or criminal law.

How do courts assess statutory illegality?

By weighing seriousness, social utility, and the protected class.

What is common law illegality?

Contracts to commit crimes, torts, or violate public policy are void.

What is restraint of trade and how is it evaluated?

Non-competition clauses must be reasonable in time, geography, and circumstances.

What are the main ways contracts are discharged?

Performance, agreement, operation of law, breach.

What is discharge by performance?

Fulfillment of contractual obligations, usually requiring exact performance.

When is substantial performance sufficient?

When defects are minor; damages may still be owed.

What is discharge by agreement?

Ending a contract through rescission, novation, variation, release, waiver, or accord and satisfaction.

What is novation?

Discharging an old contract and replacing it with a new one.

What is waiver?

Voluntary abandonment of contractual rights, enforceable without consideration.

What determines whether a breach discharges a contract?

The type of term breached: condition, warranty, or intermediate term.

What is a condition?

A major term; breach allows termination and damages.

What is a warranty?

A minor term; breach allows damages only.

What is an intermediate term?

Depends on consequences of breach; 'wait and see' approach.

What are expectation damages?

Forward-looking damages placing plaintiff as if contract performed.

What limits expectation damages?

Remoteness, causation, mitigation, and difficulty of calculation.

What is the duty to mitigate?

Plaintiff must take reasonable steps to reduce losses.

What are reliance damages?

Backward-looking damages placing plaintiff as if contract never existed.

What is disgorgement (account of profits)?

Forcing defendant to give up gains obtained through breach.

What are nominal damages and why risky to claim?

Symbolic damages for breach without loss; courts discourage trivial claims.

What are punitive damages and when awarded?

Punishment for egregious conduct plus an independent actionable wrong.

What are liquidated damages and when are they enforceable?

Genuine pre-estimates of loss agreed in advance; penalties are unenforceable.

When is specific performance available?

When damages are inadequate and supervision is feasible.

What is an injunction?

Court order preventing a party from doing something promised not to do.

What is unjust enrichment?

Independent claim requiring restitution when no contract exists.

What are the elements of unjust enrichment?

Enrichment of defendant, corresponding deprivation of plaintiff, no juristic reason.