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Chapter 8

MCS 3040 Chapter 8: Law Chapter 8


Department
Marketing and Consumer Studies
Course Code
MCS 3040
Professor
Joseph Radocchia
Chapter
8

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Tuesday, November 15, 2016
Chapter 8: Non-Enforcement of Contracts
MCS 3040
Importance of Enforcing Contracts:
preserve integrity, reliability, and predictability of contractural relationships
unjust to enforce contracts under exceptional circumstances
Legal Doctrines that are exceptions to enforceable rule of contract:
these doctrines have been developed by common law and statute
1. an unequal relationship between the two parties
2. misrepresentation or important mistakes concerning the contract
3. a defect within the contract itself
Options for when party finds themselves within legal doctrines:
Voidable Contract: a contract that, in certain circumstances, an aggrieved party can choose to
keep in fore or bring to an end
Void Contract: a contract involving a defect so substantial that it is of no force or effect
Contracts Based on Unequal Relationships
Legal capacity
Legal Capacity: the ability to make binding contracts
Minors:
age of majority is age at which person is recognized as an adult for legal purposes
if under age, you are in different position to enter contracts
age of majority and accountability act sets age of majority at 18
general rule that minors are not obligated to the contracts they make
exceptions
contracts for essentials or “necessaries”, such as food, shelter, and clothing
must legally determine: 1) is item necessary to minor? 2) does minor already have
adequate supply of item?
beneficial contracts binding if considered for benefit of minor
when they reach age of majority, there is no impacts on contracts made while underage
exception
contract is permanent or continuous in nature
Mental Incapacity:
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Tuesday, November 15, 2016
in order to form contract, both parties must be able to understand the nature and
consequences of agreement
if one party unfairly exploits the other party who is lacking capacity, then contract isn’t
enforceable
Duress:
contract mades as a result of one party being threatened are not enforceable
Economic Duress: the threat of economic harm that coerces the will of the other party and
results in a contract
when determined, contract is voidable at option to party who was under duress
Undue Influence:
Undue Influence: unfair manipulation that compromises someone’s free will or choice
if determined, then contract is voidable
Traditionally operates in two circumstances:
1) actual pressure — in transaction someone exerts unfair influence on another (ie. elderly
pressured by caregivers to sign over estate)
2) presumed pressure based on a special relationship — contract between family and lawyer,
or patient and doctor. The titles held presumes undue influence.
Certificate of Independent legal advice:
way of proving contract was freely chosen
weaker party seats independent legal advice concerning transaction they are about to enter
into
includes that…
lawyer explained proposed transaction to weaker party
they understand the transaction
they are proceeding with transaction on free and informed basis
Unconscionability:
Unconscionable Contract: an unfair contract formed when one party takes advantage of the
weakness of another
Proof of Unconscionability Two-step Process:
1) proof of inequality between the parties
arises from one party being… compared to other party
unsophisticated, poorly educated, lacks language skills, lower economic standing
generally speaking, parties are never really on equal levels
2) proof of an improvident bargain or proof of exploitation
terms greatly advantage one party over the other
!2
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