Defenses to Contract Enforceability Flashcards

A seller knowingly misrepresents that a car has never been in an accident. The buyer, who is an experienced mechanic, could easily detect signs of repair but does not inspect the car. The buyer later sues for fraud. Which element is most at issue?

Answer: Whether the buyer's reliance was justifiable

Justifiable reliance may be negated if the party had the expertise and opportunity to discover the truth through reasonable inspection.

Paul enters a contract to buy a business. The seller fails to disclose that the business is the subject of a pending government investigation. In most jurisdictions, the seller's silence constitutes actionable fraud if:

Answer: The seller had a duty to disclose due to a confidential relationship or active concealment

Non-disclosure constitutes fraud only when there is a duty to disclose, arising from a confidential relationship, partial disclosure making a statement misleading, or active concealment.

A contract is formed under physical duress when one party signs only because the other party threatens imminent bodily harm. The legal effect on the contract is:

Answer: The contract is void because consent was entirely absent

Physical duress involving a threat of imminent bodily harm negates consent entirely, rendering the contract void rather than merely voidable.

Which of the following is NOT a required element of fraudulent misrepresentation as a defense to contract enforceability?

Answer: Written communication of the misrepresentation

Fraudulent misrepresentation does not require a written statement; it can be made orally, through conduct, or by concealment.

Tom signs a contract believing it to be a receipt, when it is actually a promissory note. The other party fraudulently misled him about the document's nature. Tom's defense is:

Answer: Fraud in the execution (factum), making the contract void

Fraud in the execution (fraud in the factum) occurs when a party is deceived about the very nature of the document being signed, rendering the contract void.

A plaintiff claims she was induced to sign a contract based on the defendant's innocent (non-fraudulent) misrepresentation. Which remedy is available?

Answer: Rescission of the contract only; no damages for the innocent misrepresentation

An innocent misrepresentation entitles the misled party to rescind the contract but generally does not support an award of tort damages.

Which contract is unenforceable due to illegality?

Answer: A contract between two businesses to fix prices in violation of antitrust law

Contracts whose purpose is to violate a statute, such as price-fixing in violation of antitrust law, are illegal and unenforceable as against public policy.