Deck 12: Defenses to Contract Enforceability

Question 1

Voluntary Consent.
Jerome is an elderly man who lives with his nephew, Philip. Jerome is totally dependent on Philip's support. Philip tells Jerome that unless Jerome transfers a tract of land he owns to Philip for a price 30 percent below market value, Philip will no longer support and take care of him. Jerome enters into the contract. Discuss fully whether Jerome can set aside this contract.

Answer 1

Voluntary consent:
In the present case there exists a lack of the voluntary consent on the part of Mr J due to excessive influence and duress. Mr J depends completely on Mr P due to which the latter could influence him. Mr J can show that he did not authentically agree to the contract so he can either adhere to the contract or withdraw. Mr P had a lot of influence over the elderly Mr J and therefore could overcome his independent will. Under the present circumstances the contract was entered into under too much influence and is voidable.

Question 2

Elle, an accountant, certifies several audit reports for Flite Corporation, her client, knowing that Flite intends to use the reports to obtain loans from Good Credit Company (GCC). Elle believes that the reports are true and does not intend to deceive GCC, but she does not check the reports before certifying them. Can Elle be held liable to GCC? Why or why not?

Answer 2

A cause of action for misrepresentation can be brought against the accountant. Misrepresentation happens or occurs through omission or a failure to disclose material facts. An accountant can also be found liable for not using the skill and competence required by his or her business or profession. Suits brought by clients are typically based on negligence or fraud. Remedies for breach of contract include specific performance; general damages and consequential damages.

Question 3

Answers to the even-numbered questions in this For Review section can be found in Appendix F at the end of this text.
In what types of situations might voluntary consent to a contract's terms be lacking?

Answer 3

The situations in which the genuineness of assent to a contract's terms be lacking may arise due to fraudulent misrepresentation, duress, mistake, and undue influence.
Those individuals who enter with such contracts and are lacking genuine assent and contractual capacity are not void but voidable.

Question 4

Charter Golf, Inc., manufactures and sells golf apparel and supplies. Ken Odin had worked as a Charter sales representative for six months when he was offered a position with a competing firm. Charter's president, Jerry Montieth, offered Odin a 10 percent commission "for the rest of his life" if Ken would turn down the offer and stay on with Charter. He also promised that Odin would not be fired unless he was dishonest. Odin turned down the competitor's offer and stayed with Charter. Three years later, Charter fired Odin for no reason. Odin sued, alleging breach of contract. Using the information presented in the chapter, answer the following questions.
1. Would a court likely decide that Montieth's employment contract with Odin falls within the Statute of Frauds? Why or why not?
2. Assume that the court does find that the contract falls within the Statute of Frauds and that the state in which the court sits recognizes every exception to the Statute of Frauds discussed in the chapter. What exception provides Odin with the best chance of enforcing the oral contract in this situation?
3. Now suppose that Montieth had taken out a pencil, written "10 percent for life" on the back of a register receipt, and handed it to Odin. Would this satisfy the Statute of Frauds? Why or why not?
4. Assume that Odin had signed a written employment contract at the time he was hired by Charter, but it was not completely integrated. Would a court allow Odin to present parol evidence of Montieth's subsequent promises? Why or why not?

Question 5

Question with Sample Answer-Statute of Frauds.
Gemma promises a local hardware store that she will pay for a lawn mower that her brother is purchasing on credit if the brother fails to pay the debt. Must this promise be in writing to be enforceable? Why or why not

Question 6

My-T Quality Goods, Inc., and Nu! Sales Corporation orally agree to a deal. My-T's president has the essential terms written up on company letterhead stationery, and the memo is filed in My-T's office. If Nu! Sales later refuses to complete the transaction, is this memo a sufficient writing to enforce the contract against it? Explain your answer.

Question 7

Answers to the even-numbered questions in this For Review section can be found in Appendix F at the end of this text.
What is the difference between a mistake of value or quality and a mistake of fact?

Question 8

The Parol Evidence Rule.
Evangel Temple Assembly of God leased a facility from Wood Care Centers, Inc., to house evacuees who had lost their homes in a hurricane. The lease stated that Evangel could end it at any time by giving notice and paying 10 percent of the rent that would otherwise be paid over the rest of the term. The lease also stated that if the facility did not retain its tax exemption-which was granted to it on Evangel's behalf as a church-Evangel could end the lease without making the 10 percent payment. Is parol evidence admissible to interpret this lease? Why or why not? [Wood Care Centers, Inc. v. Evangel Temple Assembly of God of Wichita Falls, 307 S.W.3d 816

Question 9

Answers to the even-numbered questions in this For Review section can be found in Appendix F at the end of this text.
What are the elements of fraudulent misrepresentation?

Question 10

Case Problem with Sample Answer-Contract Involving Interests in Land.
Mohammad Salim offered to sell a convenience store and gas station to Talat Solaiman and Sabina Chowdhury. The prospective buyers drafted a "Purchase Agreement" that described its object as "the property and business known as BP Food Mart" at a specific address. The parties signed the agreement. Later, the buyers wanted out of the deal. Is the property description sufficient for the seller to enforce the agreement? Explain. [Salim v. Solaiman, 302 Ga.App. 607, 691 S.E.2d 389 (2010)]

Question 11

Answers to the even-numbered questions in this For Review section can be found in Appendix F at the end of this text.
What contracts must be in writing to be enforceable?

Question 12

Mutual Mistake.
When Steven Simkin divorced Laura Blank, they agreed to split their assets equally. They owned an account with Bernard L. Madoff Investment Securities estimated to be worth $5.4 million. Simkin kept the account and paid Blank more than $6.5 million-including $2.7 million to offset the amount of the funds that they believed were in the account. Later, they learned that the account actually contained no funds due to its manager's fraud. Could their agreement be rescinded on the basis of a mistake? Discuss. [Simkin v. Blank, 80 A.D.3d 401, 915 N.Y.S.2d 47 (1 Dept. 2011)]

Question 13

Answers to the even-numbered questions in this For Review section can be found in Appendix F at the end of this text.
What is parol evidence? When is it admissible to clarify the terms of a written contract?

Question 14

Misrepresentation.
Charter One Bank owned a fifteen-story commercial building. A fire inspector told Charter that the building's drinking-water and fire-suppression systems were linked. Without disclosing this information, Charter sold the building to Northpoint Properties, Inc. Northpoint spent $280,000 to repair the water and fire-suppression systems and filed a suit against Charter One. Is the seller liable for not disclosing the building's defects? Discuss. [Northpoint Properties, Inc. v. Charter One Bank, 2011-Ohio-2512 (Ohio App. 8 Dist. 2011)]

Question 15

Statute of Frauds.
Newmark Co. Real Estate, Inc., contacted 2615 East 17 Street Realty, LLC, to lease certain real property on behalf of a client. Newmark e-mailed the landlord a separate agreement for the payment of Newmark's commission. The landlord e-mailed it back with a separate demand to pay the commission in installments. Newmark revised the agreement and e-mailed a final copy to the landlord. Do the parties have an agreement that qualifies as a writing under the Statute of Frauds? Explain. [Newmark Co. Real Estate, Inc. v. 2615 East 17 Street Realty, LLC, 80 A.D.3d 476, 914 N.Y.S.2d 162 (1 Dept. 2011)]

Question 16

The Parol Evidence Rule. Rimma Vaks and her husband, Steven Mangano, executed a written contract with Denise Ryan and Ryan Auction Co. to auction their furnishings. The six-page contract provided a detailed summary of the parties' agreement. It addressed the items to be auctioned, how reserve prices would be determined, and the amount of Ryan's commission. When a dispute arose between the parties, Vaks and Mangano sued Ryan for breach of contract. Vaks and Mangano asserted that, before they executed the contract, Ryan had made various oral representations that were inconsistent with the terms of their written agreement. Assuming that their written contract was valid, can Vaks and Mangano recover for breach of an oral contract? Why or why not? [ Vaks v. Ryan, 2012 WL 194398 (Mass.App. 2012)] (See pages 320-322.)

Question 17

A Question of Ethics-Bilateral Mistake.
On behalf of BRJM, LLC, Nicolas Kepple offered Howard Engelsen $210,000 for a parcel of land known as lot five on the north side of Barnes Road in Stonington, Connecticut. Engelsen's company, Output Systems, Inc., owned the land. Engelsen had the lot surveyed and obtained an appraisal. The appraiser valued the property at $277,000, after determining that it was three acres and thus could not be subdivided because it did not meet the town's minimum legal requirement of 3.7 acres for subdivision. Engelsen responded to Kepple's offer with a counteroffer of $230,000, which Kepple accepted. The parties signed a contract. When Engelsen refused to go through with the deal, BRJM filed a suit against Output, seeking specific performance and other relief. Output asserted the defense of mutual mistake on at least two grounds. [BRJM, LLC v. Output Systems, Inc., 100 Conn.App. 143, 917 A.2d 605 (2007)]
1. In the counteroffer, Engelsen asked Kepple to remove from their contract a clause requiring written confirmation of the availability of a "free split," which meant that the property could be subdivided without the town's prior approval. Kepple agreed. After signing the contract, Kepple learned that the property was not entitled to a free split. Would this circumstance qualify as a mistake on which the defendant could avoid the contract? Why or why not?
2. After signing the contract, Engelsen obtained a second appraisal that established the size of lot five as 3.71 acres, which meant that it could be subdivided, and valued the property at $490,000. Can the defendant avoid the contract on the basis of a mistake in the first appraisal? Explain.

Question 18

Critical Legal Thinking.
Describe the types of individuals who might be capable of exerting undue influence on others.

Question 19

Business Law Critical Thinking Group Assignment.
Jason Novell, doing business as Novell Associates, hired Barbara Meade as an independent contractor. The parties orally agreed on the terms of employment, including payment of a share of the company's income to Meade, but they did not put anything in writing. Two years later, Meade quit. Novell then told Meade that she was entitled to $9,602- 25 percent of the difference between the accounts receivable and the accounts payable as of Meade's last day of work. Meade disagreed and demanded more than $63,500- 25 percent of the revenue from all invoices, less the cost of materials and outside processing, for each of the years that she had worked for Novell. Meade filed a lawsuit against Novell for breach of contract.
1. The first group will evaluate whether the parties had an enforceable contract.
2. The second group will decide whether the parties' oral agreement falls within any exception to the Statute of Frauds.
3. The third group will discuss how the lawsuit would be affected if Novell admitted that the parties had an oral contract under which Meade was entitled to 25 percent of the difference between the accounts receivable and payable as of the day Meade quit