MT311 – Business Law I Seminar Presentation UNIT 5 Contracts – Part II I. Chapter 10, Defenses to Contract Enforceability II. Chapter 11, Third Party Rights and Discharge

Genuineness of Assent In what types of situations might genuineness of assent to a contract’s terms be lacking? Mistake Fraudulent misrepresentation Undue influence Duress  

Mistakes of Fact  

Mistakes of Quality What is the difference between a mistake of quality or value and a mistake of fact? Mistake of quality or value of a deal is an ordinary risk of business for which a court normally will not provide relief. A mistake concerning a fact important to the subject matter of a contract, however, may provide a basis for relief.

Fraudulent Misrepresentation What elements must exist for fraudulent misrepresentation to occur? Misrepresentation of a material fact; Intent to deceive; Justifiable reliance by innocent party; and Injury as a result of the misrepresentation.

Undue Influence and Duress Arises from a special relationship of trust. A stronger party overcomes a weaker party’s free will by exerting psychological influence. Duress Threat of physical force or extortion. Can serve as basis for rescission of contract. Economic need, by itself, is not duress.

Statute of Frauds What contracts must be in writing to be enforceable? Interests in land Cannot be performed within one year Collateral contracts Pre-nuptial agreements Contracts for sale of goods at $500 or more

One-Year Rule

Exceptions to the Statute of Frauds Partial performance Purchaser has paid part of purchase price, taken possession and made valuable improvements to property. Admissions Party admits in court records contract exists Promissory Estoppel/Detrimental Reliance Promisee justifiably relies Customized Goods

Statute of Frauds

Sufficiency of Writing Includes memorandum, invoice, fax, check, e-mail, etc. Essential terms sufficient Signed by party against whom enforcement is sought (Initials adequate)

Parol Evidence Rule

Exceptions to the Parol Evidence Rule Evidence of subsequent contract modifications Oral evidence to show contract was void or voidable Show meaning of ambiguous terms To “fill in the gaps” Prior dealings, course of performance, usage in trade Obvious or gross clerical errors

Assignments Transfer of contractual rights to a 3rd party (assignee). The assignee has the right to demand performance from the other original party (Obligor) to the contract. Cannot assign rights for personal services or when obligor’s performance changes.

Delegation Transfer of duties to a 3rd party (Delegatee) by Delegator. Delegatee owes duty to original party in contract. Delegator is still liable for performance of duty.

Assignment vs. Delegation

Intended vs. Incidental Beneficiaries Intended Beneficiaries Benefit is intentional After rights vest, third party can sue Incidental Beneficiaries Benefit is unintentional Third party has no rights

Third-Party Beneficiaries

Contract Discharge

Scenario Aaron, a college student, signs a one-year lease agreement that runs from September 1 to August 31. The lease agreement specifies that the lease cannot be assigned without the landlord’s consent. In late may, Aaron decides not to go to summer school and assigns the balance of the lease (three months) to a close friend, Erica. The landlord objects to the assignment and denies Erica access to the apartment. Aaron claims that Erica is financially sound and should be allowed the full rights and privileges of an assignee. Discuss fully whether the landlord or Aaron is correct.

Questions & Reminders Questions on Unit 5 material? Next Seminar on Unit 6 Unit 4 Grades Available by Monday Remember to complete all Assignments Review (Graded Automatically) Discussion (See Discussion Board Posting Requirements) Activity Case Analysis Have a great week!