Chapter 12 Void and Voidable Agreements

What makes an agreement void or voidable? b because it violates the law as stated in constitutions, statutes, or court opinions b because sometimes one of the parties lacks capacity to contract or failed to give consideration b because one of the parties failed to genuinely assent to the agreement genuine assent exists when consent is not clouded by fraud, duress, undue influence, or mistakegenuine assent exists when consent is not clouded by fraud, duress, undue influence, or mistake disaffirmance refusal to carry out or to comply with the terms of a voidable contract, with out any liability to pay damagesdisaffirmance refusal to carry out or to comply with the terms of a voidable contract, with out any liability to pay damages

What types of agreements are illegal? b agreements to commit crimes or torts b agreements that obstruct legal procedures compounding a crime accepting something of value for a promise not to prosecute a suspected criminalcompounding a crime accepting something of value for a promise not to prosecute a suspected criminal b agreements that injure public service b agreements made without a required competency license b agreements that restrain trade unreasonably

b agreements to pay usurious interest maximum rate of interest the highest rate of interest that state law permits lenders of money to changemaximum rate of interest the highest rate of interest that state law permits lenders of money to change small loan rate of interest a high rate of interest that the state permits licensed loan companies and pawnbrokers to charge on small loanssmall loan rate of interest a high rate of interest that the state permits licensed loan companies and pawnbrokers to charge on small loans b agreements that involve illegal gambling, wagers, or lotteries wager a bet on the uncertain outcome of an eventwager a bet on the uncertain outcome of an event b agreements that affect marriage negatively

What is fraud? b Fraud false representation or concealment of a material fact all of the following elements must be present for fraud to existall of the following elements must be present for fraud to exist –the false representation or concealment of a past or present fact must be deliberate –personal opinion are not statements of fact and should not be taken serious –the misrepresented or concealed fact must be material –material fact fact that influences a decision

–the person making the false representation must know it is false or make it recklessly without regard to its possible falsity –the misrepresentation must be made with the intention of influencing the other person to act upon it –the misrepresentation or concealment must induce action and cause injury to the other party

What is duress? Undue influence? b duress if one person compels another to enter into it through coercion or by illegal imprisonment b undue influence one person insidiously, or by wrongful persuasion and control over the free will of another, gets the other to make a contract that is unfavorable

Two types of mistakes. b Unilateral mistake one of the parties has an erroneous idea about the facts of a contract b mutual mistake or bilateral mistake both parties are wrong about some important facts

When can a minor disaffirm a voidable contract? b A minor can disaffirm a voidable contract any time while still a minor or within a reasonable time after reaching majority b After reaching majority, a person may ratify a voidable contract made while a minor ratification the approval of a voidable contract in its entiretyratification the approval of a voidable contract in its entirety

Can minors disaffirm contracts for necessaries? b Necessaries goods and services that are reasonably required to maintain ones life-style b An article must meet all of the following requirements for necessaries before a minor for a minor or parent can be held responsible for payment the item must be reasonably requiredthe item must be reasonably required the item must be actually furnishedthe item must be actually furnished the item must be reasonably suitable to the age and social and economic status of the minorthe item must be reasonably suitable to the age and social and economic status of the minor the item must not be otherwise furnishedthe item must not be otherwise furnished