Void and Voidable Agreements

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Chapter 12

• Void and Voidable Agreements

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What makes an agreement void or voidable?

• because it violates the law as stated in
  constitutions, statutes, or court opinions
• because sometimes one of the parties lacks
  capacity to contract or failed to give
  consideration
• 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
  mistake
• disaffirmance refusal to carry out or to comply
  with the terms of a voidable contract, with out
  any liability to pay damages

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What types of agreements are illegal?

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

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• agreements to pay usurious interest
• maximum 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
  loans
• agreements that involve illegal gambling, wagers,
  or lotteries
• wager a bet on the uncertain outcome of an event
• agreements that affect marriage negatively

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What is fraud?

• Fraud false representation or concealment of a
  material fact
• all 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

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• 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

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What is duress? Undue influence?

• duress if one person compels another to enter
  into it through coercion or by illegal
  imprisonment
• 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

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Two types of mistakes.

• Unilateral mistake one of the parties has an
  erroneous idea about the facts of a contract
• mutual mistake or bilateral mistake both parties
  are wrong about some important facts

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When can a minor disaffirm a voidable contract?

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

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Can minors disaffirm contracts for necessaries?

• Necessaries goods and services that are
  reasonably required to maintain ones life-style
• 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 required
• the item must be actually furnished
• the item must be reasonably suitable to the age
  and social and economic status of the minor
• the item must not be otherwise furnished