Capacity, mistake, misrepresentation, duress, and unconscionability

Black-letter propositions

1. 01

   Minors ordinarily may disaffirm, subject to necessities and statutory rules; mental incapacity depends on cognitive or volitional inability and the other party's knowledge in some settings.

2. 02

   Mutual mistake permits avoidance when both parties err about a basic material assumption and the claimant did not bear the risk.

3. 03

   Unilateral mistake ordinarily requires knowledge, fault, or extreme unfairness plus no allocated risk.

4. 04

   Fraudulent or material misrepresentation inducing justified reliance makes a contract voidable; fraud in the execution can prevent formation.

5. 05

   Improper threat plus no reasonable alternative supports duress.

6. 06

   Unconscionability examines procedural unfairness and substantively oppressive terms at formation.

Use this attack sequence under time

Common wrong turns

• A bad bargain alone is not unconscionable.
• Mistake about future market value is usually a prediction, not an existing fact.
• Economic pressure is not duress without an improper threat and lack of reasonable alternative.

Worked example

Both parties contract for a painting believing it is an original; neither assumed authenticity risk, and it is a copy.

Practice this topic

Defenses in Cornell's summaries

Cornell says capacity in contract law denotes a person's ability to satisfy the elements required to enter binding contracts, such as a minimum age and sound mind, and a contract signed by a person lacking capacity may be void or voidable. It defines duress as unlawful threats or coercive behavior that cause another to act as they otherwise would not, and quotes a definition as conduct or a threat of unlawful conduct that destroys the other party's exercise of free will.

It defines misrepresentation as a false or misleading statement, or a material omission that renders other statements misleading, made with intent to deceive or induce reliance. A mistake in contract law is an incorrect belief about a basic assumption on which the contract was made, which differs from a misunderstanding about an ambiguous term.

Unconscionability and mistake in detail

UCC 2-302(1) says if the court as a matter of law finds a contract or clause unconscionable at the time it was made, it may refuse to enforce the contract, enforce the remainder without the clause, or limit the clause to avoid an unconscionable result. Section 2-302(2) gives the parties a reasonable opportunity to present evidence on the commercial setting, purpose and effect.

Cornell distinguishes procedural unconscionability, where a party lacks meaningful choice or there is misrepresentation or unequal bargaining power, from substantive unconscionability, where terms unfairly benefit one side. It says a contract is most likely found unconscionable when both are shown. For mutual mistake it lists four requirements: a material mistake about a basic assumption, adverse effect, both parties mistaken, and no assumption of the risk by the disadvantaged party.

Frequently asked questions