Improper Bargaining cont. + Incapacity setup

Last class covered misrepresentation by affirmative assertion and the procedural prong of unconscionability. Today closes both loops — adding misrepresentation by silence and the substantive prong — and then opens the final defense, incapacity. The through-line: each defense identifies a defect in the conditions of formation that justifies the law’s refusal to enforce.

Misrepresentation by nondisclosure

R2d § 161. Silence becomes an assertion in defined situations: where disclosure is needed to prevent a prior statement from being a misrepresentation, where it would correct the other party’s mistake about a basic assumption and nondisclosure violates good faith, or where a relationship of trust entitles the other party to know. The duty is narrower than the duty not to lie affirmatively — it attaches only to material facts the seller knows and the buyer cannot reasonably discover. This is the modern erosion of caveat emptor in residential real estate.

Unconscionability — the substantive prong

R2d § 208 / UCC § 2-302. With the procedural prong established last class, today supplies the substantive side: terms so oppressive or one-sided that enforcement shocks the conscience. The two prongs work together — procedural defect in the process plus substantive oppression in the terms. The framework is portable: consumer arbitration clauses, payday-loan rates, and cross-collateral clauses all run through the same test even though the terms differ.

Capacity — the setup

R2d § 12. Capacity is a precondition to enforceability. The section names the categories of incapacity — guardianship, infancy, mental illness, and intoxication — and frames the recurring policy tension between bright-line rules (efficiency) and case-by-case inquiry (fairness).

R2d § 14. A minor’s contracts are voidable: the minor may disaffirm before majority or within a reasonable time after, subject to the necessaries exception. Webster Street previews how fact-bound “necessary” is.

Cases

Hill v. Jones holds that a seller of residential real estate has a duty to disclose known, material defects that are not readily observable to the buyer; the sellers’ failure to disclose a history of termite infestation and treatment could be a misrepresentation by nondisclosure under § 161, so summary judgment for the sellers was reversed and remanded. It shows that nondisclosure can be as actionable as an affirmative lie. Williams v. Walker-Thomas returns for its substantive prong: the cross-collateral clause that kept a balance on every item until the last was paid illustrates the line between a hard term and an unconscionable one, and why both prongs are needed. Webster Street Partnership v. Sheridan previews infancy: minor tenants could disaffirm an apartment lease because housing was not a “necessary” where they could return to a parent able and willing to provide for them — the centerpiece for next class.

What you should be able to do

Identify when § 161 converts silence into a misrepresentation and distinguish the inquiry-triggered duty from the relationship-based one. Complete the unconscionability analysis by applying the substantive prong and explaining why a one-sided term alone is not enough. State the categories of incapacity under § 12 and why a minor’s contract is voidable rather than void. Next class takes capacity in full — infancy, mental illness, and intoxication — with Webster Street at the center.