Contract Defenses: Everything You Need to Know
Most contract defenses of breach of contract claim are "affirmative defenses," there are many others than can also be claim that a contract is not enforceable.4 min read
2. Lack of Capacity
9. Undue Influence
10. Frustration of Purpose
11. Public Policy
Most contract defenses of a breach of contract claim are "affirmative defenses," but there are many others than can also be raised to claim that a contract is not enforceable.
It is usually not enough to simply deny legal wrongdoing. Instead, you should respond to a breach of contract claim with every possible argument or defense that supports your position. The party raising the defense usually has the burden of proving it. You should also raise defenses early in the lawsuit. If you do not, you might not be allowed to raise them later.
Here are some of the defenses that you can raise:
Error in Formation
If the required elements of offer, acceptance, or consideration are missing from contract formation then there is no valid contract between the parties.
Lack of Capacity
If any party lacked the capacity to fully understand the contract and its terms at the time of contract formation, the contract is invalid. This defense is most successful when minors and those with mental incapacities are involved.
There are both mutual mistakes and unilateral mistakes that can invalidate a contract.
A mutual mistake occurs when both parties make the mistake and it is unclear if there was truly a meeting of the minds between the parties. If the mistake significantly changes the subject matter or purpose of the contract, the court will not enforce it.
A unilateral mistake is when one party makes a mistake. These mistakes are not a basis for voiding a contract unless the non-mistaken party caused the mistake, or knew the other party was mistaken and did nothing to correct it. In this case, the court will not enforce the contract.
A contract may not be enforced if a) a party was wrongly induced to enter into the contract or b) the terms are grossly unfair to one party due to bargaining positions. A stronger bargaining party will know that the weaker party is unable to reasonably protect its interests and the resulting contract may be unconscionable. If so, a court will not enforce it.
If a party misrepresents a material aspect of the contract, even accidentally, and the other party reasonably relies on that misrepresentation, a court will find the contract invalid.
If a party intentionally misrepresents a material aspect of the contract to the other party, this is fraud and the contract will be invalid. This misrepresentation can be active misrepresentation or hiding information from the other party.
The misrepresenting party must intend to cause the other party to change his mind or action in order to qualify as fraud.
If something happens after contract formation that causes performance of the contract to be impossible or impracticable, by one or both parties, the contract will not be enforced. However, all of the following must be true:
- The party looking to avoid his duties under the contract must not have created the impossibility
- The parties at the time of contract formation must have assumed the circumstance would not occur; and
- The party raising the defense must not have assumed the risk of that circumstance occurring
Duress occurs when a party is forced to enter into the contract when he would not have otherwise entered into it voluntarily.
If a party blackmails you, threatens you with physical harm, or threatens to sue you, they have applied duress that will render the contract not binding.
Undue influence is similar to duress but involves less severe conduct. Party A has such control over Party B that A’s will is substituted for B’s. Persuasion is not enough to constitute undue influence. This control often occurs where there is a fiduciary relationship between the parties. A fiduciary relationship exists when one party is in a position of trust with the other: usually a familial relationship or a professional relationship. These relationships are scrutinized very closely by courts
Frustration of Purpose
Frustration of purpose is when circumstances substantially frustrate a party’s purpose in entering the contract. For this defense to be effective, the party raising it must not have caused the frustration. Similar to impossibility, the non-occurrence of the event that frustrated the purpose must have been a basic assumption at the time of contract formation.
If enforcement of the contract would violate public policy, a court will not enforce the contract.
A contract is unenforceable if its object or the thing bargained for is illegal; however, a court may strike the illegal aspect from the agreement and leave the rest of the contract enforceable.
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