Defenses to Breach of Contract
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How Can I Defend Myself against a Breach of Contract Claim?
Breaching a contract will generally have legal consequences. This means that if someone breaches a contract, the other party can usually bring a lawsuit to recover the damages resulting from the breach.
There are many exceptions to this. First of all, breaching a contract that is void is always acceptable. A contract is void if enforcing it would be against the law.
Otherwise, a breach of contract may also be acceptable if a valid contract was never formed in the first place. In order to form a valid contract, there must be:
- Offer – a party must offer to make an agreement.
- Acceptance of the offer – Usually the acceptance must be express, but implied acceptance may be found in certain cases.
- Intent – If one party did not intend to make an exchange, the transaction may be treated as a gift.
- Consideration – Exchange of valued goods or services.
If one of these elements are lacking, then there is no enforceable contract, so there can be no breach.
Are There Any Other Instances Where a Breach of Contract Is Acceptable?
In addition to general rules listed above, the following specific circumstances may allow the breaching party to avoid liability:
1. The Contract Is Not in Writing
Many contracts can be made orally, but there are certain agreements which must be in writing. The statute of frauds is a law that requires certain types contracts be in writing. If the contract fits into one of these categories and is not in writing, then it is unenforceable:
- Contracts involving the sale or transfer of land
- Promises to pay someone’s debt obligations
- Contracts that cannot be completed within one year of their making, according to the terms of the contract
- Contracts involving the sale of goods for more than $500
- Contracts that will go beyond the lifetime of the one performing the contract
2. The Contract Is Not the Intended Agreement
In a few situations, the contract may not reflect the original intention of the parties. In those situations, a breaching party may be able to avoid liability if:
- They show that other agreements were made outside the contract
- The outside agreements change the nature of the contract
This defense typically works well if the contract does not contain a merger clause.
3. One Party Was a Minor
In general, minors cannot enter into contracts because they lack legal capacity. In most states, someone is a minor if he or she is under 18. Thus, if someone enters into a contract with a person younger than 18, that agreement can freely be breached without any consequences. For this reason, it is a good idea to have the minor’s parents sign the agreement in order to ensure it will be enforceable later.
4. Mental Capacity
Similar to entering into an agreement with a minor, a contract may be unenforceable if a party lacks mental capacity. Determination of mental capacity will vary from state to state. Sometimes, courts will look at whether or not the person understood what they were doing at the time of contract creation. Similarly, courts may also look at whether or not the person had control over their actions at the time of contract creation.
5. Duress or Undue Influence
Duress occurs when a person is influenced to sign a contract under extreme pressure. Undue Influence occurs when a dominant party exerts excessive pressure on a weaker party to sign a contract. Both of these defenses are highly state specific and can be quite complicated.
6. There Is a Mistake in Creating the Contract
A mistake occurs when parties have a mistaken belief about a fact upon entering into a contract. If only one party is mistaken, it is a unilateral mistake, and generally contract performance is not excused, and breaching may have consequences. In a bilateral mistake situation, both parties are mistaken, and the contract will generally be void.
The unilateral mistake rule does not apply if one party misleads the other party. Unilateral mistakes can also void a contract if one side fails to disclose information which is only known to that party and which a reasonable person could not discover on their own.
7. The Contract Is Unconscionable
A contract is void if it is unconscionable. "Unconscionable" simply means that the contract is very obviously one-sided, essentially to the extent that no reasonable person would agree to such terms. Thus, the court will assume that one party was either ill-informed or otherwise pressured into signing the contract since no reasonable person would otherwise.
8. Circumstances Change
When something happens that makes it impossible to perform the duties of the contract, parties may be excused from performance. However, circumstances that simply make performance more difficult do not necessarily make the contract impossible. A party may be able to excuse performance when an important overriding event has frustrated the purpose of the contract.
Do I Need a Contract Lawyer?
Contract law is often very fact specific and quite complicated, and defenses to a breach of contract may vary greatly. If you are being accused of breaching a contract, you should strongly consider consulting with a business lawyer or contract attorney. It may be tempting to consider handling the situation on your own, but it will likely cost you in the end. Only a lawyer can effectively and accurately assess your case and inform you as to the best courses of action.
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Last Modified: 08-13-2014 11:40 AM PDT
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