The following 12 questions frequently arise in the context of a breach of contract issue.
- Will I Always Be Liable If I Breach a Contract?
- What If the Agreement Is Not a Valid Contract?
- What If a Contract Is Not In Writing?
- What If the Contract Is Not What I Agreed To?
- Can a Contract Be Voided Where One Party Was a Minor?
- Can a Contract Be Voided Where One Party Lacked Mental Capacity?
- What If a Contract Was Signed under Duress or Undue Influence?
- What If Somebody Commits a Fraud or Misrepresentation in Creating the Contract?
- What Happens When There Is a Mistake in Creating the Contract?
- What Happens When a Contract Has an Illegal Purpose or Violates Public Policy?
- Is a Contract Void If It Is Unconscionable?
- What Happens When Circumstances Change?
- Do I Need a Lawyer for My Breach of Contract Issue?
First of all, in order to form a contract, there must be:
- An offer – A party must offer to make an agreement.
- Acceptance of the offer – Usually the acceptance must be express, but may also be implied.
- Intent – If one party did not intend to enter into an agreed upon exchange, the transaction may be treated as a gift.
- Consideration – Exchange of valued goods or services.
If one of these elements are lacking, then contract is not enforceable, because essentially there is no contract.
Many contracts can be made orally, but there are certain agreements that must be in writing. The Statute of Frauds describes a law which requires contracts be in writing and describes the types of contracts that must be in writing. If the contract falls into one of these categories, then it is legally 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
In a few situations, the contract may not reflect the true intentions of the parties. In those situations, a party may show that other agreements were made outside the contract, and that those agreements change the nature of the original contract. The argument here is that because the current agreements between the parties are fundamentally different from what either party agreed to, their conduct is not enforceable under the terms of the original contract. This is a common defense where a contract does not contain a merger clause.
Generally, minors cannot enter into contracts. In most states, someone is a minor if he or she is under 18. Therefore, if a minor signs a contract but later wants to get out of it, they usually can. For this reason, if you are dealing with a minor, it is a good idea to have the minor’s parents sign the agreement to potentially avoid entering into a voidable agreement.
A contract may be unenforceable if a person entering into it lacked mental capacity. What constitutes sound mental capacity will vary from state to state. Sometimes, courts will look at whether or not the person understood what he or she was doing at the time of contract creation. Other courts will look at whether or not the person had control over their actions at the time of contract creation.
Duress occurs when a person is influenced to sign a contract under extreme pressure, often a threat of violence or bodily harm. Undue Influence occurs when a dominant party exerts excessive pressure on a weaker party to sign a contract.
Generally, a party engages in fraud when they misrepresent a material fact to induce another party to act or refrain from acting. Persons alleging fraud must prove that the person making the representation knew or should have known that it was false, that they intended for the other party to rely on it, and that the party did in fact rely on it, which resulted in damages.
A mistake occurs when parties have an incorrect belief about a fact upon entering into a contract. If only one party is mistaken, it is called a unilateral mistake, and generally contract performance will not be excused. If both parties are share an incorrect belief on a fact, it is called a bilateral mistake, and the contract will generally be voidable.
It is worth nothing that a unilateral mistake does not apply if one party misleads the other party. Unilateral mistakes can also make a contract voidable if one side fails to disclose information which is only known to that party, and that a reasonable person could not discover on their own.
If the terms of the contract run counter to public policy or existing law, the contract will be unenforceable, especially if those terms were fundamental terms. For example, a court will not enforce a contract for the sale of drugs or illegal firearms.
"Unconscionable" means that the contract is very obviously one-sided that no reasonable person would agree to such terms. An unconscionable contract is void. Therefore, the court will assume that one party was pressured into signing the contract since no reasonable person otherwise would.
When something happens that makes it impossible to perform the duties of the contract, parties may be excused from performance. However, just because the event rendered performance of the agreement more difficult does not mean that it is impossible. A party may also be able to excuse performance when an important, overriding event has frustrated the purpose of the contract.
As you can tell, contract law can be quite complicated, and defenses to a breach of contract only complicate the matter further. An business attorney can help you understand the depth of this area of law and determine whether there is an appropriate defense if you are accused of breaching a contract.