Defenses to Contract Obligations

In theory, the idea of a contract should be simple and irreversible. However, there are numerous technicalities to consider, all of which have been passed as a means to keep dealings between companies, clients and employees fair and unbiased.

What are some of the legal defenses to breach of contract?

• No Contract, No Case!: The first line of defense is obvious—if there is no existing contract then the case can be thrown out. The prosecution must be able to show evidence of three aspects of the contract: (1) the first party offers something of value to the second party; (2) the second party agrees to the offer; (3) the second party gives something of value to the first party.

• Lack of Capacity to Contract: If it can be proven that one party was not in full understanding of a contract, as well as the consequences of such an agreement, then the contract can be declared void. This judgment will largely depend on why the other party lacked capacity to understand an agreement. Ignorance is not an excuse; usually the other party must be proven to be under the age of comprehension, mentally infirm or a victim of some other circumstance. Drugs or intoxication can occasionally be used as a defense. Children under the age of 18 have an inherent protection here and their faulty contracts can be voided by their parents or legal guardian. However, upon turning of legal age, contracts involving minors can become enforceable, no longer protected by the Lack of Capacity defense.

• Undue Influence, Duress and Misrepresentation: If one of the parties committed fraud, coerced the other party to sign or improperly influenced the other party, then it can be voided. This defense suggests that the contract was detrimental and given to the victim possibly by a trusted friend or acquaintance. It could also mean that the contract was signed because the other party threatened the signer, through duress or even blackmail. Misrepresentation involves the other party intentionally making a false statement on the contract or concealing or withholding information from the signer.

• Unconscionability: This defense can be argued when the contract terms are so unfair or illegal (as regards the industry the parties are involved in) that they "shock" the conscience of the court. Some of the factors involved in this defense may include unequal bargaining power, the education and understanding of the signer, the lack of opportunity to negotiate or contact an attorney as well as generally unfavorable terms to a weaker party.

• Illegal Terms or Mistakes: Naturally, if illegal terms are on the contract or if it can be proven that an error was made on the contract (which led to both parties having mistaken beliefs) then the contract could be voided.