Defenses to Contract Formation to Know for Contracts

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Defenses to contract formation protect parties from unfair agreements. They address issues like lack of capacity, coercion, misrepresentation, and illegality, ensuring that contracts are entered into freely and with a clear understanding of their implications.

  1. Lack of capacity

    • Refers to the inability of a party to enter into a contract due to age, mental state, or intoxication.
    • Minors (typically under 18) can void contracts, except for necessities.
    • Individuals deemed mentally incompetent may have contracts voided or voidable.
    • Intoxication can lead to a lack of capacity if it prevents understanding the contract's nature.
  2. Duress

    • Involves coercion or threats that compel a party to enter into a contract against their will.
    • Can be physical (threat of harm) or economic (threat to financial well-being).
    • Contracts formed under duress are voidable at the option of the coerced party.
    • The threat must be unlawful or wrongful to constitute duress.
  3. Undue influence

    • Occurs when one party takes advantage of a position of power over another party.
    • Typically involves a relationship of trust or confidence (e.g., attorney-client, caregiver-patient).
    • The influenced party must show that the contract was a result of the undue influence.
    • Contracts can be voided if the influenced party can prove the influence was improper.
  4. Misrepresentation

    • Involves false statements that induce a party to enter into a contract.
    • Can be innocent (unintentional), negligent (careless), or fraudulent (intentional).
    • The misrepresentation must be material and relied upon by the other party.
    • Affected parties may seek rescission or damages based on the misrepresentation.
  5. Fraud

    • A deliberate deception intended to secure an unfair or unlawful gain.
    • Requires a false representation, knowledge of its falsity, intent to deceive, and reliance by the victim.
    • Victims of fraud can rescind the contract and seek damages.
    • Fraudulent contracts are voidable, and the defrauded party has legal recourse.
  6. Mistake (mutual and unilateral)

    • Mutual mistake occurs when both parties share a false belief about a fundamental fact.
    • Unilateral mistake involves one party being mistaken, typically not a defense unless the other party knew or should have known.
    • Mistakes must relate to a material fact affecting the contract's essence.
    • Contracts may be voidable if the mistake significantly alters the agreement.
  7. Illegality

    • Contracts that involve illegal activities or violate public policy are unenforceable.
    • Examples include agreements for illegal services, gambling in jurisdictions where it is prohibited, or contracts that contravene statutes.
    • Courts will not enforce contracts that are illegal, even if both parties agree.
    • The principle aims to uphold the law and public interest.
  8. Unconscionability

    • Refers to contracts that are so one-sided or oppressive that they shock the conscience.
    • Typically involves a significant imbalance in bargaining power and terms that are unfairly favorable to one party.
    • Courts may refuse to enforce unconscionable contracts or modify them to make them fairer.
    • Unconscionability can be procedural (how the contract was formed) or substantive (the terms of the contract).
  9. Statute of Frauds

    • Requires certain contracts to be in writing to be enforceable, including those involving real estate, contracts that cannot be performed within one year, and agreements for the sale of goods over a certain amount.
    • A written contract must be signed by the party against whom enforcement is sought.
    • The purpose is to prevent fraud and misunderstandings in significant transactions.
    • Exceptions exist, such as partial performance or reliance on an oral contract.
  10. Public policy

    • Refers to the principles and standards that promote the welfare of the public and the community.
    • Contracts that violate public policy, such as those promoting illegal activities or harming societal interests, are unenforceable.
    • Courts may refuse to enforce contracts that are deemed contrary to the public good.
    • The doctrine serves to protect societal values and ensure fairness in contractual relationships.


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ยฉ 2024 Fiveable Inc. All rights reserved.
APยฎ and SATยฎ are trademarks registered by the College Board, which is not affiliated with, and does not endorse this website.