Breaching a contract almost certainly brings legal consequences. However, there are exceptions to this general rule. For example, the breach of a contract term may have no legal consequences if a valid contract was never formed. Again, to form a valid contract, there must be an offer, acceptance, intent and consideration. In other circumstances, a contract may be rescinded. Other instances where a breach of contract may be defended include:
Void Contracts
Many times, breaching a contract that is void is has no legal consequence. A contract may be void if enforcing it would be against the law.
Minors
Minors cannot enter into contracts because they lack the legal capacity to enter into a contract. The age of majority varies from state to state. A parent or legal guardian may contract on behalf of a minor.
Mental Capacity
Breaching a contract with someone who lacks mental capacity may have no legal consequence because a party who lacks mental capacity cannot enter into a valid contract. The determination of sufficient mental capacity to enter into a contract varies from state to state. For example, some courts look at whether the person understood what he or she was doing at the time of contract creation, others look at whether the person had control over his or her actions at the time of contract creation, and some look at both.
Duress
Duress can be broadly described as any unlawful threat or coercion used to induce another to act or not act in a manner he or she otherwise would not or would act. For duress to qualify as a defense, the following four requirements must be met:
- The threat must be of serious bodily harm or death;
- The harm threatened must be greater than the harm caused by the crime;
- The threat must be immediate and inescapable; and
- The defendant must have become involved in the situation through no fault of his or her own.
A party may also claim duress if force or violence is used to compel him or her to enter into or carry out the terms of a contract. A party who enters a contract under duress may rescind it. Importantly, the determination as to whether a party to contract lacked mental capacity is highly dependent on the specific individual facts of the case.
Undue Influence
Undue influence is different than duress. Undue influence occurs when a dominant party exerts excessive pressure on a weaker party to sign a contract. Like duress, this defense if proven will result in the right to rescind the contract and is highly fact specific and depends on state-specific law.
Generally, to advance a claim of undue influence, the following four requirements must be met:
The probability of undue influence
For example, physical or mental illness or a traumatic event.
The opportunity to be dominated
For example, the parties share a special relationship and the victim reasonably believed that the offending party had the victim’s best interests in mind.
Acts taken to influence the victim
For example, isolating the victim or constantly pressuring the victim into a decision.
Unusual or suspicious transactions
For example, the offending party coerces the victim into doing something that benefits the offender, not the victim.
No Writing
Many contracts can be made orally, but there are certain agreements that must be written. For example, the Statute of Frauds requires certain types contracts to be in writing. If the contract falls into one of these categories and is not in writing, then it may be unenforceable if they involve the following:
- Terms of the contract cannot be completed within one year;
- The sale or transfer of land;
- A promise to pay another’s debt obligation;
- The sale of goods for more than a certain amount;
- A promise that will go beyond the lifetime of the party obliged to perform under the contract.
Not-Intended Agreement
On rare occasions, a contract does not reflect the original intention of the parties. In those situations, a breaching party may be able to avoid legal consequences if he or she can show that other agreements were made outside the contract, the outside agreements change the nature of the contract, and no subsequent enforceable contract has a merger clause.
Unconscionable Terms
Rarely, contract may be voided if it is unconscionable. An unconscionable contract is one that is so one-sided that no reasonable person would agree to the terms.
Impossible Performance
A contract may be voidable if an intervening circumstance occurs that makes performance by a party impossible. Circumstances that make performance more or very difficult do not necessarily make the contract impossible. A party may be excused from performance only when an overriding event has frustrated the purpose of the contract.
