Chapter 13

MISCELLANEOUS DEFENSES: ILLEGALITY, DURESS, MISREPRESENTATION, UNCONSCIONABILITY, AND LACK OF CAPACITY

ChapterScope

This chapter discusses miscellaneous defenses that may be asserted by a party being sued for breach of contract. Key defenses:

• Illegality: A contract is illegal if the subject matter is unlawful, whether it is barred by statute or found to be against public policy. (Examples: gambling contracts, usurious contracts, unreasonably broad covenants to compete.)
  • Neither party may enforce: As a general rule, neither party to an illegal contract may enforce it—the court will leave the parties to the contract where it finds them.
• Duress: A party may assert the defense of “duress,” i.e., that he entered into or modified a contract because of unfair coercion arising from the other party’s wrongful act or threat. The act or threat must be great enough to overcome the free will of the party asserting the defense.
• Misrepresentation: An aggrieved party may sue for rescission or breach or defend in a suit when the other party to the contract makes an intentional or even innocent misrepresentation. The aggrieved party must have justifiably relied on a misrepresentation of fact (not opinion).
  • Concealment and disclosure: There are some instances in which a party may rescind or recover on account of the other party’s mere failure to disclose information (as opposed to that other party’s making of an affirmative misrepresentation).
• Unconscionability: The unconscionability defense is available to consumers who enter into contracts that are so one-sided that they are considered shockingly unfair.
• Capacity: A party who does not possess the capacity to contract may generally avoid the contact. (The option to avoid the contract belongs solely to the party lacking capacity, not to the other party.)
  • Infants. Until a person has reached his majority (usually age 18), most contracts which he enters into are voidable at his option.
  • Mental incompetents. Persons who are mentally incompetent (the insane, mentally ill, retarded and intoxicated) may sometimes avoid contracts they sign.