Discussion: Defenses to Breach of Contract
Review the defenses to breach of contract below and write about an instance where you employed or considered using one of these methods and explain what happened.
What are valid defenses against a breach of contract claim?
The most common defenses to enforcement of a contract or liability for damages are as follows:
- Enforcement of the contract would violate public policy.Example:A contract to lease part of a liquor license will not be enforced because splitting a liquor license between two parties and two locations violates the public of the state. SeeDigesu v. Weingardt,91 N.M. 441, 575 P .2d 950(1978).
- Performance of the contract has become impossible or the purpose of the contract has become frustrated.Example:Dan hires Tom to paint his house, but the house burns down before the contract can be performed.
- The contract is illegal.Example:The contract is for commission of murder.
- The contract lacks consideration.Example:Tom promises to give $20 to Dan, but Dan does not have to do or give anything in return.
- The contract was obtained by fraud.Example:Blue Company refuses to sell to Red Company, so Red Company sends Pink Company to buy goods from Blue Company and turn them over to Red Company.
- The contract limits the amount of damages that can be recovered.Example:The contract states that in the event of a minor breach, the damages will be $100 regardless of the actual loss.
- The contract contains a unilateral mistake that was material to the agreement and the other party knew or should have known of the mistake.Example:Maria paid Tom a lot of money for a painting signed "Picasso". Tom knew that Maria thought Pablo Picasso painted it, when really Arnold Picasso was the printer, but Tom did not correct the misunderstanding.
- The parties have accepted the contract performance, or a substitution for the performance, as adequate. This is called accord and satisfaction.Example: Tim owes Frank $100 on a contract debt. Frank agress to accept a radio worth $50 in exchange for discharging the debt.
- When Frank changes his mind and sues for the additional $50.00, the Court will not enforce the original contract because Frank has accepted the radio as performance of the contract.
- One (or both) of the parties lacked capacity to make the contract.Example: A party to the contract is 16 years old or is mentally incompetent.