Contract Defenses Study Outline

Capacity refers to a party's legal ability to enter into a contract. Generally, individuals under the age of majority (usually 18), mentally incapacitated persons, and intoxicated individuals may lack capacity to contract. A contract made by someone lacking capacity is voidable at their discretion. The law seeks to protect these vulnerable groups by allowing them to disaffirm contracts. In cases of minors, the emphasis is on protecting their interests, which is why most contracts with minors can be voided. However, contracts for necessities (like food or clothing) may be enforced. In instances of mental incapacity, the standard often requires the individual to comprehend the nature and consequences of the transaction at the time of contracting. Contracts made by intoxicated individuals may also be voidable if the intoxication created an inability to understand the nature of the transaction.

Duress occurs when a party is forced into a contract through improper threats, which can include physical harm or economic pressure. To establish duress, the aggrieved party must prove that they had no reasonable alternative but to agree to the contract under the threat. In contrast, undue influence involves situations where one party exerts excessive pressure on another, causing the latter to act against their free will. The determination of undue influence often relies on the relationship between the parties, such as when a fiduciary relationship exists, where one party has more power over the other. Courts often look for factors like susceptibility to influence, opportunity for the dominating party to exert influence, and whether the contract benefits the dominating party disproportionately. Both defenses can lead to a finding that the contract is voidable.

If a contract is based on illegal purposes or violates public policy, it is considered void and unenforceable. The general rule is that courts will not assist a plaintiff whose cause of action is founded upon an illegal act. Contracts that involve illegal activities, such as drug trafficking or gambling in jurisdictions where it is prohibited, are inherently void. Furthermore, if a contract is legal on its face but requires one party to engage in illegal conduct to perform, it may also be deemed unenforceable. There are some exceptions, such as when one party is less at fault than another or if a statute is designed to protect a particular class of individuals. Legal remedies may not be available unless the party seeking the remedy can prove they were an “innocent” party in the transaction.