1. Contracts Defenses to Enforcement (continued)
Defenses Arising at Formation
1. Illegal Purpose: void from the beginning based on public policy, e.g., contract on murder-for hire, or where a statute makes clear the violation should not permit any recovery…
2. Not-so-Illegal Purpose: more minor violations, e.g., lack of a plumber’s license, may void the contract, but probably still allow some form of equitable recovery – quasi contract/unjust enrichment.
3. Legal Purpose but Possible Illegal Uses: probably not void but fully enforceable, just not for the illegal uses – that it could call for illegal performance does not justify voiding it.
4. Fraud in Factum: trickery or deceit about some basic assumption of the agreement – probably voids the contract base on this defense. Also called fraudulent misrepresentation: a) defendant makes a fraudulent statement; b) known false or known likely to be false/misleading; c) with intent to induce entry into the contract; and d) actual reliance on the falsity (…and e) actual damages)).
5. Fraud in the Inducement: trickery or deceit prompting the actual execution of the agreement, e.g., “if you don’t sign now, the company will go bankrupt…” Similar elements to #4 Fraud in Fact.
6. Duress: common law was force, threat of force or imprisonment to person or family member (but not if not by a third party). More common today is Economic Duress – no choice but to agree for serious financial threat. The threat basically removes the other party’s free will to contract.
7. Undue Influence: someone in a position of influence using same to benefit from another with a weakened state of mind (perhaps not quite “impaired”).
Don’t forget the “void” vs. “voidable” distinction – at issue in above…
For a good source of the “elements” for these defenses, find your State Supreme Court’s Standard Jury Instructions for each defense and outline them to memorize (space does not permit here).
Don’t let the “inducement” facet of Fraud in Factum lead to confusion with Fraud in the Inducement – they are distinct forms.
These defenses may be “affirmative” defenses – to be plead up front.
© 2018 Paul J. Carrier, Paul J Carrier, LLC Blue – Category Recognition; White – Specific Category; Yellow – “Black Letter” Rules (to be memorized); Green – Main Factual Issues – Analysis; Red – Upper-Level, Integrated Comprehension