Our firm is experienced in advising corporations, LLCs, partnerships and entrepreneurs on a wide array of business services, including contract formation.
As discussed in my previous entry How Can I Get Out of This California Contract? Part 1: Mistake of Fact, Capacity, Undue Influence/Duress and Unconscionability you may need to prove that no contract existed to defend against a breach of contract lawsuit; or, perhaps, you are not happy with the terms of an agreement and would like to get out of the contract.
Last time we looked at mistake of fact, capacity of the parties, undue influence/duress, and unconscionability to prevent the enforcement of a contract or to prove the nonexistence of a business agreement.
Let's now examine additional defenses to contract formation below which may render a contract void or voidable.
Legal Defenses to Contract Formation
In two prior posts we reviewed the requirements for valid contract formation. (What Makes a Contract Valid in California Anyway? Part 1: Offer, Acceptance and Mutual Assent and What Makes A Contract Valid in California Anyway? Part 2: Consideration and Other Formation Requirements).
Once it is established that valid contract formation has occurred, the next step is to determine whether there are defenses to contract enforcement.
Fraud
Where one party proves that it was induced to enter an agreement by fraudulent conduct, a court will void the contract. Fraud is difficult to prove as it requires evidence of an intentional misrepresentation or an omission of a material fact essential to the bargain. If fraud is proved, the contract is voidable by the party upon whom the fraud was inflicted.
Frustration of Purpose
Frustration of Purpose is a defense to contract enforcement and requires an unforeseen event which undermines a party's principal reason for entering the agreement.
Written Contracts (Statute of Frauds)
Certain contracts may be unenforceable if they are not in writing. The Statute of Frauds is an aggregate term referring to the range of statutory laws that render certain types of contracts unenforceable unless they are evidenced by writing.
California's Statute of Frauds, found at Cal.Civ. Code §1624, states that some contracts "are invalid, unless the same, or some note or memorandum thereof, is in writing and subscribed by the party to be charged." The statute allows that the contract itself need not be in writing, although, there does need to be some written evidence of it, signed by the party to be charged.
Examples of contracts which must be written are those concerning the sale of real estate, contracts involving the sale of goods valued over $500, contracts whose purpose cannot be carried out within one year, contracts to pay another's debts, leases for more than one year and marriage contracts.
There may be other ways to show that a contract is unenforceable; however, these are some of the most common.
Sources
San Francisco commercial lawyer Matthew L. Kabak, principal attorney at the Kabak Law Group, finds solutions to contract disputes for corporations, LLCs, partnerships, entrepreneurs and investors throughout the greater SF Bay Area, including Oakland, Burlingame, Cupertino and Fremont.
