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1. How to Get Out of a Contract You
Don’t Want to Be In: Defenses to a
Contract
Michael DeBlis III, Esq.
Partner
DeBlis Law

2. Michael DeBlis III, Esq.
• Trial Lawyer
• Actor
• Author
• Marathon runner

3. Defenses
• If you have found a bargain and qualified it as
a K b/c there is bargained for legal detriment
on both sides of the exchange, before you
leap to the conclusion that a K has been
formed, ask yourself whether the facts reveal
any defenses which would preclude formation
of the K. These are the so called real defenses
which – if they exist –preclude formation of a
K!

4. Defenses
• There are two types of defenses:
–Real defenses
• Defenses which, if established, preclude
the formation of a K
–Personal defenses
• These defenses acknowledge that a K was
formed but, if established by the party
who can avail himself of the defense,
render his K duties voidable

5. Defenses
• Look for defenses under four categories
–(1) Defenses centered on form of bargain;
–(2) Centered on problem w/ capacity of one
of the parties to the bargain;
–(3) Content of the bargain; and
–(4) Defense arises b/c society takes offense
at the tactics used by one of the traders in
trying to form the bargain

6. Defenses Centered on Form of Bargain
• We’re talking about SOF. It is an oral bargain
when the law requires as a price tag for a
remedy that it be in writing
• Neither CL nor UCC imposes any mandatory
form on the bargain. Oral Ks are valid but this
factor may present a problem in litigation if
subject matter of oral bargain falls w/in one of
the categories of the SOF.

7. Defenses Centered on Form of Bargain
• If the subject matter of the oral bargain falls
w/in one of the categories of the SOF and if
there is no written memorandum of essential
terms, then there can be no remedy at law to
recover damages for breach of the K UNLESS
the result of allowing D to invoke the SOF
would be a gross injustice. In that case, courts
will equitably estop D from hiding behind the
SOF.

8. Defenses Centered on Form of Bargain
• Let’s begin in the simplest place: awareness of
the basic subjects which, if they are the
subject matter of the attempted bargain, fall
w/in the statute
–(1) If the subject matter of attempted
exchange is real property or any fixture
permanently attached to the land, the
agreement falls w/in SOF

9. Defenses Centered on Form of Bargain
–(2) Ks for sale of goods fall w/in SOF if their
price is $500 or more
• UCC exceptions – notwithstanding the fact that
the price of goods exceeds $500, an oral
bargain for their purchase and sale will be
enforced.
• (1) Under UCC, an oral K for the sale of goods is
enforceable to the extent that the seller has
delivered the goods to the buyer and the buyer
has accepted delivery. The buyer’s oral promise
to pay $50M for goods that have been
tendered and accepted is perfectly binding

10. Defenses Centered on Form of Bargain
• (2) If both of the traders are merchants, a
written confirmation of the terms of the
bargain sent by one merchant to another
satisfies the SOF both as to the sender
and the recipient unless the recipient
objects to its content promptly

11. Defenses Centered on Form of Bargain
• (3) Special goods: Goods custom-tailored
or manufactured to the specific buyer’s
order or specification and n/ suitable for
ordinary resale. To the extent that the
seller has actually begun to manufacture
these goods, the buyer’s oral promise to
pay for them is completely enforceable

12. Defenses Centered on Form of Bargain
–(3) Any K which, by its terms, is incapable of
being performed w/in one year
• If there is ANY possibility – no matter
how remote or improbable – that the K
obligations could be fully performed w/in
one year, the subject was never w/in the
SOF though in actual experience it takes
50 years to carry out the terms of the
bargain

13. Defenses Centered on Form of Bargain
• Hypo: Jack makes an oral promise to support
Jill’s 3 year-old daughter w/ a $10K pay limit for
the rest of her life. This oral promise is not w/in
SOF. Jill’s daughter may die before attaining her
4th birthday. Since the possibility exists that Jack
could fully perform on this promise w/in a year,
it is n/ w/in the statute and as Jill’s daughter is
qualifying for social security, Jack would still be
obligated to make the oral promised payments!

14. Defenses Centered on Form of Bargain
• What’s the consequence of having one of
these subject matters pertain to this particular
transaction?

15. Defenses Centered on Form of Bargain
• If the subject matter of the attempted
exchange falls w/in SOF, then the statute
requires:
–A memorandum of essential terms signed
by the party to be charged

16. Defenses Centered on Form of Bargain
–All that is required to satisfy the SOF is
written evidence of the essential terms. The
writing can be very informal. It doesn’t have
to be created w/ any intent to satisfy the
statute. We’re looking for evidence of
terms, not intention. If, through written
evidence the essential terms can be
reconstructed, that evidence must relate to
the party to be charged.

17. Defenses Centered on Form of Bargain
–It need only bare signature or
authentication of the party to be charged. P
satisfies SOF w/ respect to the terms of the
bargain when she files the complaint
–No formal signature of the party to be
charged is required – a printed letterhead is
sufficient as is a fax transmission. All that’s
necessary is some means of tracing that
written evidence back to D.

18. Defenses Centered on Form of Bargain
–Any writing(s) from which the court can
reconstruct the essential terms of the
bargain are sufficient. What if that cannot
be done? Then D, whose written
memorandum is missing, can avail herself
of a personal defense. K is n/ void, but her
obligations are voidable. D must raise
defense in timely manner. If there is a
timely assertion of defense and D is n/
equitably estopped, then there can be no
recovery of damages at law.

19. Defenses Centered on Form of Bargain
– Therefore, aggrieved party (P) has standing to sue
in equity. Equity courts are n/ historically bound
by SOF. Equity cts. are willing to regard part
performance of the terms of the oral K as an
evidentiary substitute for the missing writing. So
long as the performance points to the K that the P
is alleging, there may be equitable relief in a
decree of specific performance
– If COA is predicated on PE, SOF has no application
since PE is n/ a K claim

20. Centers on Problem with Capacity of
One of the Parties to the Bargain
• Concern is that one of the traders is a minor or
lacked requisite mental capacity

21. Centers on Problem with Capacity of
One of the Parties to the Bargain
• Issue 1: Where one of the traders is a minor
– K obligations of minors are voidable even though
their promises do amount to valuable
consideration
– If minor doesn’t assert defense, he is deemed to
have waived it
– If minor asserts the affirmative defense that he
was under the age of legal consent on the day the
K was formed, there is no recovery under the
terms of that K by the adult

22. Centers on Problem with Capacity of
One of the Parties to the Bargain
–But, if the minor has consumed the benefits
of the K and those benefits are necessaries
– food, clothing, shelter, medical attention –
an exception is made to protect the interest
of the adult who furnished the necessaries.
–P may recover in quasi K for the market
value of the necessaries which the minor
received under the K and has consumed

23. Centers on Problem with Capacity of
One of the Parties to the Bargain
• Issue 2: Mental incapacity
– Renders voidable the K obligations of an individual
who permanently or temporarily lacked the
mental powers necessary in order to form a K
– If necessaries are the subject matter of the
bargain w/ the person who is mentally
incapacitated, apply same rule as Ks w/ minor.
Recovery would be on a theory of quasi K for
market value of the necessaries. If subject matter
is n/ a necessary, there is no liability at all

24. Centers on Problem with Capacity of
One of the Parties to the Bargain
–What about an individual who on normal
days is fully possessed of mental faculties,
but on the day the bargain was formed, had
those faculties impaired b/c of some self-
induced difficulty?

25. Centers on Problem with Capacity of
One of the Parties to the Bargain
–One view: If mental incapacity is of a
temporary nature and was self-induced by
the party now claiming it, the defense
cannot be raised
–Majority view: If other person knowingly
dealt w/ a person who he should have
known was suffering from the influence of
alcohol or drugs, defense can be raised.

26. Content of the Bargain
• Centers on some serious social objection to
content of bargain like illegality and
unconscionability

27. Content of the Bargain
• Illegality
–Time: If the subject matter or participation
of one of the traders is declared illegal at a
time when only the offer is outstanding, it is
revoked by operation of law. If illegality is
established subsequent to formation, but
prior to performance, both parties are
discharged on a theory of impossibility.

28. Content of the Bargain
–UCC policy on substituted performance: If a
K has been formed and is still executory and
an intervening governmental regulation
comes along (ban on religious gambling)
declaring the subject matter or the
participation of one of the parties to be
illegal, then before the merchant can walk
away from the agreement claiming
objective impossibility, he must determine
if some substitute arrangement could be
made which is legal and practical.

29. Content of the Bargain
– Assuming there is, then the merchant must
offer to perform under modified substitute
arrangement. The other party to the K is n/
obligated to accept that offer of modification.
If he does, then the agreement has been
modified in good faith. If he refuses, then
merchant is able to avoid liability on the
original terms of the K by claiming objective
legal impossibility, so long as he makes
accommodations to try and save the bargain.

30. Content of the Bargain
–Nature of the illegality: Important b/c it will
determine whether there can be quasi
contractual relief

31. Content of the Bargain
• Malum in se: If the SM of the bargain or
the participation of one of the parties is
intrinsically evil, then the attempted
bargain is void.

32. Content of the Bargain
• Example: Tony puts out a K on his
brother-in-law w/ a $10K down payment
to the hitman. The subject matter would
be intrinsically evil. Any person who has
reached the age of reason can detect the
intrinsic wrongfulness merely by checking
his conscience. There is no K. No ct. will
assist Tony even if he attempts to
withdraw from the transaction and
recover $10K. Ct. house doors will be
slammed shut in his face.

33. Content of the Bargain
• Malum prohibitum: Subject matter is merely
offensive to some regulatory statute that has
been passed for the convenience of society.
Wrong only b/c society has prohibited it. There
is no K b/c the common law of Ks will never
clash w/ criminal law.
• The party who rendered valuable services may
well recover in quasi-K for the market value of
those services if she was unaware that the
subject matter was regulated and therefore
offensive. Remember: If subject matter is MP,
there is no recovery on the K!

34. Content of the Bargain
• Whether there can be a recovery or
adjustment between the parties in quasi-
K depends upon whether they are in pari
delicto – aware of fact that subject
matter offends the law. If one of the
parties is innocent (i.e. he is n/ in pari
delicto), then he can recover in quasi-k.

35. Content of the Bargain
• Status of member of a protected class: If
bargain is merely mp, a person for whose
protection or benefit the gov’t acted in
defining the illegality will be permitted a
quasi-contractual recovery of any
performance rendered, notwithstanding
his awareness of the illegality.

36. Content of the Bargain
• Hypo: Paul, aged 14, takes a job w/ a local
laundry. The bargain is a clear violation of the
child labor laws of the state in which both
parties reside. The laundry owner later fires
Paul, owing him one week’s work. Paul is a
member of a protected class. As a minor, it was
for his protection that legislative restrictions on
labor were created. Notwithstanding his being
in pari delicto w/ his adult employer, Paul may
recover the FMV of his services.

37. Content of the Bargain
• Unconscionability
– One of the parties seeks to avail himself of a
privilege which is contrary to public policy,
informing the terms of a bargain
– A seller of an inherently dangerous article
attempts to disclaim implied warranty of
merchantability. If the content of the bargain sees
one of the parties attempt to insert a term
contrary to pubic policy, it is n/ illegal but it is
unconscionable

38. Content of the Bargain
– A reviewing court may do one of two things in
response to an unconscionable term in a K: (1)
deny relief altogether or (2) court can blue pencil
the bargain to remove or modify the
unconscionable term while enforcing the balance
of the exchange against the parties. A ct. will
exercise these inherent equitable powers to police
against unconscionability if there is no other way
to prevent oppression and surprise by the
dominant party in a transaction.

39. Content of the Bargain
–This is especially true where at the
formation stage there was no real
opportunity to bargain over the terms of K.
Classic “David v. Goliath.” A dominant party
made an adhesion K (take it or leave it
proposition) which b/c of limited ability to
satisfy oppressing need, the other party
agreed to. If the terms of that resulting
bargain offend public policy, it can be
policed for unconscionability.

40. Society Takes Offense at Tactics Used by One of
the Traders in Trying to Form Bargain
• Fraud
–Fraud in the factum: Any contrivance or
artifice that prevents the fraud victim from
appreciating that a K is even contemplated.
Victim didn’t even know that a K was being
contemplated. A real defense – there is no
K.

41. Society Takes Offense at Tactics Used by One of
the Traders in Trying to Form Bargain
–Fraud in the inducement: A personal
defense. The victim is aware that a K has
been contemplated but his consent to enter
the K is induced by deceit or half-truths.
Gives victim the opportunity to assert the
personal defense and have his obligations
voidable.

42. Society Takes Offense at Tactics Used by One of
the Traders in Trying to Form Bargain
– Fraud in the execution: The victim is aware that a K is
being formed and his consent is validly obtained.
Fraud surfaces because the bargain is oral and victim
trusts the other party to reduce their oral agreement
to a formal written expression. Other party does and
comes back and says, “here’s our deal, sign this
paper.” Victim trustingly signs paper w/o closely
examining it. Later on, it turns out that the party who
prepared the writing suffered from selective hearing
or convenient amnesia. Now, we have a V of fraud in
the execution and that is a personal defense. The
obligation expressed in the paper is voidable if V
chooses to assert the defense

43. Society Takes Offense at Tactics Used by One of
the Traders in Trying to Form Bargain
• Duress (two types)
–Duress of person
–Economic duress

44. Society Takes Offense at Tactics Used by One of
the Traders in Trying to Form Bargain
– Duress of person
• Mental or physical force directed against the
victim and they always render the consent
of the V voidable (literally the offer you can’s
refuse – “Your signature on the paper or
your brains on the wall!”)
• Exertion of physical force, or
–Ex. If you do n/ agree, you’ll never live to
see your 30th birthday.
• Threats of duress are treated the same as
duress

45. Society Takes Offense at Tactics Used by One of
the Traders in Trying to Form Bargain
–Economic duress
• One party must have some desperate
pressing need for the subject matter,
• The other party – taking conscious
advantage of that need – insists upon
harsh and one-sided terms, and

46. Society Takes Offense at Tactics Used by One of
the Traders in Trying to Form Bargain
• There is active wrongdoing on the part of
the aggressor where she (1) creates the
pressure which is driving the victim or (2)
she actively meddles to make the
pressure worse
• Elements: (1) Overwhelming pressure
created by or exacerbated by (2) the
aggressor coupled w/ (3) harsh term.

47. Society Takes Offense at Tactics Used by One of
the Traders in Trying to Form Bargain
• Example:
–You roar through San Fernando valley in
your car when it runs out of gas. Nearest
gas station is “Mike’s Station” where gas
is $1K/gallon. Container rents for
$100/minute. You charge the transaction
on your credit card.
–Do you have the defense of economic
duress? No.
–Argument: “I was desperate. She drove
harsh, one-sided terms.”

48. Society Takes Offense at Tactics Used by One of
the Traders in Trying to Form Bargain
–Analysis: There is no economic distress
b/c Mike didn’t create the plight that
drove you to his station. There would
be economic distress only if you
stopped for a burger next door and
while you were distracted, Mike
drained your tank. If Mike is
responsible for your circumstance,
then economic distress exists.

49. Society Takes Offense at Tactics Used by One of
the Traders in Trying to Form Bargain
• Procedural Unconscionability
–One of the parties at the formation stage
uses formation tactics designed to deprive
the other trader of a fair opportunity to
appreciate the terms that she is objectively
consenting to.

50. Society Takes Offense at Tactics Used by One of
the Traders in Trying to Form Bargain
– This is the individual who does business in fine
print or expresses the terms of the K in
legalese and then takes the fine print
document into an area of dealing w/
consumers who would never be able to notice
the terms in which they’re waiving all the
warranties. In other words, one party prevents
the other party from having a fair opportunity
to appreciate the terms of the bargain to which
the latter appears to objectively be giving their
consent.

51. Connect With Me!

52. Contact Information
Website: www.DeBlisLaw.com
Email:
MJDeBlis@DeBlisLaw.com
Office: 973-783-7000