Defenses to Enforcement of a NJ Contract

Often times people enter into a contract and then want out.  Maybe they underpriced the job, the price of materials unexpectedly went up, or a key employee resigned.  Once it is determined that there is a contract, it must be determined whether there are any defenses to the enforceability of the contract. There are some defenses that make a contract unenforceable (void) and other defenses that give the parties the option to withdraw from the contract or to enforce the contract.  Let’s look at them.

Do the Parties to the Contract Have Legal Capacity 

In order to be bound to a contract, the parties must be competent. Underage persons and persons who are mentally ill usually are not held to the contracts they enter.  A similar concept involves corporations who fail to properly register to do business in New Jersey. 

Mistake, Duress, and Fraud; the Most Commonly Used Defenses

in a New Jersey Contract Dispute

A Mistake by both parties to a contract on an important issue makes the contract unenforceable. However, a mistake by only one party does not necessarily make the contract void.

Duress is physical force or mental pressure used by one party to make the other party agree to the contract. Duress is considered to affect the fairness and independence of the contract. The use of duress makes the contract voidable by the party put under duress.

Fraud is the intentional misrepresentation of an important fact in a contract. The presence of fraud in a contract makes the contract voidable by the party upon whom the fraud was perpetrated.  Fraud can be an affirmative misrepresentation or a concealed failure to disclose a known fact.  For more information on the law of fraud and NJ contracts, go to www.njlawonfraud.com (click here).

Unconscionability of the Underlying Contract; It’s Hard to

Establish but Very Effective if Proven. 

A contract may be unenforceable if it is found by a court to be flagrantly unfair. This defense is usually found in consumer cases, in which a person buys an item under terms so grossly unfair to the customer that the court refuses to enforce the contract.

Statute of Frauds; Put Your New Jersey Contract

in Writing or Face the Risk!

The law of contracts often refers to the Statute of Frauds. This is a complex legal term which mandates that certain types of contracts be in writing, if they are to be enforceable.  The defense that the contract falls within the Statute of Frauds means that the agreement must be shown to be "in writing” and contain certain minimum terms and provisions in order to be legally enforced in court.  In the absence of such writing, the legal proceeding to enforce the contract will be dismissed. 

What type of contracts fall within the Statute of Frauds?

a)  A Contract that will last longer than one (1) year.

b)  A contract for the sale of real estate or an interest in real property

     must be in writing and signed by the party to be charged.

c) A promise to pay or guarantee payment for the debt of another.

d)  A contract for the sale of goods $500 or more in value is required

     to be in writing in NJ.  It must be signed by the party against whom

     enforcement is to be sought.

The writing required in a contract for the sale of goods need not be a formal contract.  It can be a memorandum, e-mail, letter or note to indicate that a contract was made, and its terms.

Sometimes a writing is not required if the product to be manufactured is especially for the buyer and is not suitable for sale to others in the ordinary course of business.  These are special and unique exceptions to the law on SOF’s that require especially good facts to win.

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