Breaches of contract are some of the most common business disputes that can arise. Since agreements are central to every business transaction, nearly every entrepreneur will face this type of claim at some point. Putting an agreement in writing is crucial to outlining the parties’ responsibilities and obligations, but it doesn’t always guarantee that a party will satisfy them. Some parties might intentionally disregard their contractual duties — others may have a viable defense. It’s crucial for business owners to understand whether they have valid defenses in breach of contract claims. Illinois law recognizes a number of defenses in breach of contract claims, including the following:
Although ambiguity is not a formal defense to a breach of contract claim, a defendant in such a case might still be able to argue that the language used in the agreement isn’t clear. To resolve these types of claims, a court would look to the entire contract to clarify what the intentions of the parties were in drafting the provision. If the court still cannot determine the ambiguity, parol evidence may be admissible to determine the meaning.
Parol evidence is any agreement that is not contained within the four corners of the written contract. While these agreements are usually inadmissible, a court might permit the introduction of evidence of fraud, duress, or mutual mistake to establish the existence of grounds that would result in the contract being void.
A defendant may be entitled to raise the affirmative defense of duress if they can show that the plaintiff induced them into entering the contract by threat. Duress may also be asserted if the plaintiff’s conduct was morally wrongful or illegal. Similarly, economic duress — also referred to as “business compulsion” may be a defense when the business owner is deprived of exercising their own free will due to fear of economic hardship caused by the plaintiff.
A condition precedent is an event that must be performed before a contract can become effective or a party is obligated to perform in accordance with the terms of the agreement. If the condition precedent is not met, a defendant may be able to use the nonoccurrence as a defense to a breach of contract claim.
Fraud can be a defense to a breach of contract claim when the defendant can establish that the plaintiff made a false statement concerning a material fact — and they reasonably relied upon it to their detriment when entering into the transaction. In such instances, a contract would not be enforceable by law.
A contract that was entered into for the purpose of carrying out illegal activity is void from the outset. This defense may be used in cases where the contract terms violate state or federal law, as well as public policy.
Although a contractual agreement entered into by a person under the age of 18 is not automatically void, it is voidable upon election of the minor once the age of majority is reached. However, such a contract is ratified once the defendant reaches the age of majority if they do not disaffirm it within a reasonable amount of time — or they take action to show they intend to affirm the contract.
A defendant may assert the defense of mental illness or deficiency as a defense to contract formation. This defense can be used if the defendant was suffering from a mental condition that rendered them unable to understand the nature of the transaction at the time it was entered into. When a mental deficiency alone is not enough to void a contractual agreement, the defense may be strengthened by showing there was undue influence, fraud, or concealment.
A mutual mistake may exist if both parties had mistaken beliefs that certain facts were true at the time the contract was formed. A defendant may have a valid claim for a breach of contract if the agreement did not reflect the parties’ true agreement and one failed to perform.
Under Illinois law, certain types of contracts must satisfy the statute of frauds. This means that the contract must be in writing in order for it to be enforceable. Such contracts include those where one party promises to pay for the debt of another, agreements that cannot be performed within one year, or those involving the sale of a business under the Business Opportunity Sales Law of 1955. In addition, contracts for the sale of goods in the amount of $500 or more are governed by the UCC’s statute of frauds.
A defendant may assert the defense of unclean hands when the plaintiff committed either misconduct, fraud, or bad faith.
The defense of unconscionability can be raised in Illinois when a contract is unconscionable procedurally because the defendant did not have the opportunity to understand its terms or critical terms were embedded in the fine print. A contract might also be deemed unconscionable substantively if the terms are overly one-sided and a reasonable party would not agree to the terms. These types of contracts are not enforceable.
Also referred to as a “legal impossibility,” the defense of impossibility can be used when contractual performance would be objectively impossible by operation of law. The doctrine of impossibility can also be asserted if unanticipated circumstances made the performance of the contract vitally different from what was agreed to between the parties.
If you’ve been served with a lawsuit for breaching a contract, it’s essential to have a knowledgeable business attorney by your side who can help you navigate the process and protect your rights. Located in Rolling Meadows, Litico Law Group is committed to helping entrepreneurs and small business owners in Illinois with a wide variety of legal issues, including breach of contract matters. We welcome you to contact us at (847) 307-5942 to schedule a consultation to learn how we can help.