Promises are made to be kept. Contracts are made to be performed. But the law recognizes several situations that let you walk away from a contract if you choose. Here are some lawful reasons for rejecting a contract, including some common "defenses."

Duress

When someone unlawfully pressures you to make a contract against your will, it's called duress. A contract made under duress isn't enforceable. An example would be a person holding a gun to your head to get you to sign a contract.

Fraud and Misrepresentation

Fraud and misrepresentation are false statements used to get you to make a contract. They must relate to a present or past important fact that you rely on. A fraud is a deliberate misstatement of a fact. An example would be if someone sold you a table they said was an antique, knowing it to be a reproduction. A misrepresentation can be an innocent misstatement.

If you're a victim of fraud or a misrepresentation, you can cancel the contract. A defrauded party can sue the wrongdoer for damages too. A victim of fraud may also have other remedies under the law of consumer fraud.

Mistake

Mistake happens if one or both parties believe a fact about the contract to be true that isn't. If one party makes a mistake, it's called a unilateral mistake. For example, let's say you sell somebody a table for a few dollars believing it to be an ordinary table made in 1950. It turns out to be a valuable antique made in the year 1800. That's a unilateral mistake. The law ordinarily won't invalidate that contract.

Generally, this type of mistake doesn't invalidate a contract, because the law doesn't excuse negligence or inadvertence. However, if the other party to the contract induced the mistake by leading you to believe it was a modern table instead of an antique, then you may cancel the contract.

If both parties to a contract make a mistake, the error is called a bilateral mistake. This type of mistake generally voids the contract because there was no "meeting of the minds" or consent.

Lack of Consideration

Lack of what's called consideration, which can be money or property, or a promise of money or a promise to do or not to do something, can invalidate a contract. For this reason, a promise to make a gift is ordinarily not enforceable.

However, if another person acts in reliance on your promise to make a gift, the promise may become enforceable under what's known as promissory estoppel or detrimental reliance. For example, if you promise to donate a million dollars to your college to build a library, and the college builds the library, you may be required to make the gift.

Statute of Frauds

The Statute of Frauds requires certain contracts to be in writing. Otherwise they're not enforceable. For example, in most states a lease of a year or longer must be in writing. However, the Statute of Frauds won't defeat an unwritten contract if a party has relied on the contract to his or her detriment.

Impossibility of Performance

Impossibility of performance happens if something unforeseen makes it impossible to complete the contract. For example, you contract with a famous painter to paint your portrait. The famous painter dies before doing so. The obligation to paint your portrait can't be completed. The contract to paint your portrait is terminated.

Rescission

Rescission may happen when one or both parties has the right to cancel a contract. This can be stated in the contract. It also can be allowed by law. For example, an underage person can cancel a contract because he or she lacks competence to make a contract in the first place. Or the parties can together agree to terminate the contract.

Keep these contract concepts in mind next time you have a dispute over a contract. It can help you decide if your contract is valid or invalid, and work with the other party to find a solution to your problem.

Questions for Your Attorney

  • Can a pledge to a charity be enforced? What if it's a modest amount?
  • I have dispute over a contract that wasn't in writing, so can the contract be enforced?
  • Can impossibility of performance apply when the contract is a bad deal for one side? Say if the cost of materials skyrockets after a contract is signed?