Q: I am in a bad situation and hope you can help. I signed a contract with this guy and he was supposed to deliver a ton (literally) of clay to my studio, where we make pottery that I sell commercially. It was a sweet deal. But the guy never delivered and when I asked nicely, and then threatened to sue, he said that because he was 20, he was under the legal age to make a contract and I have no recourse. Is that right?
A: Typically, we think that when we sign a contract, especially in business, a deal is a deal, right?
Not every deal actually is a deal, or, even if it is, there are times when one side can legally not perform.
Say what, Steve? Yes, you heard me right. There are in fact many situations where you, or the other party, can legally breach your contract and not perform. Here are the main ones:
Incapacity: There are two different times when someone is legally incapacitated enough that, despite having signed a contract, he or she will not be required to perform because it will not be considered an enforceable contract:
When they are under the legal age: The good news for Belinda, above, is that for contracting purposes, the legal age is 18. So someone who is 20 who signs a contract cannot hide behind the apron strings of the law and say they were not old enough to contract. They are.
When the person is actually incapacitated: Making a deal with a drunk person for instance, or someone who has Alzheimer’s, also negates the contract. The reason is that a contract is also called an agreement for a reason – both sides have to agree to all material terms. Someone who is actually incapacitated cannot agree if they do not understand the terms.
Duress: There was a scene in a movie, I think it was Karate Kid 3, where the tough guys were trying to force Daniel-san to “Sign the application!” If he signed, then he would be in the karate tournament and they could then beat him up. He eventually signed the application, under duress of their threats, and of course he eventually beat them up, but if he wanted a less violent way to get out of the obligation, he could have just cited “duress.” (But that would have made for a far worse, and much more boring movie, – “Junior Associate 3”).
Signing a contract with a proverbial gun to your head voids the contract.
Fraud: Again, the idea is the same and it makes sense. If someone materially misrepresents a fact – they defraud you into signing – the contract is no good and you have no obligation to perform.
Act of God: Many contract spell this out explicitly. If an act of God or “force majeure” (force of nature) occurs, you are relieved of your obligations. For example, if the clay delivery was due on a day when an earthquake knocked out the freeway, well, that’s the way it goes.
They breached first: This one is my favorite. My professor in law school used to ask us “who was the first dirty, rotten breacher?” Because once someone breaches his or her main obligation under the contract to you, you don’t have to live up to your end of the deal either. Note though that there is a difference between a “material breach” and an “inconsequential” one.
It was never actually agreed to: Contracts should be clear and specific. If something is not spelled out, and it cannot logically be inferred from the contract, you probably don’t have an obligation to do it.
Mutual agreement: Contracts can always be changed by mutual agreement, and of course this option is best. If you are unable to perform on time, instead of looking for some slick defense, (above) working out an alternate solution is almost always a better solution.