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Difference between revisions of "Contract Defences"
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{{REVIEWEDPLS | reviewer = [[Alison Ward]]|date= August 2018}}{{Consumer and Debt Law TOC|expanded = contracts}} | {{REVIEWEDPLS | reviewer = [[Alison Ward]]|date= August 2018}}{{Consumer and Debt Law TOC|expanded = contracts}} | ||
This section describes some of the basic grounds in common law and statute law that can help a party get out of a contract. | This section describes '''contract defences''', some of the basic grounds in common law and statute law that can help a party get out of a contract. | ||
== Client problems== | == Client problems== | ||
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== Summary of the law== | == Summary of the law== | ||
Even with the basic elements of a contract present (see the [[Contracts Overview]]), common law and statute law provide a number of grounds for a party to avoid having a contract enforced against them. These | Even with the basic elements of a contract present (see the [[Contracts Overview]]), common law and statute law provide a number of grounds for a party to avoid having a contract enforced against them. These defences to contract actions give the defending party a legal excuse to get out of the contract. Without such defences, the contract would be legally enforceable. Remedies to enforce contracts are discussed in the section on [[Contract Remedies]]. (See also the sections on [[Opting Out and Cooling-off Periods]] and [[Unfair or Deceptive Practices]].) | ||
[[File:Consumer_Law_and_Debt_-_Contract_Defences.jpg|thumb|275px|right| link=| <span style="font-size:50%;">Image via www.istockphoto.com</span>]] | |||
=== Defences versus causes of action=== | === Defences versus causes of action=== | ||
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==== Illegality==== | ==== Illegality==== | ||
Courts generally do not enforce contracts that are for an '''illegal purpose''' or that contravene a statute. An obvious example of an unenforceable contract is one made with the intent of harming someone. Some interesting exceptions to the general rule include: | Courts generally do not enforce contracts that are for an '''illegal purpose''' or that contravene a statute. An obvious example of an unenforceable contract is one made with the intent of harming someone. Some interesting exceptions to the general rule include: | ||
* '''Gambling debts | * '''Gambling debts''': Historically considered uncollectable and illegal, court decisions suggest they are now collectable.
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* '''Illegally paid interest | * '''Illegally paid interest''': Although it is illegal under the [https://www.canlii.org/en/ca/laws/stat/rsc-1985-c-c-46/latest/rsc-1985-c-c-46.html#sec347_smooth ''Criminal Code''] to lend or collect interest at an annual rate above 60% (except as authorized under [[Payday Loans|payday loan]] legislation), in at least some instances the courts have allowed the recovery of the illegally paid interest.
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==== Misrepresentation==== | ==== Misrepresentation==== | ||
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==== Unfairness of bargain==== | ==== Unfairness of bargain==== | ||
Several common law grounds deal with contracts that are '''fundamentally unfair'''. In many instances, these principles overlap: | Several common law grounds deal with contracts that are '''fundamentally unfair'''. In many instances, these principles overlap: | ||
* '''Unconscionability | * '''Unconscionability''': A contract is said to be unconscionable if a stronger party uses power to gain an unfair advantage over a weaker one. Inequality between the parties created by one party’s ignorance, need or distress can result in substantial unfairness in the overall bargain; for example, with one party setting an inordinately high or low price. Notable BC cases on unconscionability are [http://canlii.ca/t/gd7z1 ''Morrison v. Coast Finance Ltd.''] and [http://canlii.ca/t/1dm18 ''Waters v. Sun Route Tours Inc.'']
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* '''Under duress | * '''Under duress''': External coercion or compulsion exerted by one party against another can result in a contract being made under duress or force. Compulsion may be physical, psychological or economic. The most obvious example of duress is if one party is threatened with physical harm unless they enter into an agreement.
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* '''Undue influence | * '''Undue influence''': Undue influence is when one party uses the other party’s confidence in them to gain an advantage. The confidence may arise from the nature of the relationship, such as between members of a family, or between professionals and their clients.
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=== Statutory defences=== | === Statutory defences=== | ||
