Legal Blog

Defenses to Breach of Contract Under Florida Law

There are several defenses to breach of contract under Florida law. The main defenses include:

• Unilateral or Mutual Mistake;
• Misrepresentation and Fraud;
• Duress and Undue Influence;
• Unconscionability;
• Lack of Consent;
• Impossibility or Impracticability;
• Frustration of Purpose; and
• Statute of Frauds

Each of these defenses to breach of contract is discussed below.

Unilateral or Mutual Mistake

A mistake is an erroneous belief related to the facts as they exist at the time the contract is made. Restatement (Second) of Contracts § 151 (1981) (“Restatement”). There are two types of mistakes, mutual mistake, when both sides were under the same mistake and unilateral mistake, where only one side was under a mistaken impression. Restatement § 152, § 153. Because a contract requires the two sides to come to a “meeting of the minds” if one or both sides of the contract were mistaken about the key facts the contract is based on, there may never have been a true contract formed.

Usually, a unilateral mistake is not a defense to breach of contract. However, “[a] contract may be set aside on the basis of a unilateral mistake of material fact if: (1) the mistake was not the result of an inexcusable lack of due care; (2) denial of release from the contract would be inequitable; and (3) the other party to the contract has not so changed its position in reliance on the contract that rescission would be unconscionable.” DePrince v. Starboard Cruise Servs., Inc., 271 So. 3d 11, 20 (Fla. 3d DCA 2018).

Conversely, a contract based on mutual mistake made at the time of the contract formation may be a defense to breach of contract where:

• the mistake concerned a basic assumption on which the contract made;
• the mistake materially affects the agreement; and
• the adversely affected party does not bear the risk of the mistake.

Restatement § 152

“A party may avoid a contract by proving mutual mistake regarding a basic assumption underlying the contract.” Leff v. Ecker, 972 So. 2d 965, 966 (Fla. 3d DCA 2007). “However, to prevail on this basis the party must also show he did not bear the risk of a mistake.” Id. “A party to an agreement bears the risk of a mistake when ‘he is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient.’” Id. (quotation omitted).

However, not all mistakes are defenses to breach of contract. A party seeking to avoid the contract may not rely on mistake as a defense where the party:

• assumed the risk of mistake with respect to the accuracy of facts existing at the time the contract was made;
• is at fault for the mistake, e.g., erroneous calculation of costs or prices, but generally only where the fault amounts to gross negligence;
• violation of a legal duty or failure to act in good faith and in accordance with standards of fair dealing; or
• failed to read the contract.

Misrepresentation and Fraud

If one side induced the other into entering a contract through dishonesty, trickery, or other form of fraud, a court will excuse the defrauded side from performing their duties under the contract. Fraud is tied to the concept that a true contract cannot be formed unless the two sides agree on the underlying facts of the deal.

If one side lied about the facts or somehow misled the other party, there was never a true “meeting of the minds.” This means there was never actually a contract and as a result, there can be no breach of a contract that never existed. An aggrieved party may avoid a contract based on misrepresentation where the assertion was either material or fraudulent.

A misrepresentation is fraudulent if the maker intends his assertion to induce a party to consent to the contract and the maker knowledge of its falsity or lacked an adequate foundation for the representation. Restatement § 162(1).

A misrepresentation is material if it would be likely to induce a reasonable person to agree to the bargain, or the party who made the misrepresentation knew or should have known that it was likely to induce the other party to manifest assent to the bargain. Restatement § 162 (2). See Lance Holding Co. v. Ashe, 533 So. 2d 929, 930 (Fla. 5th DCA 1988) (fraud is material to a contract where the contract would not have been made if the fraud had not been perpetrated).

To prevail on its claim for fraud in the inducement, the complaining party must show: “(1) a misrepresentation of a material fact; (2) knowledge by the person making the statement that the representation is false; (3) intent by the person making the statement that the representation would induce another to rely and act on it; and (4) that the plaintiff suffered injury in justifiable reliance on the representation.” Susan Fixel, Inc. v. Rosenthal & Rosenthal, Inc., 842 So.2d 204, 209 (Fla. 3d DCA 2003).

Reasonableness of the reliance is assessed based on the totality of the facts, including the party’s age, education, and experience, and the transaction’s subject matter, nature, and circumstances under which it was made. Reliance on opinion may be reasonable in some cases where the opinion is expressed by one who possesses or appears to possess superior knowledge on such matter, such as when there exists a special relationship of trust between the parties.

Duress and Undue Influence

Duress is a defense that looks at the mindset of the parties entering into the contract. If someone is forced to sign a contract under some sort of threat, they cannot be said to have voluntarily entered into a deal. There is no true contract present. For duress to excuse performance of a contractual duty, the duress must essentially deprive the party of their agency, or ability to choose.

“Duress ‘is a condition of mind produced by an improper external pressure or influence that practically destroys the free agency of a party and causes him to do an act or make a contract not of his own volition.’” Parra de Rey v. Rey, 114 So. 3d 371, 387 (Fla. 3d DCA 2013) (quotation omitted). “It is now well settled that ‘[t]wo factors must be proven to establish duress: ‘(a) that the act sought to be set aside was effected involuntarily and thus not as an exercise of free choice or will and (b) that this condition of mind was caused by some improper and coercive conduct of the opposite side.’” Id. “Duress involves a ‘dual concept of external pressure and internal surrender or loss of volition in response to outside compulsion.’” Id. As such, the party claiming duress must establish that the effects of the alleged coercive behavior affected their subjective intent to act.” Id.

When raising the defense of duress, the nature of the force used to compel one side to enter into the contract is important. If assent to a contract was obtained by coercion constituting duress, the contract may be avoided by the person subjected to the duress. An improper threat of harm that induces the other party to assent to contract terms constitutes duress.

A threat is “improper” if the resulting exchange is not on fair terms and:

• the threatened act would harm the recipient and would not significantly benefit the party making the threat;
• the effectiveness of the threat in inducing the manifestation of assent is significantly increased by prior unfair dealing by the party making the threat; or
• what is threatened is otherwise a use of power for illegitimate ends.

Restatement § 176(2)

Examples of duress include improper threats to:

• commit a criminal or tortuous act against the party, his family or his property;
• extort money;
• commence a civil action under circumstances which could be deemed abuse of process;
• refuse to do business with the party;
• blackmail the party;
• refuse to perform a contract in order to extract an economically unjustified modification; or
• terminate an employment contract unless the party or someone close to him consents to an agreement not connected with the employment contract.

Among the defenses to breach of contract, duress is a high legal standard. The threat must be of sufficient gravity to make the contract voidable, determined based on an examination of the victim’s experience, sophistication, age, and other relevant personal characteristics.

Undue influence is similar to duress. It is unfair persuasion of a party who is under the domination of the person exercising the persuasion or who by virtue of the relation between them is justified in assuming that that person will not act in a manner inconsistent with his welfare. Restatement § 177(1). A victim of undue influence may void a contract if their consent was induced by undue influence by the other party to the contract. Restatement § 177(2).

In order to constitute undue influence, the mind must be so controlled or affected by persuasion or pressure, artful or fraudulent contrivances, or by the insidious influences of persons in close confidential relationships with the person influenced, that the individual is unable to act intelligently, understandingly, and voluntarily. See Cripe v. Atl. First Nat’l Bank of Daytona Beach, 422 So. 2d 820, 823 (Fla. 1982).

Unconscionability

“Unconscionability is a common law doctrine that courts have used to prevent the enforcement of contractual provisions that are overreaches by one party to gain ‘an unjust and undeserved advantage which it would be inequitable to permit him to enforce.’” Basulto v. Hialeah Auto., 141 So. 3d 1145, 1157 (Fla. 2014) (quotation omitted). Unconscionability is the idea that the terms of the contract are so one-sided that they are unjust and enforcing such contracts would be against public policy. Restatement § 178. It is common for one side in a contract negotiation to have more power than the other side. But, these ordinary situations do not rise to the level of unconscionability.

To qualify for this defense the contract must be so unjust that no reasonably informed person would ever consent to the terms. Courts will often look at the situation of the parties when examining a contract for unconscionability. It will consider factors such as age, bargaining power, mental capacity, and the availability of other options. If a contract is found to be unconscionable, it is unenforceable.

Generally, a defense based on unconscionability must present both procedural and substantive unconscionability. “‘The procedural component of unconscionability relates to the manner in which the contract was entered and it involves consideration of such issues as the relative bargaining power of the parties and their ability to know and understand the disputed contract terms.’” Basulto, 141 So. 3d at 1157 n.3. “The central question in the procedural unconscionability analysis is whether the complaining party lacked a meaningful choice when entering into the contract.” Id.

When determining whether a contract is procedurally unconscionable, Florida courts consider the following:

(1) the manner in which the contract was entered into;

(2) the relative bargaining power of the parties and whether the complaining party had a meaningful choice at the time the contract was entered into;

(3) whether the terms were merely presented on a ‘take-it-or-leave-it’ basis; and

(4) the complaining party’s ability and opportunity to understand the disputed terms of the contract.

Basulto, 141 So. 3d at 1157 n.3.

“Substantive unconscionability focuses on whether the terms are ‘unreasonably favorable’ to the other party and ‘whether the terms of the contract are so unfair that enforcement should be withheld.’” Basulto, 141 So. 3d at 1158 n.4 (quotation omitted). “In other words, the reviewing court asks whether the more powerful party overreached and ‘gained an unjust and undeserved advantage which it would be inequitable to permit him to enforce.’” Id.

In short, “[t]he absence of meaningful choice when entering into the contract is often referred to as procedural unconscionability, which ‘relates to the manner in which the contract was entered,’ and the unreasonableness of the terms is often referred to as substantive unconscionability, which ‘focuses on the agreement itself.’” Basulto, 141 So. 3d at 1157–58.

Lack of Consent

“A valid contract requires capacity of the parties. They must be competent to contract. The parties must be capable of an intelligent assent in order to make a valid contract.” 11 Fla. Jur 2d Contracts § 17 (2019). Because a contract is dependent upon the two parties reaching an agreement, the inability of one side to consent to the deal would make the contract voidable giving rise to another of the defenses to breach of contract, lack of consent.

“A party may challenge the existence of a contract by alleging that at least one party never agreed to its terms, that a signatory lacked the authority to commit his principal, or that the signor lacked the mental capacity to assent.” Wiand v. Schneiderman, 778 F.3d 917, 924 (11th Cir. 2015) (applying Florida law). Lack of consent includes everything from mental capacity to the age of the parties.

One of the most common examples of this defense would be contracts with minors. Contracts entered into by a minor, someone under 18 years old in most states, are generally voidable by the minor-party, even if he misrepresented his age. Restatement § 14. A minor can furthermore avoid contractual obligations for a reasonable time after attaining the age of majority. However, if he fails to disaffirm within a reasonable time, the contract will become binding against him.

A mental illness or defect might also prevent someone from validly consenting to a contract. Restatement § 15. Under certain circumstances, an intoxicated person also cannot consent to a contract. Restatement § 16.

Impossibility or Impracticability

When it is objectively impossible for anyone to perform the duties of the contract, one side may use the defense of impossibility, sometimes also referred to as impracticability, to excuse performance. If, after a contract is formed, circumstances arise which make a party’s performance impossible or impracticable, his duty to render that performance is discharged. This defense cannot be used if the party’s own actions, or inactions, caused performance to be impossible or impractical.

“Under the doctrine of impossibility of performance or frustration of purpose, a party is discharged from performing a contractual obligation which is impossible to perform and the party neither assumed the risk of impossibility nor could have acted to prevent the event rendering the performance impossible.” Marathon Sunsets, Inc. v. Coldiron, 189 So. 3d 235, 236 (Fla. 3d DCA 2016) (emphasis added).

Generally, in order to prove impossibility or impracticability defenses to breach of contract:

• an event must have occurred that makes performance, or performance in the contemplated sense, impossible or impracticable;
• the party seeking relief must not have been at fault in causing the event to occur;
• non-occurrence of the event must have been a basic assumption upon which the contract was made; and
• the party seeking relief must not have assumed the risk of the event occurring.

Restatement § 261.

“Under Florida contract law, the defense of ‘impossibility’ may be asserted in situations ‘where purposes for which the contract was made, have, on one side become impossible to perform.’” Harvey v. Lake Buena Vista Resort, LLC, 568 F. Supp. 2d 1354, 1367 (M.D. Fla. 2008) (quotation omitted). “Acts of God” and governmental action are among several types of business risks which implicate the impossibility defense.” Id. However, “[t]he doctrine of impossibility of performance should be employed with great caution if the relevant business risk was foreseeable at the inception of the agreement and could have been the subject of an express provision of the agreement.” Am. Aviation, Inc. v. Aero–Flight Serv., Inc., 712 So. 2d 809, 810 (Fla. 4th DCA 1998).

Events that may make performance of the contract impossible include:

• death or disability of a person indispensable to performance of the contract;
• destruction of the subject matter of the contract or other thing necessary for the performance of the contract, provided the destruction is not the fault of the party asserting impossibility;
• failure of a specific thing necessary for performance to come into existence;
• supervening governmental action that makes performance of the contract illegal;
• where performance would subject the party to potential harm;
• shortages or significant price increases in materials due to embargo or war; and
• other circumstances that would involve “extreme or unreasonable difficulty, expenses, injury or loss.”

Restatement § 261, cmt. d

Frustration of Purpose

“The doctrine of ‘frustration of purpose’ excuses performance by a party where the value of performance regarding the subject of an agreement has been frustrated or destroyed.” Hopfenspirger v. West, 949 So. 2d 1050, 1053–54 (Fla. 5th DCA 2006). Stated another way, “‘[f]rustration of purpose’ refers to that condition surrounding the contracting parties where one of the parties finds that the purposes for which he bargained, and which purposes were known to the other party, have been frustrated because of the failure of consideration, or impossibility of performance by the other party.” State v. Dempsey, 916 So. 2d 856, 860 (Fla. 2d DCA 2005) (quotation omitted).

In order to qualify for the defense of frustration of purpose, there must have been an unforeseen event that severely undermines the original justification for entering into the contract. Restatement § 265. Often, frustration of purpose comes from changes in governmental rules or regulations but, almost any event can be the basis of a frustration of purpose defense so long as:

• The event was unforeseen by the parties;
• The event was caused by a third party or outside force; and
• The event makes performance of the contract contrary to the original understanding of the parties.

If, after the contract is formed, circumstances arise which substantially frustrate a party’s purpose in entering into the contract, the party’s remaining duties are discharged, provided:

• the party seeking discharge was not at fault;
• the nonoccurrence of such event was a basic assumption on which the contract was made; and
• the language or the circumstances do not prohibit excuse based on frustration of purpose.

Restatement § 265.

Statute of Frauds

Ordinarily, oral contracts are valid and enforceable under Florida law, and are subject to the same basic contract principles that govern written contracts. St. Joe Corp. v. McIver, 875 So.2d 375, 381 (Fla. 2004). However, the law requires certain types of contracts to be made in writing in order to be valid. This is known as the statute of frauds and it can be one of the defenses to breach of contract. Restatement § 131. In a breach of contract case, the statute of frauds may be a defense if the contract was not in writing when it should have been. If true, the contract would be unenforceable.

Florida’s statute of frauds is located in Fla. Stat. § 725.01. The following types of agreements are the most common examples of contracts that fall within the statute of frauds:

• Agreements that by its terms cannot be performed within a year from the making of the contract;
• Promises to pay someone else’s debt, including co-signing a loan;
• Agreements for the purchase and sale of land;
• Agreements for the lease of real property for longer than one year.