STATE Q&A

Breach of Defenses: Illinois by Diane Cafferata and Allison Huebert, Quinn Emanuel Urquhart & Sullivan, LLP, with Practical Commercial Litigation

Status: Law stated as of 23 Mar 2021 | Jurisdiction: Illinois, United States

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A Q&A guide to common defenses to contract claims under Illinois . This Q&A covers defenses to contract formation, performance, and . It also covers procedural and equitable defenses specific to .

Defenses to Contract Formation Duress is a to contract formation under Illinois law. A defendant may assert duress where: 1. Does your jurisdiction recognize • The plaintiff induces the defendant, by a wrongful act or ambiguity as a defense to contract threat, to enter into a contract under circumstances that formation? If so, when should a defendant deprive the defendant of the exercise of its own free will. assert this defense? • The plaintiff’s conduct is legally or morally wrongful. (In re Marriage of Tabassum & Younis, 377 Ill. App. 3d 761, Ambiguity is a not a formal “defense” to contract 775 (2007); Krilich v. Am. Nat’l Bank & Tr. Co. of Chicago, formation under Illinois law. However, a defendant may 334 Ill. App. 3d 563, 572 (2002).) The facts supporting argue that the wording of a written contract is ambiguous the defense of duress should be pleaded as an affirmative and that the plaintiff’s interpretation of the ambiguous defense (735 Ill. Comp. Stat. Ann. 5/2-613(d)). contract language does not match the defendant’s interpretation. 3. Does your jurisdiction recognize Illinois courts look to resolve ambiguities that appear economic duress as a defense to contract on the face of the contract. The court must consider the formation? If so, when should a defendant entire agreement to clarify what the parties meant by assert this defense? the provision in question. (Thompson v. Gordon, 241 Ill. 2d 428, 442-43 (2011).) If the court cannot resolve the Economic duress, also known as business compulsion, is ambiguity by reference to the entire agreement, the court an which releases the party entering may admit parol to determine the meaning by into the contract under duress from all contractual reference to the parties’ statements and conduct. As a rule obligations. A defendant may assert economic duress of last resort, the court should construe an ambiguous where: term against the drafter. (Baker v. Am.’s Mortg. Servicing, Inc., 58 F.3d 321, 327 (7th Cir. 1995) (applying Illinois law) • The plaintiff induced the defendant, by a wrongful act (“This canon of construction () is a rule or threat, to make a contract under circumstances that of last resort, a ‘tie-breaker’ of sorts, that comes into play deprive the defendant of the exercise of its own free will. only when neither the extrinsic evidence nor other methods • The threat left the defendant “bereft of the quality of of construction can resolve the ambiguity”); Premier Title mind essential to the making of a contract.” Co. v. Donahue, 328 Ill. App. 3d 161, 165-66 (2002).) (Bank of Am., N.A. v. 108 N. State Retail LLC, 401 Ill. App. 2. Does your jurisdiction recognize duress 3d 158, 173-74 (2010); Krilich, 334 Ill. App. 3d at 572.) as a defense to contract formation? If However, economic duress does not exist where the so, when should a defendant assert this plaintiff secures the defendant’s to an agreement defense? merely in a lawful demand or by doing or threatening to

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do that which the plaintiff has a legal right to do (Bank of If pleaded as an affirmative defense, a defendant must plead Am., 401 Ill. App. 3d at 174). it with particularity (735 Ill. Comp. Stat. Ann. 5/2-613(d); see Connick v. Suzuki Motor Co., 174 Ill. 2d 482, 496-97 (1996); 4. Does your jurisdiction recognize failure First Mercury Ins. Co. v. Ciolino, 2018 IL App (1st) 171532, ¶¶ of a condition precedent as a defense to 39-40). contract formation? If so, when should a defendant assert this defense? 6. Does your jurisdiction recognize illegal purpose as a defense to contract formation? Failure of a condition precedent is a defense to contract If so, when should a defendant assert this formation under Illinois law. A defendant may assert defense? failure of a condition precedent as a defense where: Illegal purpose is an affirmative defense to contract • A condition precedent must be performed or an event formation under Illinois law (735 Ill. Comp. Stat. Ann. must occur before: 5/2-613(d)). If the subject matter of a contract is illegal, the –– a contract becomes effective; or contract is void from the outset (In re Marriage of Newton, –– one party is obligated to perform. 2011 IL App (1st) 090683, ¶ 39). A defendant should assert illegal purpose where the contract contravenes either • The plaintiff failed to perform the required condition Illinois or federal law and therefore violates public policy precedent or the required event failed to occur. (Gamboa v. Alvarado, 407 Ill. App. 3d 70, 75 (2011)). While (Cathay Bank v. Accetturo, 2016 IL App (1st) 152783, ¶ 32.) this doctrine bars a for breach of contract, depending on the circumstances, an aggrieved party may When denying performance of a condition precedent still assert a claim for return of given to the under a contract, the defendant must allege facts in defendant based on fraudulent inducement of the illegal connection with the denial showing that there was a contract (Gamboa, 407 Ill. App. 3d at 75). failure to perform (Ill. S. Ct. R. 133(c)). For more on asserting failure of a condition precedent as a 7. Does your jurisdiction recognize infancy contract performance defense, see Question 21. as a defense to contract formation? If so, when should a defendant assert this 5. Does your jurisdiction recognize as defense? a defense to contract formation? If so, when should a defendant assert this defense? Infancy is a defense to contract formation under Illinois law. The contract of a minor is not void, but voidable Fraudulent inducement is a defense to contract formation at the minor’s election on reaching the age of majority under Illinois law. A defendant may assert fraudulent (Fletcher v. Marshall, 260 Ill. App. 3d 673, 675 (1994); inducement as a defense where: Terrance Co. v. Calhoun, 37 Ill. App. 3d 757, 761 (1976)). A minor or the minor’s may still be liable for • The plaintiff made a false statement concerning an necessaries furnished to the minor (Manago v. Cty. of existing material fact. Cook, 2016 IL App (1st) 121365, ¶ 31). • The plaintiff made the false statement with knowledge or belief of that representation’s falsity. A defendant who is a minor at the time of entering into a contract ratifies the contract if the defendant, after • The plaintiff made the false statement with the purpose attaining the age of majority, either: of inducing another party to act or to refrain from acting. • Fails to disaffirm the contract within a reasonable time. • The defendant reasonably relied on the false statement and to his detriment entered into the contract or • Does any distinct and decisive act clearing showing an transaction. intent to affirm the contract. (Avon Hardware Co. v. Ace Hardware Corp., 2013 IL App (Fletcher, 260 Ill. App. 3d at 675.) (1st) 130750, ¶ 15; Phil Dressler & Assocs., Inc. v. Old Oak Therefore, a defendant may assert infancy if the defendant Brook Inv. Corp., 192 Ill. App. 3d 577, 584 (1989); see also is still under 18 years old or disaffirmed the contract within Jordan v. Knafel, 378 Ill. App. 3d 219, 228-29 (2007).) a reasonable time of turning 18 years old (755 ILCS 5/11-1

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(definition of minor); see Villalobos v. Cicero Sch. Dist. 99, • Came to an understanding and unintentionally drafted 362 Ill. App. 3d 704, 712-13 (2005); Terrance Co., 37 Ill. and signed a contract that failed to express the true App. 3d at 760-61). agreement. A minor above the age of 16 may apply to the court for (Alliance Prop. Mgmt., Ltd. v. Forest Villa of Countryside complete or partial emancipation (750 ILCS 30/4). A fully Condo. Ass’n, 2015 IL App (1st) 150169, ¶ 39.) emancipated minor has the right to enter into valid legal A party mutual must plead facts (750 ILCS 30/5(a)), but a partially emancipated establishing the “who, when, and where” (Schafer v. minor has only the rights and responsibilities specified in UnionBank/Central, 2012 IL App (3d) 110008, ¶ 23; the court’s emancipation order (750 ILCS 30/5(b)). Briarcliffe Lakeside Townhouse Owners Ass’n v. City of When repudiating the contract, the minor generally must Wheaton, 170 Ill. App. 3d 244, 251-52 (1988)). return any consideration to the other party unless the consideration is lost or expended (Terrace Co. v. Calhoun, 10. Does your jurisdiction have a statute of 37 Ill. App. 3d at 762). that requires certain contracts be in writing and signed by the defendant? If so: 8. Does your jurisdiction recognize mental deficiency or illness as a defense to contract • What types of contracts must be in writing? formation? If so, when should a defendant • May a defendant assert the as a assert this defense? defense if the plaintiff fully performed its obligations under an ? Mental deficiency or illness is a defense to contract Illinois’s statute of frauds requires that certain contracts formation under Illinois law. A defendant may assert this be in writing and signed by the defendant, including: defense if, when it entered into the contract: • A promise to pay for the debt or default of another • The defendant suffered from a mental or physical person (740 ILCS 80/1). weakness. • Any agreement in consideration of marriage • That weakness rendered the defendant unable to (740 ILCS 80/1). comprehend the effect and nature of the transaction. • An agreement for the sale or or other disposition (In re Marriage of Davis, 217 Ill. App. 3d 273, 276 (1991); see of . However, the lease of property for less also In re Estate of Gruske, 179 Ill. App. 3d 675, 678 (1989); than one year is not within the statute of frauds and In re Lewis-Pride, 330 B.R. 660, 662-63 (Bankr. N. D. Ill. may be oral. (740 ILCS 80/2.) 2005) (applying Illinois law).) • Any agreement that could not possibly be performed Even where a party’s mental weakness, standing alone, is within one year (740 ILCS 80/1). This does not insufficient to void a contract, mental weakness coupled necessarily include contracts that have an indefinite with , fraud, or concealment may be a duration if, at the time the contract was made, the basis to set aside the contract (Frieders v. Dayton, 61 Ill. contract’s full performance could have occurred App. 3d 873, 880 (1978)). within one year from inception of the contract (Dugas-Filippi v. JP Morgan Chase, N.A., 66 F. Supp. 9. Does your jurisdiction recognize mutual 3d 1079, 1089 (N.D. Ill. 2014) (applying Illinois law); mistake as a defense to contract formation? Armagan v. Pesha, 2014 IL App (1st) 121840, ¶ 41). If so, when should a defendant assert this • A wholesale brewer’s agreement (815 ILCS 720/5(4)). defense? • The sale of a business opportunity that must be registered under the Business Opportunity Sales Law of 1955 Mutual mistake is a defense to contract formation under (815 ILCS 602/5-40(a)). Illinois law. A defendant should assert mutual mistake where both parties either: The defense should be plead as an affirmative defense (735 Ill. Comp. Stat. Ann. 5/2-613(d) or raised in a • Had erroneous beliefs at the time of contracting that pre-answer for dismissal (735 Ill. Comp. Stat. certain material facts were true, unless the party seeking Ann. 5/2-619)(a)(7)). A defendant may not assert to avoid the contract bears the risk of the mistake.

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the statute of frauds defense if the plaintiff fully (Sweis v. Founders Ins. Co., 2017 IL App (1st) 163157, ¶ 63; performed its obligations under an oral contract (see Aliaga Med. Ctr., S.C. v. Harris Bank N.A., 2014 IL App (1st) Goldwater v. Greenberg, 2017 IL App (1st) 163003, ¶ 14; 133645, ¶ 27; Draper & Kramer, Inc. v. King, 2014 IL App Meyer v. Logue, 100 Ill. App. 3d 1039, 1043-44 (1981)). (1st) 132073, ¶ 28.) The acts allegedly done in performance musty be “positively attributable exclusively to the contract” (John 13. Does your jurisdiction recognize O. Schofield, Inc. v. Nikkel, 314 Ill. App. 3d 771, 784 (2000); undue influence as a defense to contract Blaise v. Stein, 75 Ill. App. 3d 793, 796 (1979)). formation? If so, when should a defendant However, contracts for the sale of goods for the price of assert this defense? $500 or more are governed by the UCC’s statute of frauds (810 ILCS 5/2-201). Undue influence is a defense to contract formation under Illinois law. A defendant may assert undue influence where: 11. Does your jurisdiction recognize unclean • The defendant was under the domination of the plaintiff hands as a defense to contract formation? or, by virtue of the parties’ relationship, the defendant If so, when should a defendant assert this was justified in assuming that the plaintiff intended to defense? act in a manner consistent with defendant’s welfare. • The parties entered into a contract in which there was Unclean hands is a defense to contract formation under an urgency of persuasion. Illinois law. A defendant may assert unclean hands where: • The defendant would not otherwise have voluntarily • The plaintiff seeks equitable relief. entered into the contract but for the undue influence. • In connection with the transaction, the plaintiff (Ill. Pattern Jury Instr.-Civ. 700.00 Intro. 1; see committed either: Britton v. Esson, 260 Ill. 273, 277-79 (1913); –– misconduct; Kuster v. Schaumburg, 276 Ill. App. 3d 220, 224 (1995).) –– fraud; or This defense often arises in cases where the plaintiff is a fiduciary. Although available as a defense to breach of –– bad faith. contract, the cases in which the issue is raised involve (Zahl v. Krupa, 365 Ill. App. 3d 653, 658 (2006).) testamentary (see Kuster, 276 Ill. App. 3d at 224, 227). The doctrine of unclean hands is not a defense to a claim for money damages (Zahl, 365 Ill. App. 3d at 658). 14. Does your jurisdiction recognize 12. Does your jurisdiction recognize unilateral mistake as a defense to contract as a defense to contract formation? If so, when should a defendant formation? If so, when should a defendant assert this defense? assert this defense? Unilateral mistake is a defense to contract formation under Illinois law. A defendant may assert unilateral Unconscionability is a defense to contract formation under mistake where: Illinois law. A defendant may assert unconscionability where a contract is both: • The mistake is of a material fact. • Procedurally unconscionable because, for example: • The mistake renders enforcement of the contract unconscionable. –– the defendant lacked the opportunity to understand the terms of the contract; or • The mistake occurred despite the exercise of due care by the party asserting the defense. –– important terms were hidden in a maze of fine print. • Rescission of the contract can return the other party to • Substantively unconscionable because the contract’s the status quo at the time of contracting. terms: • Reformation is available to remedy the other party’s –– are overly harsh; or fraud (see Harris Bank Naperville v. Morse Shoe, Inc., –– one-sided.

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716 F. Supp. 1109, 1121 (N.D. Ill. 1989) (applying Illinois Ambiguity is a not a formal “defense” to contract law); Ringgold Capital IV, LLC v. Finley, 2013 IL App (1st) performance under Illinois law. However, a defendant may 121702, ¶¶ 31-32). argue that the wording of a written contract is ambiguous and that the plaintiff’s interpretation of the ambiguous (ZippySack LLC v. Ontel Prod. Corp., 182 F. Supp. contract language does not match the defendant’s 3d 867, 872 (N.D. Ill. 2016) (applying Illinois law); interpretation. Vandenberg v. Brunswick Corp, 2017 IL App (1st) 170181, ¶ 36; Cameron v. Bogusz, 305 Ill. App. 3d 267, 273 (1999).) Illinois courts look to resolve ambiguities that appear on the face of the contract. The court must consider the A party pleading unilateral mistake must plead facts entire agreement to clarify what the parties meant by the establishing the “who, when, and where” of the mistake provision in question. (Thompson, 241 Ill. 2d at 442-43.) (Schafer, 2012 IL App (3d) 110008, ¶23). If the court cannot resolve the ambiguity by reference to 15. Does your jurisdiction recognize any the entire agreement, the court may admit parol evidence to determine the meaning by reference to the parties’ additional defenses to contract formation? statements and conduct. As a rule of last resort, the If so, when should a defendant assert the court should construe an ambiguous term against the defenses? drafter. (Baker, 58 F.3d at 327 (applying Illinois law) (“This canon of construction (contra proferentem) is a rule of last No. resort, a ‘tie-breaker’ of sorts, that comes into play only when neither the extrinsic evidence nor other methods of construction can resolve the ambiguity”); Premier Title Co., Defenses to Contract Performance 328 Ill. App. 3d at 165-66.)

16. Does your jurisdiction recognize accord 18. Does your jurisdiction recognize and satisfaction as a defense to a breach anticipatory breach as a defense to a breach of contract claim? If so, when should a of contract claim? If so, when should a defendant assert this defense? defendant assert this defense? is a defense to a breach of contract Anticipatory breach is a defense to a breach of contract claim under Illinois law. An accord and satisfaction is claim under Illinois law. A defendant may assert a contractual method of discharging debts or claims anticipatory breach where: between the parties to such an agreement. To constitute an accord and satisfaction there must be: • The parties had a valid contract. • A genuine dispute pending between the parties. • Both parties had future performance obligations under the contract. • An unliquidated sum owed. • The plaintiff unequivocally repudiated the contract, by • Consideration. words or , before performance was due. • A shared mutual intent to compromise the claim. (Busse v. Paul Revere Life Ins. Co., 341 Ill. App. 3d 589, • The parties’ execution or performance of the 594-95 (2003); Alguire v. Walker, 154 Ill. App. 3d 438, agreement. 446 (1987).) (MKL Pre-Press Elecs./MKL Computer Media Supplies, Inc. v. La Crosse Litho Supply, LLC, 361 Ill. App. 3d 872, 19. Does your jurisdiction recognize 877 (2005); Koules v. Euro-American Arbitrage, Inc., 293 economic duress as a defense to contract Ill. App. 3d 823, 829-30 (1998).) performance? If so, when should a defendant assert this defense? 17. Does your jurisdiction recognize ambiguity as a defense to a breach of Economic duress, also known as business compulsion, contract claim? If so, when should a is an affirmative defense to a contract, which releases defendant assert this defense? the party signing under duress from all contractual obligations. See Question 3. Although this defense relates

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specifically to contract formation, if successful, it also A defendant claiming that the plaintiff failed to perform a relieves the defendant from its performance obligations. condition precedent must allege facts to show the plaintiff’s failure to perform (Ill. S. Ct. R. 133(c); see Deutsche Bank Nat’l 20. Does your jurisdiction recognize Tr. Co. v. Roongseang, 2019 IL App (1st) 180948, ¶¶ 22-24 equitable as a defense to a breach (non-final opinion not yet released for publication)). of contract claim? If so, when should a For more on asserting failure of a condition precedent as a defendant assert this defense? contract formation defense, see Question 4.

Equitable estoppel is a defense to a breach of contract 22. Does your jurisdiction recognize failure claim under Illinois law. A defendant may assert equitable of consideration as a defense to a breach estoppel where: of contract claim? If so, when should a • The plaintiff knowingly misrepresented or concealed defendant assert this defense? material facts. • The defendant did not know of the falsity of the Failure of consideration is a defense to breach of contract representations when they were made or acted on. (and also a ground for rescission) under Illinois law. A defendant may assert failure of consideration where the • The plaintiff intended or reasonably expected the plaintiff neglected, refused, or failed to either: representations to be acted on by the party claiming estoppel. • Perform its contractual obligations. • In performing the contract, the defendant reasonably • Furnish the agreed-on consideration. relied on the representations in to its (Ahern v. Knecht, 202 Ill. App. 3d 709, 715 (1990); Worner detriment. Agency, Inc. v. Doyle, 121 Ill. App. 3d 219, 222 (1984).) • The defendant would be prejudiced by its reliance. Failure of consideration should be pleaded as an (Packaging Corp. of Am., Inc. v. Croner, 419 F. Supp. affirmative defense (735 Ill. Comp. Stat. Ann. 5/2-613(d)). 3d 1059, 1075 (N.D. Ill. 2020) (applying Illinois law); see also Ruiz v. Cal-Ful Condo. Ass’n, 2019 IL App (1st) 23. Does your jurisdiction recognize 181734, ¶ 21; Bd. of Library Trs. of Vill. of Midlothian v. Bd. as a defense to a of Library Trs. of Posen Pub. Library Dist., 2015 IL App breach of contract claim? If so, when should (1st) 130672, ¶ 40.) a defendant assert this defense? Estoppel should be pleaded as an affirmative defense (735 Ill. Comp. Stat. Ann. 5/2-613(d)). Frustration of purpose is a defense to a breach of contract claim under Illinois law. A defendant may assert 21. Does your jurisdiction recognize failure frustration of purpose where: of a condition precedent as a defense to a • The contract is rendered meaningless due to an breach of contract claim? If so, when should unforeseen change in circumstances. a defendant assert this defense? • The frustrating cause totally or almost totally destroys the value of the plaintiff’s performance. Failure of a condition precedent is a defense to a breach of contract claim under Illinois law. A defendant may assert (Sunshine Imp & Exp Corp. v. Luxury Car Concierge, Inc., failure of a condition precedent if: 2015 WL 2193808, at *5 (N.D. Ill. May 7, 2015) (applying Illinois law); Illinois-American Water Co. v. City of Peoria, • The defendant is not obligated to perform under the 332 Ill. App. 3d 1098, 1106 (2002); Smith v. Roberts, 54 Ill. contract until: App. 3d 910, 912-913 (1977).) –– a specific event occurs; or 24. Does your jurisdiction recognize breach –– the plaintiff performs a specific act. of the implied of good faith • The event or act did not occur. and fair dealing as a defense to a breach (Beal Bank Nev. v. Northshore Ctr. THC, LLC, 2016 IL App (1st) of contract claim? If so, when should a 151697, ¶ 18; Cathay Bank, 2016 IL App (1st) 152783, ¶ 32.) defendant assert this defense?

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Breach of the implied covenant of good faith and fair dealing is a defense to a breach of contract claim 26. Does your jurisdiction recognize under Illinois law. A defendant may assert breach of as a defense to a breach of contract claim? the implied covenant of good faith and fair dealing If so, when should a defendant assert this where: defense? • The contract vests plaintiff with discretion. Novation is a defense to a breach of contract claim under • The plaintiff failed to exercise that discretion reasonably Illinois law. A defendant may assert novation where the and with proper motive. parties: • The plaintiff acted: • Had a valid existing contract. –– arbitrarily; • Expressly or impliedly agreed to: –– capriciously; or –– extinguish their obligations under the original –– in a manner inconsistent with the reasonable contract; and expectations of the parties. –– make a new contract in place of the original contract. (Mid-West Energy Consultants, Inc. v. Covenant Home, Inc., • Entered into a new contract supported by valid 352 Ill. App. 3d 160, 165 (2004); Beraha v. Baxter Health consideration. Care Corp., 956 F.2d 1436, 1443 (7th Cir. 1992), applying (Crest Hill Land Dev., LLC v. Conrad, 2019 IL App (3d) Illinois law and citing Dayan v. McDonald’s Corp., 125 Ill. 180213, ¶ 35.) App. 3d 972, 991 (1984).) The duty of good faith and fair dealing cannot, however, 27. Does your jurisdiction allow the parties be used to overrule or modify the express terms of a to modify the terms of their written contract (Bank One, Springfield v. Roscetti, 309 Ill. App. contract? If so, under what circumstances 3d 1048, 1059-60 (1999)). may a modification vary the terms of a 25. Does your jurisdiction recognize written contract? of performance as a defense Illinois law allows parties to modify a written contract to a breach of contract claim? If so, when in writing or orally. To modify a contract, the parties should a defendant assert this defense? must satisfy all criteria essential for a valid contract, including: Impossibility is a defense to a breach of contract claim under Illinois law. A defendant may assert impossibility • Offer. where both: • Acceptance. • Performing the contract became objectively • Consideration. impossible: (VC Mgmt., LLC v. Reliastar Life Ins. Co., 195 F. Supp. 3d –– because the subject matter of the contract was 974, 985 (N.D. Ill. 2016) (applying Illinois law); Nebel, destroyed; or Inc. v. Mid-City Nat’l Bank of Chicago, 329 Ill. App. 3d 957, –– by operation of law. 964 (2002).) • The event or circumstance that rendered performance Illinois law permits parties to a written contract to alter impossible: or modify its terms by later oral agreement, even where the written contract precludes oral modification (R.J. –– was not reasonably foreseeable at the time of O’Brien & Assocs., Inc. v. Vierstra, 2003 WL 1627271, contracting; or at *5 (N.D. Ill. Mar. 27, 2003) (applying Illinois law); –– cannot be guarded against in the contract. Tadros v. Kuzmak, 277 Ill. App. 3d 301, 312 (1995); Falcon, Ltd. v. Corr’s Nat. Beverages, Inc., 165 Ill. App. 3d 815, (YPI 180 N. LaSalle Owner, LLC v. 180 N. LaSalle II, LLC, 403 821-22 (1987)). Ill. App. 3d 1, 6-7 (2010).)

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–– freely and intentionally gave up its right to require the 28. Does your jurisdiction recognize defendant’s performance either by express words or ratification as a defense to a breach of implied by conduct. contract claim? If so, when should a (Takiff Props. Grp. Ltd. #2 v. GTI Life, Inc., 2018 IL App defendant assert this defense? (1st) 171477, ¶ 26; Bd. of Trs. of City of Harvey Firefighters’ Pension Fund v. City of Harvey, 2017 IL App (1st) Ratification is a defense to a breach of contract claim under 153074, ¶ 222; see also N. League of Prof’l Baseball Illinois law. A defendant may assert that the plaintiff ratified Teams v. Gozdecki, Del Giudice, Americus & Farkas, LLP, the defendant’s breach of contract where the plaintiff clearly 2018 IL App (1st) 172407, ¶ 74. (waiver is the intentional evinced an intent to be bound by the defendant’s acts that relinquishment of a known right).) amounted to a breach. The court may infer ratification from the circumstances of the case, including the plaintiff’s 31. Does your jurisdiction recognize any long-term acquiescence in the defendant’s conduct. (See VC Mgmt., LLC, 195 F. Supp. 3d at 994 (applying Illinois law).) additional defenses to a breach of contract claim? If so, when should a defendant 29. Does your jurisdiction recognize unclean assert the defenses? hands as a defense to a breach of contract claim? If so, when should a defendant No. assert this defense? Defenses Related to Damages Unclean hands is a defense to a breach of contract claim under Illinois law. A defendant may assert unclean hands 32. How, if at all, does your jurisdiction where: prevent a plaintiff’s double recovery for • The plaintiff seeks equitable relief. breach of contract claim? • As part of the transaction, the plaintiff either: Under Illinois law, a plaintiff may not recover damages –– engaged in misconduct; that are duplicative of damages sought for another claim (see Gritters v. Ocwen Loan Servicing, LLC, 2014 WL –– committed fraud; or 7451682, at *10 (N.D. Ill. Dec. 31, 2014) (applying Illinois –– acted in bad faith. law) (potential recovery for breach of contract and breach (Zahl, 365 Ill. App. 3d at 658.) of fiduciary duty are duplicative and therefore must be appropriately limited); see also Anekom, Inc. v. Estate of The doctrine of unclean hands is not a bar to a claim for Demith, 2018 IL App (3d) 160554, ¶¶ 40-45; Otto Baum money damages (Zahl, 365 Ill. App. 3d at 658). Co. v. Süd Family Ltd. P’ship, 2020 IL App 3d 190054, ¶ 30 (non-final opinion not yet released for publication); 30. Does your jurisdiction recognize waiver Douglas Theater Corp. v. Chicago Title & Tr. Co., 288 Ill. as a defense to a breach of contract claim? App. 3d 880, 886-87 (1997)). If so, when should a defendant assert this defense? 33. Under what circumstances may a clause be Waiver is a defense to a breach of contract claim under unenforceable in your jurisdiction? Illinois law. A defendant may assert waiver where: Under Illinois law, a liquidated damages clause is • The defendant was required to perform under the contract. unenforceable as a penalty unless the court finds: • The defendant did not perform. • The parties intended to agree in advance to the of damages. • The plaintiff: • The parties made a reasonable estimate that bore –– knew that the defendant did not perform; “some relation” to the damages that would be sustained by the breach. –– knew or should have known that it had the right to require the defendant’s performance; and • Actual damages would be:

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–– uncertain; and damages clause is enforceable, a nonbreaching party may not seek more than the liquidated damages –– difficult to prove. amount); Hartford Fire Ins. Co. v. Architectural Mgmt., (See Berggren v. Hill, 401 Ill. App. 3d 475, 479-80 (2010); Inc., 194 Ill. App. 3d 110, 115 (1990)). Jameson Realty Grp. v. Kostiner, 351 Ill. App. 3d 416, • Do not directly and naturally result from the breach 423-24 (2004).) (Midland Hotel Corp. v. Reuben H. Donnelley Corp., 118 Ill. In doubtful cases, Illinois courts construe the stipulated 2d 306, 318 (1987); Westlake Fin. Grp., Inc. v. CDH-Delnor sum as an unenforceable penalty (GK Dev., Inc. v. Iowa Health Sys., 2015 IL App (2d) 140589, ¶ 31). Malls Fin. Corp., 2013 IL App (1st) 112802, ¶ 47). 36. What restrictions, if any, does your 34. What kinds of damages, if any, does jurisdiction place on a plaintiff’s ability to your jurisdiction prohibit a plaintiff from recover special or recovering for breach of contract claim? for breach of contract claim?

Under Illinois law, a plaintiff suing for breach of contract Under Illinois law, a defendant can challenge the plaintiff’s typically may not recover: alleged special or consequential damages by showing that either: • (see Morrow v. L.A. Goldschmidt Assocs., Inc., 112 Ill. 2d 87, 94-95 (1986); Bank of Ill. • The plaintiff cannot prove that the special or consequential in Mt. Vernon v. Bill’s King City Stationary, Inc., 198 Ill. damages were within the contemplation of the parties at App. 3d 434, 436 (1990); McGrady v. Chrysler Motors the time that it entered into the contract. Corp., 46 Ill. App. 3d 136, 141 (1977) (punitive damages • The plaintiff injury did not arise from the defendant’s generally not recoverable for breach of contract unless breach. accompanied by an independent claim that involves fraud, malice, wantonness, or oppression)). • The plaintiff failed to plead the special or consequential damages with the requisite specificity. • Damages that are speculative or cannot be established with reasonable certainty (see Santorini (1472 N. Milwaukee, Ltd. v. Feinerman, 2013 IL App (1st) Cab Corp. v. Banco Popular N. Am., 2013 IL App (1st) 121191, ¶ 31; Allstate Ins. Co. v. Winnebago Cty. Fair Ass’n, 122070, ¶ 19; Jones v. Melrose Park Nat’l Bank, 228 Ill. Inc., 131 Ill. App. 3d 225, 232 (1985); Clark v. Standard Life App. 3d 249, 259 (1992) (a breach of contract plaintiff & Accident Ins. Co., 68 Ill. App. 3d 977, 986 (1979); but see cannot recover speculative damages or damages that Heller Int’l Corp. v. Sharp, 839 F. Supp. 1297, 1303 (N.D. were not the proximate result of the breach); Oakleaf Ill. 1993) (federal pleading standards do not require these of Ill. v. Oakleaf Assocs., Inc., 173 Ill. App. 3d 637, 648 specific allegations to support a request for consequential (1988) (discussing whether a claim for lost profits was damages in a ).) speculative)). • Damages or remedies that the contract expressly 37. Does the failure to mitigate damages precludes or limits (see Cox v. U.S. Fitness, LLC, 2013 IL preclude or limit recovery for breach of App (1st) 122442, ¶ 14; Hicks v. Airborne Express, Inc., contract in your jurisdiction? 367 Ill. App. 3d 1005, 1011-12 (2006)). Under Illinois law, contracting parties generally have 35. What restrictions, if any, does your a duty to mitigate their damages. A plaintiff’s failure jurisdiction place on a plaintiff’s ability to to mitigate may preclude or limit its ability to recover recover general compensatory damages for damages in a civil suit. A defendant should assert failure breach of contract claim? to mitigate where the plaintiff did not take reasonable and available steps to minimize injury and reduce its damages Under Illinois law, a plaintiff suing for breach of contract (Pokora v. Warehouse Direct, Inc., 322 Ill. App. 3d 870, 880 typically may not recover general compensatory damages (2001) (a breach of contract plaintiff is obligated to use if they: all reasonable means to mitigate its damages); see, for example, Sharon Leasing, Inc. v. Phil Terese Transp., Ltd., • Are superseded by a valid liquidated damages clause 299 Ill. App. 3d 348, 360 (1998); Bank of Hillside v. Laurel (see Berggren, 401 Ill. App. 3d at 479 (if a liquidated Motors, Inc., 259 Ill. App. 3d 362, 366 (1994)).

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(805 ILCS 5/15.85(c); 805 ILCS 5/13.70(a); Askew Ins. 38. Does your jurisdiction recognize any Grp., LLC v AZM Grp., Inc., 2020 IL App (1st) 190179, additional damages defenses to a breach ¶ 25 (non-final opinion not yet released for publication) of contract claim? If so, when should a (a dissolved corporation cannot sue or be sued)). defendant assert the defenses? (735 ILCS 5/2-619(a)(2) (motions for involuntary dismissal based on lack of capacity to sue or be sued)). No. 40. Does your jurisdiction recognize a Procedural Defenses plaintiff’s lack of standing as a defense to a breach of contract claim? If so, when should 39. Does your jurisdiction recognize lack of a defendant assert this defense? legal capacity to sue or be sued as a defense to a breach of contract claim? If so, when Under Illinois law, a defendant may assert that the should a defendant assert this defense? plaintiff lacks standing to bring a breach of contract claim when the plaintiff does not have a sufficient interest in the Under Illinois law, a defendant may assert that a plaintiff outcome of the (see Greer v. Ill. Housing Dev. Auth., lacks the legal capacity to sue for breach of contract where 122 Ill. 2d 462, 492-93 (1988); Muirhead Hui L.L.C. v. Forest the plaintiff does not have the power to appear and bring Pres. Dist. of Kane Cty., 2018 IL App (2d) 170835, ¶ 21). its grievance before the court, such as where the plaintiff is: Illinois law recognizes both intended and incidental third- party beneficiaries, but only intended beneficiaries have • A natural person who is: rights and may sue on the contract (Hacker v. Shelter Ins. –– incompetent; Co., 388 Ill. App. 3d 386, 394 (2009)).

–– a minor; or 41. Does your jurisdiction recognize laches –– deceased. as a defense to a breach of contract claim? (A Plus Janitorial Co. v. Grp. Fox, Inc., 2013 IL App (1st) If so, when should a defendant assert this 120245, ¶ 15; In re Marriage of Kutchins, 157 Ill. App. 3d defense? 384, 388-89 (1987) (mentally incompetent persons); Freiders v. Dayton, 61 Ill. App. 3d 873, 883 (1978) (same); Laches is a defense to a breach of contract under Illinois Klak v. Skellion, 317 Ill. App. 3d 1092, 1094-95 (2000) law. A defendant may assert laches where: (minors); Villalobos v. Cicero School Dist. 99, 362 Ill. App. 3d 704, 711-12 (2005) (where a parent or guardian appears • The plaintiff seeks equitable relief. for a minor, the minor is considered a ward of the court); • The plaintiff had knowledge of the defendant’s conduct Volkmar v. State Farm Mut. Auto. Ins. Co., 104 Ill. App. 3d giving rise to the claim. 149, 151 (1982) (deceased persons); Castaneda v. Ingram, 2018 IL App (1st) 170065, ¶ 5 n. 1 (only the administrator • The plaintiff delayed in asserting its rights. of a decedent’s estate can bring a survival action on the • The defendant did not know or was not on notice that decedent’s behalf); 755 ILCS 5/11a-18(c) (the guardian of a the plaintiff intended to assert its rights. disabled adult must appear for and represent the disabled adult in legal proceedings).) • The delay induced the defendant to adversely change position. • An unincorporated association (A Plus Janitorial Co., 2013 IL App (1st) 120245, ¶ 15). (See Osler Inst., Inc. v. Miller, 2015 IL App (1st) 133899, ¶ 23; Nancy’s Home of the Stuffed Pizza, Inc. v. Cirrincione, • A corporation that: 144 Ill. App. 3d 934, 940-41 (1986).) –– failed to pay a franchise tax, fee, penalty, or Laches is the equitable counterpart to a statute of interest; limitations defense. Statutes of limitations generally –– is dissolved; or apply to actions at law, while laches applies to equitable remedies. (Gen. Auto Serv. Station, LLC v. Garrett, 2016 IL –– is organized under foreign law but not authorized to App (1st) 151924, ¶ 16.) do business in Illinois.

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42. What is the for a 43. Does your jurisdiction recognize any breach of contract action in your jurisdiction? additional procedural defenses to a breach of contract claim? If so, when should a The limitations period for breach of contract in Illinois is: defendant assert the defenses? • Ten years of the alleged breach of a written contract (735 ILCS 5/13-206; Clark v. Robert W. Baird Co., 142 F. Supp. No. 2d 1065, 1075 (N.D. Ill. 2001) (applying Illinois law)). • Five years of an alleged breach of an oral contract (735 Equitable Defenses ILCS 5/13-205; Clark, 142 F. Supp. 2d at 1075 (applying Illinois law); Hassebrock v. Ceja Corp., 2015 IL App (5th) 44. What defenses based in , if 140037, ¶31 (if parol evidence is necessary to make a any, can a defendant assert in a breach of contract complete, it is treated as an oral contract for purposes of the statute of limitations)). contract action in your jurisdiction?

• Four years from the time plaintiff knew or should Under Illinois law, a defendant may assert several reasonably have known of the act or omission giving different equitable defenses, including: rise to the claim arising from a construction contract (735 ILCS 5/13-214). • Equitable estoppel (see Question 20). The limitations period starts to run from the date of the • In pari delicto (in equal fault) (see McRaith v. BDO breach (Clark, 142 F. Supp. 2d at 1075 (applying Illinois Seidman, LLP, 391 Ill. App. 3d 565, 595 (2009)). law); Am. Family Mut. Ins. Co. v. Krop, 2018 IL 122556, ¶ 17). • Laches (see Question 41). However, the statute of limitations for contracts for the • Unclean hands (see Question 11 and Question 29). sale of goods is four years from when the cause of action accrued (810 Ill. Comp. Stat. Ann. 5/2-725).

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