Which of the following is a defense to formation of a contract?

• A. Public policy
• B. Mutual mistake
• C. Ambiguity
• D. Unconscionability

Answer: (C)

Ambiguity about essential terms can prevent a contract from forming because a binding agreement requires definite terms that reflect mutual assent. If the offer or acceptance leaves important details open or unclear—like price, subject matter, or time of performance—there is no definite promise to be bound to, so there is no true meeting of the minds and no formation of a contract. For example, an offer to sell “a used car for a fair price” or to deliver “in a reasonable time” leaves critical terms undefined, so no contract forms until those terms are clarified.

Public policy concerns are about whether an agreement is against the public good, which typically renders the contract void before formation or unenforceable after formation, but they don’t address whether terms are definite at the outset. Mutual mistake is a defense to formation because both parties share a mistaken belief about a fundamental fact at the moment of contracting. Unconscionability is generally a defense to enforcement, focusing on the fairness of the contract when it's already formed. Ambiguity targets whether the terms themselves show a definite agreement, so it best fits as a defense to formation.