Introduction
A contract is created between two or more for doing something or not. It is one kind of legal document legally binding to the contracting party and lawfully enforceable by law. A party can make a mutual agreement through the offer and acceptance. Any contract that is created in legally valid terms can be enforceable legally. Essential ingredients must be fulfilled, such as a valid offer, consideration, acceptance, and capability of the party, to make a legally valid and binding contract. The contracting party can enforce that contract in a court of law. In this article, we address the unenforceable contract. When a contract becomes unenforceable, what are the reasons that make a contract invalid or unlawful? So please stay tuned and read below;
What is an Unenforceable contract?
A valid contract that the court can declare as not enforceable for a specific reason is called an unenforceable contract. The most common reason for the defense to declare an unenforceable contract is a contradiction of a contract to declare it void or voidable. Disputes of the enforceability of a contract arise when the parties seek the enforceability of a legally binding contract.
The main reasons which are commonly used for making a void and voidable contract are given below;
Void Contract: A void contract is one that is not legally valid under contract law or any other law.
Voidable Contract: A voidable contract is one in which the contracting party is legally not bound by the agreement.
An unenforceable contract can not be enforced in a court of law as it is not legally binding. However, it is not an unlawful contract, and no remedies exist.
Sometimes, when the legal conditions of the contract are not satisfied it might be declared unenforceable. After announcing an unenforceable contract. The court can order the opposite party to act or pay the affected party for the non-completion.
For example, suppose A enters an oral agreement with B to kill C for a specific sum of money. In this case, the said agreement is illegal and unlawful.
Let’s discuss other reasons that make a contract unenforceable,. Such as a defect in signing a contract, the content of the agreement not covering some legal aspects, or some unwanted event that occurred after entering the contract. You may also include, a lack of capacity and ability to enter into the agreement, force or undue influence, mistakes, or violation of public policy. All those reasons make a contract unenforceable.
The essential ingredients that are required to make an enforceable contract
To make an enforceable contract you should know some essentials required to make a legally valid and enforceable contract in the eye of the law. A valid contract can be enforced because it is legally binding to the contracting parties. The person who enters the contract is called the party of the contract, which may be two or more. Any legal entity, such as a company, can enter the contract. Another thing you should note is that there is no need to create a contract in written form; the oral agreement is also valid in the law. However, making a contract in writing is advisable because the oral agreement is more difficult to prove by law.
The essential ingredient for making a legally valid contract is an offer. An acceptance of that offer, and consideration; all these need to be satisfied. Consideration is an exchange based on whether to do something regarding the contract; in this way, money is a common form of consideration.
A typical joint enforceable contract is when one contracting party promises a certain sum to another party in exchange for a service. In this way, one party receives service, and another gets a sum for their services.
What are the reasons that make a contract unenforceable?
Many reasons can be considered for making a contract unenforceable. The court of law will never enforce such a contract if is found one contracting party wants to take advantage of it or if proof of agreement is missing. For the determination of the validity of a contract, the court follows some criteria, which are given below;
Lack of capacity of the party
It is a crucial requirement that the contracting party who wants to enter into the contract must be mentally stable. In this way, the party’s capacity plays a vital role in making a valid contract. The lack of capacity can be defined in a different way, such as a person who has not attained the age of 18. A person who is intoxicated by drugs or alcohol, and a person who has no sense. At the same time, he enters into a contract, and he does not know the outcome of that contract. All types of these disabilities count as a lack of capacity, and the contract can not be enforced if the court finds a lack of capacity in it.
Let’s understand that with an example, suppose A is drunk, and he is not in a position to understand what is going on with him, and he enters into a contract. In that situation, such a contract is void and unenforceable by law. More so, if he does not fulfill the contract, he will not be punished and will be free from the contract.
A person who is not qualified by law can not enter into a contract. The contract is made between a disqualified party, or someone legally prohibited from doing so. Such as a convicted person, insolvent, etc. Such a contract is unenforceable by law.
Duress or Coercion
A party who enters into the contract must be signed with feel free and voluntarily not to sign a contract with any coercion or violence. Sometimes, the contracting party is forcefully duressed by the other party to enter into a contract. Such type of contract is not considered an enforceable contract in a court of law and shall be declared unenforceable. For example, suppose ‘A’ is threatened with a knife by ‘B’ for signing an illegal contract; that contract is unenforceable because it is made by duress.
Undue influence
Undue influence means using power or position to make an agreed to sign an agreement. The court can not accept such a contract made using undue influence if such an activity is proven. As a result, it would be an unenforceable contract.
Misrepresentation
When a party makes a false statement of the fact, and the result of another party agreeing to enter into the contract by believing that statement. It is known as a misrepresentation of a contract. Here, the sufferer party must prove to the court that the statement regarding the contract is given based on false and not actual. That’s the reason the agreement is unenforceable in a court of law. You should note, all misrepresentations do not fall under fraud, but all frauds fall under misrepresentations.
Fraud
Fraud is an act committed with bad intentions to someone else to prevent their legal rights. A fraudster person can prove himself by whether he is truthful or lies before the fraud reaches a court of law. If their intention is proven in a court of law, the contract based on fraud will be declared void. The court does not favor the party who entered the contract fraudulently.
Nondisclosure
It is called nondisclosure, if a party leaves important statements while discussing aspects of the contract before entering. In terms of a contract, all terms, conditions, statements, and declarations are determined between the parties. If any contracting party laps that it results in such a contract, it will become unenforceable.
Unconscionability
Unconscionability in a contract means something unfairly written in a contract that should not exist. Such a contract is not enforced in a court of law. When the dispute of unconscionability comes before the court, that can be determined before concluding. For example, if one contracting party has unequal bargaining power, the contracting party needs help understanding the terms of the agreement due to language issues. Or if the terms prescribed in the contract are unfair and unconscionable, etc. In that situation, the court may declare a contract unconscionable and unenforceable.
However, the court can enforce that part that is enforceable and considerable of the contract. If the remaining parts are unenforceable, the party has to rewrite or remove them from the agreement.
Illegal contract
As per the name suggested, an illegal contract is a type of contract that violates the law of public policy. For example, an agreement is made between the parties to buy and sell illicit products that are against public policy. Such type of contract is declared unenforceable under the law. Such types of contracts are unenforceable based on the protection of society and the parties involved in it. If the court found that an agreement goes against existing state or federal laws, that would also be an unenforceable contract in the eye of the law.
Mistake
The mistake can occur unilaterally or mutually. If any standard type of error is found in the contract, it does not mean it will be declared invalid. If the contracting makes a mistake, whether unilateral or mutual, all of that is legally not enforceable. In that situation, any significant errors must be determined in the contract. In some cases, it will be required to rewrite the mistake in the contract to make an enforceable contract in a court of law.
Impossibility
Sometimes, the contract is created in a way for legal and enforcement. But, if it is difficult and impossible to perform and carry out, and as a result of that, it becomes unenforceable.
Unwritten contract
There is no need to create a contract in writing form. An oral agreement is also valid in law. However, some particular contracts must be in writing form for enforcement purposes. For example, land-selling and land-transferring contracts, lease agreements created for more than a year, contracts made with the state, etc. All types of contracts must be formed in writing. The oral contract is hard to prove in a court of law. As a result, it might be unenforceable by law.
Here are some tips that can help you avoid an unenforceable contract
Ensure that the contracting parties have the same meaning and sense regarding the contract:
When a party wants to enter into a contract, they offer to another party similarly. In this way, the other party must think it fits in with the concept provided to them. A minor mistake may have resulted in an unenforceable contract in the eye of the law. The contracting parties are essential because every term and condition they speak in oral terms is converted into written form and creates a written agreement. In this way, the contracting parties can take legal advice and hire an attorney expert who can help them prepare agreement drafts legally.
Write a clause regarding disputes and the resolution method:
The contracting parties must have written down a particular clause regarding disputes and resolution methods. This clause helps them when some unwanted disputes arise between them. They can easily resolve them without reaching the court and save time and money. Through the resolution clause, the party can direct a disagreement via independent mediation and arbitration to resolve any disputes. In this way, they can avoid litigation, which saves them valuable time and money.
The parties must evaluate the contract:
The contracting parties should ensure the proper evaluation of the contract. They can appoint an attorney for that work and help them prepare a contract draft, terms, conditions, and any other necessary aspects to be included. After reviewing all clauses, the contracting parties must be signed on it.
Also Read:
Remedies for Breach of Contract under the Contract Law
What Is A Formation Of A Contract?
What is Standard Form Of Contract?
