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Court play a key role in determining enforceable contracts.
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A contract may ultimately be found unenforceable for a number of reasons.
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We examine the factors that can make a contract unenforceable below!
In Brief:
Sometimes, disputes between parties in a contract end up in court. Whether it’s an alleged breach of contract, unfair terms, or other issue, there are plenty of reasons why legal contracts may be disputed in a court of law.
This raises the question of whether a court can order a contract be upheld, even if it seems unfair to one party over another. Here’s a closer look at whether a court can order that an enforceable contract be upheld even in a dispute between two parties.
Can a Court Order That a Contract Be Upheld?
Whether a court can order that a contract can be upheld or not largely depends on whether it’s found to be an enforceable contract or not. After determining that a contract exists from a legal perspective, the court must then decide whether it should be enforced. There are many reasons why a contract may not be found enforceable, such as a lack of fairness and equality in the negotiating process.
If the contract has a valid defense, it may still be deemed voidable, which means that the victim party may be able to cancel it. However, if the unfairness in the contract is so blatant and unequal, the court may declare it void, meaning that it was never formed from a legal point of view and is ultimately unenforceable.
What are Some Issues That May Make a Contract Unenforceable?
A court may find a contract to be unenforceable for a number of reasons. Just a few of these include:
Lack of Capacity
If the parties who entered into a contract are found to lack capacity, meaning the mental ability to be accountable and fully understand the contract, it may be thrown out by a court. If a signing party is found to be a minor in the eyes of the law, lacks competence, or under the influence of drugs or alcohol, the contract may be found unenforceable.
Misrepresentation and Fraud
Misrepresentation in contract law is a false statement that entices someone to sign a contract, while fraud is outright deception by telling a lie or leaving out the truth when drafting the contract.
Duress or Undue Influence
In contract law, duress is threats and violence designed to make someone enter into a contract against their will, while undue influence is when one party leverages their unequal power and influence to compel someone to sign a contract. For example, a high-level manager has undue influence over a low-level employee when they force them to sign a contract benefitting only them.
Illegality
A contract that openly breaks the law is considered to be unenforceable. For example, an agreement to sell illicit drugs can’t be enforced because it blatantly disregards the law.
Unwritten
While not all contracts need to be in writing, some are required by law to be, such as real estate transactions. Contracts in these areas that aren’t written on paper can be found unenforceable in a court of law.
Mistakes
Mistakes can also make contracts unenforceable, but they have to fall under certain criteria. For a mistake to make a contract unenforceable, both parties must have made a mistake about the basic nature of the contract which impacted the value being exchanged and must relate to the facts when the contract was created. Additionally, the party looking to get out of the contract must not have contractually assumed the risk of any mistakes. It’s important to note, however, that failure to read a contract isn’t considered a valid defense.
Force Majeure
Most business contracts have a “force majeure” clause written into them, which means they can be cancelled under certain unfortunate circumstances, some of which include natural disasters, fires, pandemics, terrorism and terroristic threats, and the like.
Unconscionability
Finally, contracts can be deemed unenforceable due to unconscionability, which means that the contract itself is so unfair and unequal to one party that it’s indefensible and must be struck down by court order.
What’s the Difference Between Void and Voidable Contracts?
If a contract is found unenforceable, it can be either ultimately found void or voidable in a court of law. But what do these terms mean? Here’s the difference between the two!
Voidable Contracts
A voidable contract is still a valid contract, but to only one party. The other party can choose to accept or refuse it.
It can be considered void by a court if:
- A party breached the terms of the contract
- Mistakes were present in the contract
- A party was under undue influence when signing the contract
- Threats were used to coerce one party into signing the contract
Void Contracts
A court can also deem a contract to be void, meaning its unenforceable and has no legal effect.
This is typically because:
- There was a lack of consideration when a party signed the contract
- The contract explicitly breaks the law
- The contract is too vague or impossible to fulfill
- The contract was drafted when one party was duped with fraud by the other