What to know about Unenforceable Contracts?

By The Law Office of Yoel Molina.
 
Due to the fact that a contract is a legally binding agreement, if you engage in one with another person or firm, you and the other party are typically expected to uphold the terms of the agreement. However, it is possible for a contract that is otherwise lawful to be deemed legally unenforceable, and this article examines some such scenarios when that can occur.
 
Inadequate Capacity:
In order for a contract to be valid, it is necessary for both (or all) parties to be able to comprehend the terms of the agreement. The contract may be deemed unenforceable against a party if it shows that they lacked this capacity for thinking. When one party to the agreement is too young or lacks the mental capacity to fully comprehend the agreement and its effects, the question of capacity to contract typically arises. The overall goal here is to stop someone who is unable to make a thoughtful decision from being exploited by an unethical individual.
 
Duress:
A contract that was made under duress, or compulsion, when someone was threatened, is void. A shipper (Company A) promised to convey a specific quantity of Company B's materials, which would be employed in a significant development project, in an instance of duress that is frequently referenced. Company A refused to finish the voyage unless Company B agreed to pay a greater fee after Company B's project had started and Company A's ship was on its way with the materials. Because there was no other method to obtain the material and failing to complete the project would result in unaffordable losses, Company B was compelled to pay the inflated amount.
 
Negative Influence:
A contract may be deemed unenforceable due to undue influence if Person B coerced Person A into signing it by using a unique or exceptionally persuasive relationship that Person B had with Person A. In order to establish undue influence, Person A must either demonstrate that Person B used excessive pressure during the negotiation process against Person A and that Person A was overly vulnerable to the pressure tactics for whatever reason, or that Person B used a confidential relationship to pressure Person A.
 
Misrepresentation:
Any agreement reached after fraud or deceit during the negotiation process will undoubtedly be deemed unenforceable. The purpose of this is to promote sincere, fair-minded negotiations and transactions. Misrepresentations frequently happen when one party intentionally conceals or misrepresents a fact (for example, by telling a prospective buyer that a house is termite-free when it is not) or when they say something falsely (for example, by concealing structural damage to a home's foundation with paint or a specific arrangement of furniture).
 
Nondisclosure:
When someone fails to disclose a crucial piece of information regarding the trade, it amounts to misrepresentation through silence. In determining whether a party had a responsibility to disclose information, courts consider a number of factors, but they also take into account whether the other party should or should have had easy access to the same information. Parties are required to reveal only pertinent information, it should be highlighted. However, if Party A directly requests Party B to provide information regarding a fact (whether material or not), then Party B has an obligation to do so.
 
Unconscionability:
Unconscionability is the legal term for when a clause in a contract or another aspect of the agreement was so startlingly unjust that it could not be upheld as written.

Again, the goal is to ensure justice, hence a court will take into account:

• Whether one party had significantly less bargaining power than the other,
• whether one party had trouble understanding the terms of the agreement (for instance, because of a language barrier or literacy challenge)
• whether the terms themselves were unfair

 
A public policy:
Public policy can be used to declare a contract unenforceable in order to safeguard one of the parties involved as well as to prevent harm to society at large. For instance, a court will never uphold an agreement that promotes anything that is already prohibited by state or federal law (you can never uphold a contract for the sale of marijuana that is prohibited by law) or that offends "public sensibilities" (contracts involving some sort of sexual immorality, for example).

​Other instances of contracts (or contract provisions) that are unenforceable because they violate public policy include:
 

• a boss compelling a worker to sign a contract that bans them from affiliating with a union
• compelling a worker to sign a contract that forbids taking time off for medical reasons
• If the conditions of a child custody agreement conflict with the kid's best interests, the contract is void in California.

 
Mistake:
Sometimes a contract is unenforceable not because one party acted in bad faith on purpose, but rather because one party made a mistake (referred to as a "unilateral mistake") or both parties made a mistake (called a "mutual mistake"). In either situation, the error had to pertain to a crucial aspect of the contract and it had to have a meaningful (considerable) impact on the exchange or negotiation process.
 
Impossibility:
A contract may not be enforceable in particular circumstances if doing so would be impossible or impractical—for example, if doing so would be too expensive or complicated. In order to demonstrate the impossible, you would need to:

• Due to an unforeseen circumstance that wasn't your fault, you are unable to execute the contract's requirements, and doing so will now be considerably more difficult or expensive.
• The contract didn't require you to assume the risk of an unforeseen circumstance.

 

If you have any questions about this article or similar matters, please contact our office, the Law Office of Yoel Molina, P.A., at fd@molawoffice.com or 305-548-5020, option