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Unenforceable Contracts and the Common Situations that Create Them

Lucere Legal helps small business owners create enforceable contracts

When your company enters into a contract with another entity or person, both parties are expected to fulfill the terms of the contract.  However, you can only enforce a contract that is square with the law, otherwise they aren’t worth the paper they are written on. If you want to have agreements with teeth, you need to make sure they will be fully supported in court. The following are grounds for a contract to be found legally unenforceable:

Lack of capacity – If one of the parties lacks the ability to understand what they are agreeing to—a disqualification with several possible reasons, including mental incapacity, age (under the legal age to sign) or not understanding the language—a contract could be deemed unenforceable.

Coercion – Any contract entered into under duress (one party was threatened into signing) may be invalid.

Undue influence – If one of the parties was pressured into signing the agreement. A step down from coercion, but the contract is no more enforceable if the pressure is excessive.

Fraud – Any misrepresentation during the contract negotiations could lead the contract to be found unenforceable.

Nondisclosure – If one party to a contract makes a misrepresentation by staying silent or otherwise failing to inform the other about important details.

Unconscionability –If something within the contract is grossly unfair–one side has significantly less bargaining power or is illiterate and cannot understand the terms–this can render a contract invalid.

Breach of public policy – Contracts that require one party to commit illegal acts or force one party to forfeit employment or other rights cannot be legally enforceable.

Mistakes – When an unintentional mistake regarding something important in the contract that has a significant effect on the negotiating process happens, that may leave the contract unenforceable.

Impossibility – A contract can be found to be unenforceable, should an unanticipated event or circumstance make it impossible to fulfill the terms.

Effective contracts are vital to governing business relationships between your company, your employees, your vendors, and your customers. If you’re a small or mid-size business owner, call us today  or fill out our contact form to learn more about effective contracts or to schedule a business consultation session.

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