Contracts are used every day, especially in business. But without experienced legal advice, unenforceable contracts are all too common. This article explores seven reasons for unenforceable contracts.
Generally, enforceable contracts must include certain elements, including:
· Offer. One party makes an offer to another.
· Acceptance. The receiving party accepts the offer.
· Consideration. Some form of consideration (money or services, for example) is exchanged.
· Mutual Consent. All parties to the contract consent to its terms.
· Capacity. The parties must understand what they are doing.
· Legal Purpose. The contract must be for a legal purpose.
Unenforceable contracts might be lacking one or more of these essential elements.
#1. One Party to the Contract Lacked Capacity
‘Capacity’ means the ability to understand. For contracts to be enforceable, the parties must have the capacity to know what the agreement contains.
People can lack capacity because of drug use and being intoxicated. Also, certain medical conditions and medications can affect an individual’s ability to make informed, responsible decisions. And while Texas allows minors to sign contracts, the minor usually has the option to void the contract.
#2. An Unenforceable Contract Might Have Been Signed Under Duress
The parties to a contract should be signing it voluntarily. However, one party might force another person to sign a contract. The act of forcing someone to do something they ordinarily would not do is duress.
Contracts signed under duress could be considered unenforceable contracts because mutual consent is not present.
#3. The Contract Lacks Basic Elements Like an Acceptance
As noted above, the parties must accept the terms of the contract. This should be reflected in the contract provisions to prevent the creation of unenforceable contracts.
For example, contracts generally start by should identifying the parties. Details about the offer should be stated unambiguously. Contracts signed at this point would lack provisions showing acceptance of the offer.
#4. One Party to an Unenforceable Contract Used Fraud or Misinformation
Parties typically exchange information about the deal while negotiating a contract. For example, Jack might offer to sell Joel his 10,000-acre ranch in west Texas. Joel agrees, based on the prospectus and business records that Jack provides. However, Joel learns that Jack lied about crucial details that might have caused Joel to pass on the deal.
The contract Jack and Joel signed could be unenforceable because of Jack’s misinformation.
#5. Mutual Mistakes Occur in Unenforceable Contracts
Sometimes a contract is voidable because all parties to the contract erred on a material fact. This situation generally is not considered fraud since both parties were mistaken.
For the contract to be considered invalid,
· There must have been a mistake.
· It was a material mistake.
· And the mistake was mutually made.
#6. Unenforceable Contracts Might Contain an Illegal Purpose
This reason pertains to the reason the contract was made. Contracts that call for an illegal act are invalid.
For example, Jack and Joel sign a contract agreeing to sell illegal drugs from their club. The contract cannot be enforced without breaking the law, so it’s an unenforceable contract.
#7. The Doctrine of Impossibility
After a valid contract is signed, an unforeseen event may occur that makes performance of the contract impossible. One party might use the doctrine of impossibility as a defense for its inability to complete the contract.
Are You Using Unenforceable Contracts?
The attorneys at Henke, Williams & Boll assist clients like you with litigation and other matters. But we don’t just help a little. We win cases through aggressive representation using extensive knowledge of the Texas legal system.
For a free consultation or phone appointment, call 713-940-4500 or use the convenient contact form located on our website. [link to website]. We represent clients in the Houston area, including Harris County, Montgomery County, Waller County, Fort Bend County, Galveston County, and Brazoria County.