Enforceability: Everything You Need to Know
Enforceability of a contract is when someone can be compelled to observe or forced to obey. 3 min read
2. The Rules Under Contract Law
3. What Makes a Contract Enforceable?
4. The Duties of the Parties Agreeing to a Contract
5. What Is an Unenforceable Contract?
6. Does a Contract Exist?
7. Gift or Enforceable Contract?
8. The Difference Between Valid and Invalid Contracts
Updated November 23, 2020:
Enforceability of a contract is when someone can be compelled to observe or forced to obey. It also means something has the capacity to be enforced. Rights and obligations are examples of enforceable things when one party who is obligated to do something is compelled or ordered to go along with the lawful action.
The Potential for Compulsory Action
To rephrase, an enforceable action is one that can be made through compulsion. An example of an enforceable contract is when two or more people make an agreement or contractual obligation that allows one of the parties to lawfully force the other to do something. To be enforceable, a contract needs to have both an offer from one party and an acceptance from another party.
The Rules Under Contract Law
When the parties both agree to and sign a contract, they are then obligated to follow the rules as established under contract law. They are also obligated to do what they've agreed to do. Whether the agreement will be ruled legally enforceable is one of the most important things to consider when negotiating a business contract.
What Makes a Contract Enforceable?
There are four main factors involved in forming a legally binding, enforceable contract:
- The presentation of an offer
- An acceptance of the offer
- Consideration, or the thing of value offered by each party
The Duties of the Parties Agreeing to a Contract
Contracts are built to be legally binding. Once mutually agreed upon, contracts become enforceable agreements between the parties involved. These legally binding agreements can be presented in a court of law whether in written or oral form. The parties who agree to the contract are obligated to execute the deal as arranged in a legally enforceable contract.
What Is an Unenforceable Contract?
The terms of a contract can't be broken without causing the contract to be void. This occurs when one or both of the involved parties violates the agreement by failing to do what they've promised to do. There has to be a valid reason to void the contract for the party victimized by the breach to be able to cancel the agreement.
Does a Contract Exist?
Sometimes, the court decides the terms applied during the bargaining process were unjust, or a problem may exist within the terms of the contract. If the contract is found to be void in this manner, it becomes as if there never was a contract. To determine if there is a contract and if it has been breached, a court must examine the matter via contract litigation.
Gift or Enforceable Contract?
For a contract to be enforceable, legal analysis needs to uncover three elements, an offer, acceptance of the offer, and the exchange of consideration for the offer. US Federal contract law requires evidence of all elements for an arrangement to be considered a valid contract. Courts must consider:
- The original offer was for something that has value.
- There must be an agreed-upon meeting of the minds.
- Both parties must have the legal capacity to form a contract.
- Contract terms must be stated and definite.
- The offeree has to have the chance to review all terms, or initial intent, of the offer.
- The offeree has to have the chance to accept or reject the offer.
- The second party accepted the offer, making it binding.
- Both parties must clearly indicate approval of contract terms for it to be treated as binding and enforceable.
- Something of value was received in exchange for the offered item or service.
- Consideration was received as agreed.
- Consideration may be monetary in nature or a commitment to perform a service.
Without these things taking place to form an enforceable contract, the exchange is then treated as a gift from the offering party. Also, a legally binding contract cannot be formed regarding illegal activity or immoral behavior as defined by the court.
The Difference Between Valid and Invalid Contracts
The details of the agreement determine the validity of a contract. If any of the details are missing, a contract is then considered invalid or non-existent. The terms and conditions used in creating the original agreement are more important legally than the monetary value of items or services exchanged.
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