What Makes a Contract Unenforceable?
Enforceable or legal contract is one that can be enforced by the courts. Although contracts are signed to minimize the possibility of disputes between entities.3 min read
Updated November 3, 2020:
What makes a contract unenforceable? A contract is unenforceable in the following situations:
- Coercion or deception was used in negotiating it.
- Enforcing it is not for the good of society.
- One of the parties to contract proves that fulfilling the contract is impossible.
- Mistakes were made during the signing.
- Fulfilling the terms of the contact has become illegal.
What Is an Unenforceable Contract?
An enforceable or legal contract is one that can be enforced by the courts. Although contracts are signed to minimize the possibility of disputes between entities, there are few legal areas that are as fraught with disputes as contracts. When one or both parties to a contract fails to live up to his part of the contract, the aggrieved party may naturally want to seek the intervention of a court. Many people find out that the contract they signed is not valid in a court because courts have high standards for contracts.
A contract can be rendered unenforceable because of circumstances surrounding its signing, the terms of the contract, and events that happen after the signing of the contract.
Contracts That Are Unenforceable Because of Circumstances Surrounding the Signing
There are a number of issues before or during the signing of the contract that courts can use as valid grounds to declare a contract unenforceable:
- Coercion. A contract can be declared unenforceable if a court is convinced that coercion was used to facilitate the signing. An example would be if blackmail was used as leverage to facilitate the contract. Courts can also declare a contract unenforceable when one of the parties to the contract has undue influence on the other. This might occur when one of the parties to the contract was a minor or when one of the parties was illiterate and could not read and scrutinize the terms of the contract.
- Deception. If fraud was involved in the facilitation of the signing, the contract can be declared unenforceable. For example, when a real estate owner misleads a buyer about the size of a property he is selling, the contract can be declared unenforceable. The courts may also declare a contract unenforceable because one of the parties deliberately withheld information pertinent to the contract before the signing.
Contracts That Are Unenforceable Because of the Terms of the Contract
Courts have declared contracts unenforceable because of some terms in the contract. Examples of terms that may lead to trashing a contract include the following:
- A contract to do something illegal. An enforceable contract must be made for a legal purpose. Courts generally don't enforce contracts that have terms that require one of the parties to do something that is against the good of the society. This includes contracts that require parties to do things that involve gambling or sexual immorality. Contract terms should generally be in line with the laws of the jurisdiction where they are signed.
- Unfair contracts. A contract may be declared unenforceable because the financial penalties for breach of some of the terms are unfair. Alternatively, courts may declare that only those terms are unenforceable or replace the terms.
- Mistakes. A contract may be declared unenforceable when one or both of the parties make a mistake during the signing. For example, imagine a contract signed for supply of goods. During the negotiations, both parties agree that goods will be delivered at a cost of $5,000. However, in the contract, a printing error is made and the cost shows up as $500. Such a contract can be declared unenforceable because of the mistake.
Contracts That Are Unenforceable Due to Events That Happen After the Signing
A contract can be declared unenforceable because of issues that arise after the signing.
- When enforcing the contract becomes impossible. A contract may be declared unenforceable when fulfilling it becomes impossible. This may happen when a farmer who agrees to supply corn to a food processing company. If a storm subsequently wipes out a farmer's crop, a farmer can successfully ask to be released from the contract on the grounds that it is impossible to fulfill.
- When enforcing the contract becomes illegal. Courts don't enforce contracts that promote illegal activities. Some terms of a contract can become illegal because of change of laws. Such a contract is generally unenforceable.
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