If you’re sued for breaching a contract, depending on the evidence, an effective defense may be that no contract was formed, so no breach could occur. Although establishing there was no legally enforceable contract may not necessarily end the legal action against you, it may seriously weaken the legal claims you face. That shift may give you leverage to settle the dispute at a reasonable cost as a corporate disputes lawyer can explain.
Reasons Why A Contract May Not Be Valid Or Enforceable
There are potentially several reasons a contract can’t be enforced. A given situation may involve more than one. Here are some of them as shared by our friends at Focus Law LA.
1. Lack Of Capacity
In most states, the person entering the contract must be 18 or older unless it’s for essential services or goods like shelter or food. Even if they’re old enough to be a party to the contract, it’s not valid if they lack the mental capacity to understand the contract terms due to illness, intoxication, or some other reason.
2. Lack Of Consent
The contract may not legally exist if a party was forced to sign it due to threats, violence, or undue pressure. It also wouldn’t be enforceable if the party was unduly and unfairly influenced by another or false statements were made to induce the person to agree. If the other person knowingly made these false statements to get the person to sign, the contract may not be enforced due to fraud.
3. Illegal Or Impossible
A contract for an illegal act (like stealing a car) is unenforceable. Similar to that is a contract contrary to public policy, which promotes exploitation or corruption. If the contract’s subject is an act that’s impossible to perform due to things beyond the party’s control (a flood levels a business so it can’t be sold), it may be voided.
4. Lack Of Consideration
To be a valid contract, the parties must exchange something of value. It can be money for a legally enforceable promise to do something or to refrain from doing something they have a legal right to do. It can be an exchange of goods or services. The proposed contract may be seen as an unenforceable gift if there’s no mutual consideration.
5. Mistake
Both parties entering an agreement based on a fundamental misunderstanding or mistake about an essential fact may make it unenforceable because the parties don’t agree on what must be done. This would be a mutual mistake. The contract may also be invalid if one party commits a fundamental factual mistake (unilateral mistake).
6. Lack Of Formality
Under statutory law, some contracts are invalid because they concern certain subjects and are verbally executed rather than in writing (statute of frauds). This can include real estate transactions or actions that can’t be completed within a year. Depending on the subject, a lack of notarization or witness signatures may make the contract unenforceable.
7. Unconscionable
Contract terms that are unfair or one-sided enough to shock the conscience may invalidate the contract. This may result when one party has a much stronger bargaining position and exploits it, disadvantaging the other party.
8. No Offer Or Acceptance
There must be a clear offer and acceptance. Offers and counteroffers can be made, but the parties must understand and agree to them. Without clarity, there can be no “meeting of the minds” to consent to the contract.
A contract doesn’t legally exist without the necessary building blocks, so it can’t be enforced. Getting an attorney involved during negotiations may not only result in better terms for you, but the attorney should ensure that the contract meets all the requirements to be enforced.