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What issues could keep a contract from being enforced?

Contracts are promises that are enforceable by law. Every business would like to ensure that its agreements will stand up in a court of law. What are some of the issues that could stand in its way?

When a court reviews a contract, the first thing it looks for is whether the contract is valid in the first place. In order to be valid, it may need to be written, signed and dated, depending on state laws and what the contract is about. Also, the parties must have reached a "meeting of the minds" on the terms. That means that each party understood, or should have understood, the terms of the contract in the same way. It must include an offer and acceptance of that offer, and something of value must be given by each side. Finally, the terms must be detailed enough so that a court knows how to enforce them. If an agreement doesn't any of these tests, it cannot be enforced.

Once the validity of the contract has been determined, there may still be reasons not to enforce it. These are called defenses to the contract, and they are designed to prevent unfairness in the bargaining process or in the ultimate contract.

What are some defenses to contracts?

Lack of capacity. Generally, minors do not have the legal capacity to enter into a contract. Others, such as people with cognitive disorders, may be found to lack capacity. Contracts entered into by minors are typically voidable, while those entered into by someone who has been legally judged incapacitated is void.

Undue influence, misrepresentation or duress. These are examples of unfairness in the bargaining process. For example, undue influence may occur when a person who is expected to act in a party's interest pressures the party into signing an unfavorable contract. Misrepresentation is more than simply one party having better information than the other. It involves deliberate concealment of material facts or withholding of information by someone who has a duty to disclose it.

Mistake. This is only a defense when both parties made a basic assumption that turned out to be false. Making a bad bargain is not a mistake in this sense.

Illegal or contrary to public policy. Contracts are void when either party agrees to do something illegal. Similarly, some agreements may be so clearly against sound public policy that courts will refuse to enforce them.

Unconscionability. In some cases, the bargaining process was so unfair or the terms of the contract so oppressive that the contract "shocks the conscience of the court."

To ensure your contracts meet state law requirements and are fully enforceable, have an attorney negotiate, draft and/or review them.

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