When you make an agreement, especially in business, you rely on the courts’ enforcement of it if the other party fails to carry through on their obligations. If you don’t have a lawyer review your contracts, however, you may find there are problems that make the contract unenforceable. What are some issues that could have that effect?
Is the agreement a contract at all?
In general, a valid contract is defined as one in which the parties come to a meeting of the minds about what is to be contracted. There is an offer and an acceptance of that offer. Something of value (“consideration”) is given by each party. The contract terms must be defined sufficiently for a court to enforce them.
Does the contract have to be in writing?
In Louisiana, the law only requires contracts to be in writing when they involve real estate or the payment of certain debts. When writing is required, you may also need witnesses and a date on your contract. Be sure to ask your attorney if a written agreement is required in your case.
Was the other party able to enter into a contract?
Even if the court that agrees you have a valid contract in form, you may still run into trouble if the other party lacked the capacity to contract or was affected by undue influence, duress or misrepresentation. Minors under 18 generally lack the capacity to enter into enforceable contracts. In this context, a misrepresentation is either a false statement of fact, the deliberate concealment of a material fact or the deliberate withholding of information you had a duty to disclose.
We should mention that there is a contract defense called “mistake.” This defense only applies when both parties were mistaken about a basic, crucial assumption about the contract at the time the agreement was entered into. It does not relieve parties who do not read their contracts thoroughly.
Is the contract unconscionable, illegal or against public policy?
Courts can refuse to enforce contracts that involve illegal activity or are unconscionable. Unconscionability is something that shocks the conscience of the court. It could involve the bargaining process or the actual terms of the contract. For example, if one party had so little bargaining power as to have no meaningful choice, contract terms that unduly favor the stronger party could be found unconscionable. In some rare cases, courts will also find that enforcing a certain contract would go against public policy.
Having an attorney negotiate, draft or review your contracts can avoid these issues and save considerable trouble.