Contracts: Enforceable vs. Unenforceable
Contracts are a vital part of a real estate business. They establish the terms and conditions of an agreement between two or more parties and help to ensure that everyone involved knows what is expected of them.
Contracts can be either enforceable or unenforceable. An enforceable contract is one for which a legal remedy is available in the event that it is not fulfilled.
Contracts may be unenforceable when statutory requirements have not been met.
For example, an oral contract to buy land would not be enforceable because the statute of frauds requires such an agreement to be in writing.
Similarly, statutes of limitations, which limit the length of time available for legal action, may apply to contracts of certain types and render them unenforceable after a certain period of time.
What Makes a Contract Unenforceable?
There are a number of reasons why a contract might be unenforceable. Contracts may be invalidated by:
- Undue influence
If any of these factors are present, the contract may be found to be voidable, meaning that it can be canceled at the request of one of the parties.
Contracts may also be unenforceable if they are illegal or violate public policy. For example, a contract to commit a crime would not be enforceable.
Enforceable Contract Requirements
In order for a contract to be enforceable, it must meet certain requirements. Contracts must be:
- Made by competent parties
- Free of duress, fraud, or misrepresentation
- Supported by consideration (something of value given by each party to the other)
- A contract must be in writing if required by law
If a contract does not meet these requirements, it may be found to be unenforceable.
Unenforceable Contracts and Remedies
If a contract is unenforceable, the parties may still be able to resolve their dispute through negotiation or mediation.
However, if they are unable to reach an agreement, they will not be able to take legal action to enforce the contract.
What Are the Kinds of Unenforceable Contracts
There are several types of unenforceable contracts. Some common examples include:
- Contracts that violate public policy
- Contracts made under duress, fraud, or misrepresentation
- Contracts that are illegal
- Oral contracts if the law requires them to be in writing
While these contracts may not be enforceable, the parties may still be able to reach an agreement through negotiation or mediation.
Lack of Capacity
One type of unenforceable contract is one that is made by a party that does not have the capacity to contract.
This includes contracts made by minors, people with mental disabilities, and people who are under the influence of drugs or alcohol.
These contracts are enforceable. While some contracts may not be enforceable, there are still many that are.
Contracts that meet the requirements of being made by competent parties, free of duress, fraud, or misrepresentation, and supported by consideration, are typically enforceable.
Contracts are a vital part of business, but it's important to know that not all contracts are enforceable. Contracts may be unenforceable for a variety of reasons, including if they violate public policy or if they're illegal.
If a contract is unenforceable, the parties may still be able to reach an agreement through negotiation or mediation, but they will not be able to take legal action to enforce the contract.
Contracts that are made by competent parties, free of duress, fraud, or misrepresentation, and supported by consideration, are typically enforceable.
Knowing the difference between an unenforceable and an enforceable contract can help you protect your client's business interests.
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