What Is Unenforceable Contract in Contract Law
In the world of business, contracts are a vital aspect of any operation. They establish the terms of a deal and legally bind both parties to fulfill their obligations. However, not all contracts are enforceable in a court of law. In legal terms, an unenforceable contract is a contract that cannot be legally enforced because of various reasons. In this article, we will explore what an unenforceable contract is and the reasons why it cannot be enforced.
Definition of Unenforceable Contract
An unenforceable contract is a contract that cannot be enforced by law, or that can be declared void if a breach occurs. Unenforceable contracts are distinguished from void contracts, which have no legal effect from the beginning of the agreement.
Reasons for Unenforceable Contracts
1. Lack of Capacity
For a contract to be enforceable, all parties must have the capacity to enter into a legal agreement. This means that they must be of legal age, mentally competent, and not under the influence of drugs or alcohol. If a party lacks capacity at the time of entering into a contract, the agreement may be deemed unenforceable.
2. Fraud & Misrepresentation
Fraud and misrepresentation can lead to an unenforceable contract. If one party intentionally deceives or conceals information from the other party, the contract may be deemed unenforceable. This is because the deceit or misrepresentation is an element of fraud that voids the contract.
An agreement that is illegal or violates a public policy may be deemed unenforceable. For instance, a contract that requires a person to commit a crime or violate a law is unenforceable. The aim of the court is to deter people from breaking the law.
4. Duress or Coercion
An agreement that is obtained under duress or coercion is unenforceable. If a party threatens the other party with harm, the agreement cannot be upheld in court.
5. Statute of Limitations
The statute of limitations places a limit on the time in which a legal action can be taken. If a party waits too long to take legal action, the contract may become unenforceable.
In conclusion, unenforceable contracts are agreements that cannot be enforced in a court of law due to various reasons. The reasons range from lack of capacity to illegality or duress. As a business owner, it is vital to ensure that all contracts comply with legal requirements to avoid the risk of unenforceability.