Contracts are agreements creating mutual obligations. When one party doesn’t uphold those obligations, essentially breaking a promise, the other may sue for breach of contract. However, it’s common for disputes to arise regarding the material terms of the contract, the circumstances under which it was signed and even the legality of its subject matter.
So what makes a contract unenforceable, and how should you avoid entering into a bad contract?
Lack of capacity
For a contract to be valid, both parties must understand the agreement they’re entering into and be legally able to enter into an agreement in the first place. This means the party must be of age to enter into a contract (usually 18). Additionally, the mental capacity provision protects individuals who could be taken advantage of, like someone suffering from Alzheimer’s. It also makes it inadvisable to complete a contract with a party under the influence of alcohol or drugs.
No one should be forced into entering a contract or threatened in any way. A contract cannot be enforced if the court finds one party was pressured unfairly into completing it. Duress includes dramatic examples like blackmail, but it can also include incidents like a boss pressuring an employee to sign a contract while threatening to fire. Undue influence, or excessive persuasion, can also make a contract unenforceable.
Both parties to a contract are expected to approach negotiations with honesty and openness. Misrepresentation occurs when one party misleads the other with an untrue point, drawing them into the contract based on this deception. During a home sale, this could mean being dishonest about known major issues or hiding structural defects with cosmetic dressing. Sometimes misrepresentation becomes fraud—typically when it centers on an intentional deception regarding a crucial part of the contract.
A contract cannot be enforced when it covers something that’s illegal in the first place. For example, a contract regarding gambling or the sale of illegal drugs would already violate the law and could not be enforced.
If a contract is blatantly unfair to one party, the court may consider it unenforceable. In these cases, the court will look at the circumstances surrounding the contract’s creation and may even enforce one part of the contract but not another.
While oral contracts are acceptable in some cases, Georgia law requires that the following types of agreements be made in writing:
- Promises to answer damages for oneself or for the debt of another
- Marriage-related agreements, like prenuptial agreements
- Contracts for the sale of land
- Agreements that won’t be performed within one year
- Promises to revive debts barred by a statute of limitations
- Commitments to lend money
Good contracts should be specific, with well-defined material terms. They need to cover potential outcomes that seem unlikely and be entered into in good faith. That’s why it’s vital to have a lawyer experienced in contract law draw up these important documents to avoid any unpleasant surprises down the road.
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Disclaimer: The blog should not be used as a substitute for competent legal advice from one of our licensed attorneys.