A contract isn’t worth the legal fees that business pays to draft the agreement if it isn’t enforceable in a court of law. Several difference circumstances, and contractual language, can render the document void if you’re not a careful business owner. Our attorneys review the basics regarding the common circumstances that can make a business contract unenforceable. We’ll also explain how to avoid them the next time your company is at the bargaining table.
Mental States of Decision Makers
Mental capacity and outside influences can factor heavily in the negotiation process and can ruin the legal standing of the agreement once both sides settle on terms. Duress or coercion can force your company or the other side to agree to contractual provisions that aren’t in the best interests of either negotiating party. For example, a contractor refusing to complete a building project unless your company pays double the agreed price is attempting to leverage your business into an unfair deal. Additionally, a lack of capacity to understand the contract – be it diminished cognitive function or age – can render a contract null because the other side cannot understand the terms to agree to them in an informed manner.
Undue Influence in Negotiating
A third party with an influential relationship over your company or another party to the contract could render your contract unenforceable. How? That party outside the negotiations could place excessive pressure on your business to agree to terms that the company wouldn’t otherwise. Alternatively, a third party could exploit an intimate relationship with the party you’re negotiating with to accept contractual terms not good for their financial interest. The result is a contract that may stand up the scrutiny of a judge.
Negotiating in Bad Faith
All contract negotiations depend on good faith bargaining by both sides to reach an amicable agreement. If a company or team negotiating on their behalf lies or misrepresents the business to reach an agreement with you, the resulting contract is most likely not enforceable. A court may throw out the agreement on the basis of bad faith dealing because the other side committed fraud in convincing you to enter into a binding contract. Bad faith can also occur through nondisclosure, or silence, when a party to the negotiations fails to reveal details material to the agreement process.
Impossible to Satisfy Agreement
In some cases, a court may consider a contract unenforceable when one or both parties cannot reasonably be expected to meet benchmarks contained in its provisions. For example, a contract requiring a contractor to build millions of completed products when the company only has facilities to produce (at best) in the thousands is an agreement that can’t be fulfilled. Also, if an unexpected event wipes out the contractor’s raw materials, he/she might be to convince the court that attempting to fulfill the terms of the agreement would cause undue hardship.
Contractual law when it comes to creating a business agreement demands the assistance of seasoned legal professionals. If your company is about to sit down at the bargaining table, contact our law firm immediately to get the help your business demands.
The preceding guest post was courtesy of Joe Lombardo – an experienced personal injury attorney practicing in Atlantic County.