{"id":4386,"date":"2016-04-04T10:47:30","date_gmt":"2016-04-04T15:47:30","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/smallbusiness\/business-contracts-forms\/will-your-contract-be-enforced-under-the-law.html"},"modified":"2023-09-04T14:35:02","modified_gmt":"2023-09-04T19:35:02","slug":"will-your-contract-be-enforced-under-the-law","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/smallbusiness\/business-contracts-forms\/will-your-contract-be-enforced-under-the-law.html","title":{"rendered":"Will Your Contract Be Enforced Under the Law?"},"content":{"rendered":"\n
\n \n
\n

Will Your Contract Be Enforced Under the Law?<\/h1>\n
\n
\n By FindLaw Staff<\/a> | Legally reviewed by FindLaw Staff<\/a>\n | Last updated\n
\n

Editorial Note: We earn a commission from affiliate partner links on FindLaw. Commissions do not affect the editorial integrity of our legal content.<\/p>\n\n <\/div>\n \n

\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
\n

This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
\n

The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n

In the world of commerce, from real estate transactions to the sale of goods, understanding the ins and outs of contracts can be key to avoiding a breach of contract and potential legal action. Particularly for small business owners, understanding the legality of contracts is essential.<\/p>\r\n

If you have a business agreement, one of the first things to determine is whether the promise or agreement will be an enforceable contract under the law<\/a>. While contracts usually involve promises to do something (or refrain from doing something), not all promises are contracts. This principle holds whether you’re dealing with a commercial lease, an employment agreement, or a sale of goods under the commercial code.<\/p>\r\n

How does the law determine which promises are enforceable<\/a> contracts and which are not?<\/p>\r\n

Is the Agreement a Contract?<\/h2>\r\n

In a dispute, the court must initially determine whether an enforceable agreement exists. While most people assume that all contracts must be written agreements, a verbal contract can be valid under certain conditions.<\/p>\r\n

Elements of a Contract<\/h2>\r\n

For an agreement to be a valid contract<\/a>, one party must make an offer, and the other party must accept it. There may be a counteroffer. There has to be a "meeting of the minds." There must be "consideration." Consideration<\/a> means that something of value is given in return for a promise. In addition, the terms of a contract must be sufficiently defined for a court to enforce them. These terms often include the deliverables one or both parties promise to provide.<\/p>\r\n

Enforcement and Contract Defenses<\/h2>\r\n

If a court determines that a legally binding contract exists, it must decide whether it should be enforced. There are several reasons why a court might not enforce a contract. These are defenses to the contract. They protect people from unfairness in the bargaining process or the contract itself.<\/p>\r\n

If there is a valid defense to a contract, it may be voidable. This means the injured party may be able to cancel or revoke the agreement. Sometimes, the unfairness is so extreme that the contract is void. In other words, a court will declare that no legal document was ever formed. In business, this can happen with an overly restrictive noncompete or nondisclosure agreement. What are some of the reasons a court might refuse to enforce a contract<\/a>?<\/p>\r\n

Capacity to Contract<\/h3>\r\n

To be bound by a contract, a person must have the legal ability to form a contract in the first place. This is "capacity to contract." A person who is unable, due to age or mental impairment, to understand what they are doing when they sign a contract lacks the capacity to contract. For example, a person under legal guardianship due to a mental defect lacks the capacity to contract. Any contract signed by that person is void.<\/p>\r\n

A minor generally cannot form an enforceable contract. As a result, the minor or their guardian may cancel the contract. After reaching the age of majority (18 in most states), a person still has a reasonable period to cancel a contract made as a minor. If the contract is not canceled within a reasonable time, it is binding and enforceable.<\/p>\r\n

Courts are usually not sympathetic to people who claim they were intoxicated when they signed a contract. Generally, a court will void the contract if the other party knew about the intoxication and took advantage or if the person was involuntarily drugged.<\/p>\r\n

Undue Influence, Duress, Misrepresentation<\/h3>\r\n

Coercion, threats, false statements, or improper persuasion by one party to a contract can void the contract. The defenses of duress, misrepresentation, and undue influence address these situations:<\/p>\r\n