What Are 9 Ways A Contract Can Be Unenforceable?
Discover 9 key factors that could make a contract unenforceable and learn how to avoid common pitfalls with this essential guide, tailored for Utah residents.
What Are 9 Ways A Contract Can Be Unenforceable?
Contracts play an integral role in our daily lives, from purchasing groceries to signing a lease for a new apartment. A contract, in its essence, is a legally binding agreement between two or more parties that outlines their obligations and rights. But what happens if that contract becomes unenforceable? Understanding this can save you from legal headaches down the line. In this guide, we will take a closer look at nine ways a contract can be unenforceable, and why recognizing these pitfalls is crucial, especially within the jurisdiction of Utah.
1. Lack of Capacity to Contract
Under the Utah Code, one of the ways a contract can be rendered unenforceable is if one or more parties involved lack the legal capacity to enter into an agreement. For instance, minors, individuals who are mentally incapacitated, or intoxicated persons may not be bound by the contracts they enter.
In Salt Lake County, if a 17-year-old signs a loan agreement without the co-signature of a parent or guardian, that contract may be deemed unenforceable as per Utah Code § 15–2–2.
Example Scenario: Imagine a teenager, John, from West Jordan, trying to lease a car on his own. If the dealership’s contract doesn’t have his parent or guardian co-sign it, the lease could later be challenged and declared void.
2. Duress or Coercion
Contracts must be entered into voluntarily. If one party was forced or threatened into the contract, it cannot be enforced. Duress can take many forms, including physical threats or psychological pressure.
Imagine Sara in Davis County who was threatened into signing a business partnership agreement by her rival. This instance of coercion makes the agreement unenforceable because her consent was not freely given.
3. Fraud or Misrepresentation
According to Utah Code § 70A-2–721, if a contract was based on lies, misinformation, or deceit, it can be annulled. Fraud occurs when one party knowingly provides false information to induce another party into the contract.
Real-World Example: Imagine Tom from Provo buying a car from a dealership after being told it had zero accidents, only to find out later it had been totaled previously. This misinformation could nullify the contract under Utah’s fraud statutes.
4. Mistake
Sometimes both parties enter into a contract under a mutual mistake of fact. If this mistake fundamentally changes the nature of the contract or the obligations involved, it can be unenforceable.
For instance, in Summit County, if both parties agree to the sale of a piece of land under the mutual belief that it contains valuable minerals, but scientific tests later show it does not, the contract can be rescinded on the grounds of mutual mistake.
5. Illegality
A contract is unenforceable if its subject matter or terms violate Utah law. Any agreement to engage in illegal activities, or to perform an act prohibited by law, is naturally void.
Say, for example, Jason in Tooele County signs a contract to deliver illegal contraband. This agreement holds no legal ground because it pertains to unlawful activities and thus is unenforceable.
6. Lack of Consideration
Consideration is the value exchanged between parties in a contract. Without consideration, such as money, services, or goods, a contract lacks a crucial element and can be rendered void.
Imagine that Rose in Weber County agrees to give her neighbor’s son $1000 for no reason, and later decides to back out. Because there was no consideration or value exchanged on the neighbor’s son’s part, the agreement lacks validity.
7. Unconscionability
Under the Utah Code § 70A-2–302, a term or condition in a contract may be deemed unconscionable if it is excessively unfair or oppressive to one party. Courts in Utah scrutinize these contracts to ensure fairness.
Example Scenario: In Cache County, an employment contract might be termed unconscionable if it contains a clause that forces the employee to work 80 hours a week without overtime pay.
8. Public Policy
If a contract violates public policy or is harmful to the public interest, it cannot be enforced. This can include contracts that restrict marriage, encourage divorce, hinder justice, or promote gambling.
Consider an agreement in Grand County where one party is paid to refrain from giving testimony in a legal proceeding. This contract would be invalid as it adversely impacts the administration of justice.
9. Non-Compliance with Statute of Frauds
The Statute of Frauds, found in Utah Code § 25–5–3, requires certain types of contracts to be in writing to be enforceable. This includes contracts for the sale of land, contracts that cannot be performed within one year, and agreements to pay someone else’s debt.
For instance, in Utah County, if Sarah verbally agrees to sell her house to Jane and later refuses, Jane might find it difficult to enforce this oral contract since real estate transactions must be in writing.
Why It Matters
Understanding these critical aspects of contract enforceability in Utah is crucial to safeguard your legal rights and interests. These laws protect individuals and businesses from fraudulent, coerced, or fundamentally unfair agreements, ensuring that only fair and legitimate contracts are upheld. For everyday transactions, this knowledge empowers you to enter into agreements confidently and responsibly.
FAQ
1. What can I do if I realize a contract I signed isn’t enforceable?
If you find yourself in a situation where a contract you’ve signed might be unenforceable, it’s crucial to consult with a legal professional. You may have options to rescind the contract or negotiate modifications.
2. How can I protect myself from entering into an unenforceable contract?
Always review contracts carefully, consult legal counsel for intricate agreements, and ensure all critical elements such as capacity, consideration, and legality are satisfied.
3. Can verbal agreements be enforced in Utah?
Yes, but with limitations. While some verbal agreements can be enforced, others, especially those under the Statute of Frauds (e.g., real estate transactions), must be in writing.
4. How does Utah handle contracts with minors?
Contracts with minors are generally unenforceable unless backed by a guardian or co-signed by an adult. Exceptions can apply for necessities like food or shelter.
Final Takeaway
Contracts are foundational to many aspects of life, but not all contracts are created equal. Understanding what makes a contract enforceable or unenforceable helps protect your interests and avoid legal complications. To speak with a lawyer, call attorney Jeremy Eveland at (801) 613–1472.
If you found this article helpful, please clap, leave a comment, and subscribe to our Medium newsletter for updates! Jeremy Eveland 8833 S Redwood Rd West Jordan Utah 84088 (801) 613–1472
The information contained in this article is for information purposes only and is not legal advice. For legal advice, hire a competent lawyer in your jurisdiction.
