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A contract is an agreement between two parties that outlines mutual legal obligations. It can be either written or through word of mouth. But, some contracts must be in writing in order to be valid. Contracts that entail a lot of money have to be written. The courts won’t enforce some contracts if they are not in writing. The contracts that must be in writing include marriage contracts, sale of good contracts, interest land contracts and paying decedent’s debt guarantees. Contracts are a part of everyday business and it’s important to understand the rules that govern them. Many contracts are governed by state statutes and it’s very important to take the local laws into consideration when writing a contract. All valid contracts must have the following elements:
An acceptance of the offer
A promise to perform
A value consideration
An event or time when the performance must happen
Conditions and terms for the performance
The actual performance of the terms
All contracts should be well-written. If a contract is not well-written, there’s likely to be some legal ramifications, such as a lawsuit. Here are 3 ways a contract can get you into trouble.
If misrepresentation or fraud occurs during the negotiation for the contract, the contract will typically be deemed unenforceable. The premise here is to encourage good-faith bargaining and honesty in all transactions. Misrepresentations can occur when one of the parties says something false. For example, telling a homebuyer that the home is free of termites when it’s not. This misrepresents the state of the home and conceals possible evidence of structural damage to the home or even furniture.
Nondisclosure is a type of misrepresentation by being silent on an important facet of the deal. It’s when a party leaves something important out. The courts look at different issues to decide whether there was nondisclosure, but will also take into account whether or not the other party should have been able to assess the information on their own. It’s important to understand that the parties have the duty to disclose just material facts. But, if one party asks the other about a non-material fact, that party has a duty to answer honestly. If misrepresentation or nondisclosure exists in a contract and one party incurs a financial loss due to that, a lawsuit might ensure for breach of contract.
It is expected that all parties to a contract have the cognitive ability to understand what it is that they are agreeing to. If one party is deemed to not have reasonable cognitive ability, the contract may just be held unenforceable. A situation surrounding capacity may exist if an individual doesn’t have the mental capacity to understand the agreement or its implications. It’s common for a lack of capacity to occur if a person is too young to understand the contract. The goal here is to prevent an unscrupulous party from taking advantage of another person who doesn’t have the capacity to make a reasoned decision.
Coercion or duress will also invalidate a contract. If a person is threatened into a contract, the contract will be unenforceable. For example, if there is a contract between two parties to deliver materials for a big development project and while the materials were en route one party was forced to pay an inflated rate, that would be considered duress. That’s because if the party cannot pay if they may suffer a loss. In other words, duress is blackmail. The court would not find this contact enforceable.
Contracts can also be found unenforceable by the courts based on the grounds of public policy. This means that not only was one of the parties to the contract not protected, but society as a whole could be harmed. For example, contracts involving some type of sexual immorality or drugs would go against public policy and be unenforceable. This also includes the following scenarios:
An employer who forces an employee to sign a contract that forbids workers from being part of an existing union
An employer who forces an employee to sign a contract that forbids any type of medical leave
A landlord who forces a tenant to sign a contract forbidding a service pet. Today, medically necessary animals are a person’s right.
Contracts for child custody that are not in a child’s best interest are also unenforceable.
Whenever you need a contract written up, it’s always best to use a contract attorney. This way, you can avoid some of the pitfalls associated with a poorly written contract. Enforceable contracts must contain certain elements and there must be clarity about the terms of the contract. Use an experienced contract attorney to write up your contract. An experienced contract attorney has the legal knowledge to do it right for you.
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