Clear and effective contracts are important to our lives – both business and personal. A well-drafted contract ensures that everyone involved understands their responsibilities and that the agreement is legally binding. However, there are common mistakes that can leave a contract invalid or unenforceable. This can lead to disputes and potential losses. Understanding some of the most frequent missteps and how to avoid them will undoubtably help you protect your personal and business affairs going forward. The following mistakes account for many contract disputes and invalidations.

1. The Incapacity to Enter into a Contract

For a contract to be valid, all parties must have the legal capacity to enter into the agreement. This means they must be of sound mind, of legal age, and not under any form of coercion. If one party lacks this capacity, the contract can be deemed void.

How this happens:

  • One of the parties is under 18.
  • A party has a mental condition that impairs their ability to understand the contract.
  • Someone is intoxicated when agreeing to the terms.

To avoid this, make sure all parties are of legal age and mentally competent to agree. Confirm that everyone understands the terms and conditions, and if there’s any doubt, take the time to verify legal competence.

2. No Consideration

For a contract to be enforceable, there must be an exchange of value, “consideration”, between the parties. This doesn’t always mean money—it could also be services, goods, or a promise to act or not act in a certain way. Without this exchange, the contract will be unenforceable .

Common mistakes:

  • One party offers nothing of value in exchange for what they receive.
  • The consideration is not properly outlined in the contract.

Make sure what each party is giving and receiving is clearly defined in the contract. It is important that both sides are offering something of value.

3. Vague or Ambiguous Terms

If the language in a contract is unclear or open to interpretation, it can lead to disputes and make the contract unenforceable. For example, terms like “soon,” “reasonable,” or “as needed” can mean different things to different people.

Examples:

  • A contract promises payment “when convenient,” without specifying a date.
  • The obligations of one party are not spelled out in clear detail.

Be sure to use precise, unambiguous language in your contracts. Specify deadlines, payment amounts, and exact responsibilities for all parties. It’s always better to be overly specific than too vague.

4. Signing Under Duress or Coercion

If one party is forced or pressured into signing a contract, it is not valid. Contracts must be entered into voluntarily, with free will, and without fear of repercussions.

How this happens:

  • Physical threats are made to push someone to sign a contract.
  • Financial threats, such as ruining someone’s business, force them into the agreement.

You can avoid this by always ensuring that all parties are agreeing to the contract of their own free will. If there’s any doubt about coercion, reevaluate the negotiation process.

5. Fraud or Misrepresentation

A contract based on lies or deception is not valid. If one party makes false claims to induce the other into signing, the contract can be challenged and potentially invalidated.

How this happens:

  • One party provides false information about the terms or subject of the contract.
  • A promise is made that is intentionally false to trick someone into agreeing.

Always ensure transparency and honesty when entering into agreements. If any claims are made, confirm their accuracy before signing.

6. Failure to Meet Formal Requirements

Some contracts need to meet specific formal requirements, like being in writing or signed by witnesses, to be valid. This is especially true for contracts involving real estate, certain types of loans, and long-term service agreements.

Examples:

  • A verbal agreement about a property sale is not be valid.
  • A verbal agreement which cannot be performed within a year is not valid.

Make sure that contracts are in the correct format, signed, and witnessed as required by law, especially for significant agreements like real estate or long-term deals.

7. Illegal or Unenforceable Terms

If the contract includes terms that require one or more parties to engage in illegal activities, it is immediately invalid. Contracts cannot enforce illegal actions or violate public policy.

Examples:

  • Contracts that involve illegal activities, such as gambling in states where it’s prohibited.
  • Non-compete clauses that overly restrict an individual’s ability to work elsewhere.

Always ensure that the terms of your contract are legal and comply with local, state, and federal laws. Consulting with a legal professional can help ensure your contract is enforceable.

Contact RTRLAW for Help with Your Contract Dispute Today!

Mistakes in contract drafting and execution can lead to significant legal and financial consequences. Whether you’re entering into a personal or business agreement, it’s crucial to ensure that your contract is legally sound, clear, and enforceable. By being aware of common mistakes like vague terms, lack of capacity, and missing legal requirements, you can avoid the pitfalls that often lead to invalidated contracts.

RTRLAW’s experienced contract attorneys are here to help you draft and review contracts that are legally enforceable while protecting your rights and ensuring smooth transactions. Contact us today for a consultation. We can help make sure your contracts hold up in court. Call 1-833-HIRE-RTR or email [email protected] for more information.