Avoiding unenforceable contracts: detection tips and techniques

Contracts are the foundations of many businesses relationships, so it is crucial to make sure that every part of any contract is legally binding. If any part of a contract is unenforceable, it can have major consequences; for example, a business could find itself in a long and costly legal battle with no fruitful end result.

To ensure that contracts are valid and enforceable, AnyLawyer uses AI-based tools to identify unenforceable language and help users confidently create legal documents. In this blog post, we explore what to look for in order to detect if any part of a contract is unenforceable and how to do so.

What makes a contract unenforceable

A situation in which a contract cannot be enforced can arise from several factors. The most common ones are when contracts contain provisions that are contrary to laws or public policy, when one or both parties lack the legal capacity to enter into a contract, when contracts involve illegal activities, and when one party has been coerced into entering into an agreement.

It is not uncommon for a person entering into a contract not to be aware of the legal implications or consequences of the agreement. If he or she later discovers that part of the contract is unenforceable, they could face significant financial losses or even costly litigation.

That is why it is important to identify any parts of a contract that are unenforceable as soon as possible.

Non disclosure of key information

In order for a contract to be legally binding, both parties must fully disclose all relevant information. If something important is left out or deliberately misrepresented, the contract could be considered void or unenforceable. For example, if one party fails to disclose certain restrictions on the sale of property or a debt they owe when entering into a contract with another, the contract could be declared unenforceable.

It is also important to make sure that everyone involved in the contract understands what they are signing and agrees to all of its terms. If one party does not fully understand the agreement or has been misled into signing it, it could be considered unenforceable.

Coercion

If one party has been forced to enter into a contract under duress, the agreement could be deemed invalid. This could occur if one party was threatened or intimidated into signing an agreement, such as when they were promised money or some other benefit in exchange for their signature.

Misrepresentation

Additionally, contracts involving fraud or misrepresentation are often considered unenforceable. A common example of this is when one party misrepresents the value of a product or service they are selling to another person.

Another form of misrepresentation that could lead to an unenforceable contract is when one party overstates their ability to deliver on a promise made in an agreement. For instance, if someone promises to deliver a certain product or service within a specific time frame, but they are unable to do so, the contract could be deemed unenforceable.

Lack of capacity

If one or both parties are not legally capable of entering into an agreement, such as minors or those with a mental disability, the contract could be considered void. It is important to have the contract signed by a legal guardian if one or both parties cannot legally enter into a contract.

Impossibility

If something happens that makes it impossible for one party to meet their obligations under the contract, it could be considered unenforceable. For example, if a factory producing a product is destroyed by an earthquake or natural disaster, the contract requiring them to produce the product would become void.

Mutual mistake

If both parties enter into an agreement based on a mistake, such as believing that one party holds rights to a property they do not actually have, the contract could be unenforceable.

Breach of public policy

Contracts that violate the law or public policy, such as those involving illegal activities, are also deemed unenforceable. Whether the contract is in breach of state or federal law, the contract is void and unenforceable.

Undue influence

If one party exercises undue influence on another to enter into an agreement, it is considered unenforceable. This could occur if one party has a stronger relationship with the other and uses that relationship to pressure them into agreeing to something they would not otherwise agree to.

Unconscionability, or grossly unequal bargaining power

Finally, a contract could be deemed unenforceable if one party has significantly more bargaining power than the other. This can occur when one party is in an unusually vulnerable financial or emotional situation and the other takes advantage of this to force them into an unfair agreement. It can also be the result of one party having significantly more bargaining power or knowledge than the other and taking advantage of their weaker position. A contract that is so one-sided or unfair to one party could be deemed unenforceable.

Real life examples of a voidable contract

One example of a voidable contract is when two parties enter into an agreement to buy and sell property, but one party fails to disclose that the property has already been sold. Such a misrepresentation would make the contract unenforceable. Another example would be a contract forbidding medical leave. In this case, the contract would go against public policy.

Another possible issue is an employer forcing an employee to sign a non-compete agreement. If the employee is not informed of their rights or if the employer uses pressure tactics to get them to sign, this contract could be deemed void and unenforceable. On the flipside, if one of the parties enters into a contract with another while under duress, such as if they are offered money or other benefits to sign an agreement, the contract could be considered void.

A party having difficulty understanding the contract's terms, such as when language or literacy issues occur, could also make a contract unenforceable. Additionally, if both parties enter a contract based on a mistake, this could also make it unenforceable. For example, if they agree to the sale of property but one party does not realize that there are restrictions on its use or ownership, the contract could be considered invalid.

Solutions to unenforceability problems

Fortunately, there are solutions to help prevent or mitigate problems related to unenforceable contracts. Businesses and individuals should ensure that all parties involved in the agreement understand it and are willing to sign without being pressured or coerced into doing so. It is also important to make sure all parties are fully informed and understand exactly what they are signing.

In addition, it is important to make sure that everyone involved has disclosed all relevant information. For instance, if one party is selling a product, they need to disclose any restrictions on its use or sale. The negotiation process before a contract is signed is a great opportunity to identify any potential issues with the agreement and adjust the terms of the contract accordingly.

Finally, businesses should use AI tools such as AnyLawyer to detect any unenforceable parts of a contract and provide suggestions for improvement. This can help ensure that contracts are legally binding and reduce the possibility of disputes or litigation in the future.  By using these measures, businesses and individuals can protect themselves from the potentially devastating consequences of unenforceable contracts.

Suggestions for avoiding unenforceability

To prevent signing an unenforceable contract, it is important to always read documents carefully before signing them. Make sure that you understand all the terms of a contract before entering into it. Additionally, it is advisable to consult a lawyer before signing any legal document, to make sure that everything is in order.

A checklist for making a contract enforceable

To create a valid contract, both parties must:

• fully understand the agreement and all of its terms,
• not be coerced into signing it,
• disclose all relevant information ,
• make sure that everyone involved is capable of entering into a contract legally,
• ensure that the agreement does not violate any laws or public policies.

Detecting unenforceable contract terms

To detect unenforceable contract terms, especially in an otherwise valid contract, it is essential to have an in-depth understanding of the applicable law. This means knowing which rules and regulations apply to each specific situation and what their implications are. Additionally, it is important to be aware of any public policy considerations that could render a part of the agreement unenforceable.

Tools for spotting unenforceable contract fragments

Using automated AI-based tools can help businesses quickly spot any unenforceable parts in a contract. One such tool is AnyLawyer, which helps users identify when a contract contains language that could make it unenforceable and suggests changes to make the contract legally binding. AnyLawyer quickly flags any provision that could be problematic and gives users suggestions for improvement.

Moreover, AnyLawyer helps businesses save time and money by preventing costly legal battles caused by unenforceable contracts. This is an invaluable asset, as it allows businesses to focus their energy and resources on the core of their business, instead of spending time and money dealing with legal issues.

What happens when a contract is deemed unenforceable?

When a contract is deemed unenforceable, it is considered void and no longer legally binding. This means that any obligations set forth in the agreement will be rendered invalid and cannot be enforced by either party. Furthermore, signing an unenforceable contract can lead to costly legal battles, as both parties may have to go to court to resolve the dispute.

Here is an example: let us say that two businesses sign an NDA. If any part of this contract is unenforceable, then the protection offered by the NDA will be weakened. This could open up one party to a lawsuit, as their confidential information may not be adequately protected due to the unenforceable part of the contract.

It is therefore essential to ensure that any agreement entered into is legally binding by checking for any unenforceable parts of a contract before signing it. By taking preventative measures and using AI tools like AnyLawyer, businesses and individuals can save themselves time and money in the long run.

Creating a legally binding agreement

Using AI-based tools like AnyLawyer can also be helpful for quickly identifying and correcting any unenforceable parts of a contract. They provide businesses with the opportunity to create legally binding contracts quickly and accurately, saving time and money in the process.

Ultimately, preventative measures are key when it comes to spotting unenforceable parts of a contract. By being aware of the applicable law and public policy considerations, reading documents carefully before signing them, and consulting a lawyer if necessary, businesses can protect themselves from costly legal battles caused by unenforceable contracts.