Common Mistakes That Businesses Make That Make Contracts Unenforceable

The backbone of every business relationship is the humble contract. Contracts define expectations, outline rights, and provide a framework for resolving disputes. Not every contract, however, is created equally. The courts are very particular about plain language. Mistakes can cause contracts to be unenforceable. This could leave your business exposed to unnecessary risk. By recognizing these potential pitfalls, you can draft a stronger agreement, thus avoiding costly disputes.

Lack of consideration

For a contract to be valid, there has to be some exchange of value. This is known as consideration. If one party makes a promise without receiving anything in return, the contract can be treated as a gift rather than a legally binding agreement. For example, if you do business with a supplier who promises to deliver products without requiring payment, the agreement might not be enforceable.

Unclear or vague terms 

The biggest pitfall any contract can face is ambiguity. When essential terms such as price, quantity, deadlines, or services are too vague, a court can rule that no enforceable contract exists. For example, an agreement that states that services will be delivered “as needed” or payment will be made “when possible” leaves entirely too much room for interpretation. Clarity and specificity are the backbone of a good contract.

Failure to meet statutory requirements

Certain types of contracts have to comply with specific laws to be considered valid. Under the Statute of Frauds, agreements for the sale of real estate, contracts lasting more than a year, and contracts for goods above a specific value must be made in writing. If these requirements are ignored, the contract could be deemed unenforceable.

Duress, fraud, or misrepresentation

All parties to a contract must have the legal capacity to consent. Contracts signed by minors, individuals who lack mental capacity, or entities that are not properly formed under the law may not hold up in court.

Illegal purpose

A contract cannot provide an individual with an illegal good or service. Agreements that involve unlawful conduct, such as price-fixing, are void from the start. That means that the contract was never considered valid. Businesses must ensure that the subject matter of their contract complies with state and federal law.

The bottom line 

A contract only protects your interests when they are enforceable. Common mistakes, like vague language, lack of consideration, failure to meet legal requirements, or entering into an agreement under duress, can nullify the protections you expect. To avoid this, you should take time to draft a precise, lawful, and fair contract. Consulting with an Austin, TX, business contracts attorney can ensure your contract is enforceable.

Talk to an Austin, TX, Business and Contracts Attorney Today

Flores, PLLC, represents the interests of businesses in drafting contracts or negotiating contract disputes. Call our Austin corporate lawyers today to schedule an appointment, and we can begin discussing your next steps right away.