As an entrepreneur or business owner, most likely you are involved in business agreements of one form or another. Contracts typically constitute promises to do something or promises to stop doing something, but not all promises are contracts. The law determines which will hold up in court and which will not. The first consideration when putting together a business contract is whether the agreement or promise concerned will be deemed enforceable under the law.
For example, if two parties enter into an agreement at a bar or any situation where alcohol or another impairing substance is involved, the contract may ultimately not be enforceable.
A small business lawyer in Santa Monica can answer any questions about business contracts you may have.
The Difference Between an Agreement and a Contract
When establishing whether an employment or business agreement is enforceable, the court will examine several factors. It must initially determine if the agreement is in fact a contract. For an agreement to be regarded as a contract, certain requirements must be satisfied:
One party makes an offer and another party accepts the offer.
Something of value must be given in return for a promise made in the agreement.
For the court to enforce the contract, the terms must be clearly defined.
If the agreement does not satisfy any of the above criteria, it may not be enforceable. Similarly, if any disputes arise, interpretation of a contract is left mostly to the court. For the court to decide that an actual contract does exist, it must make the determination of whether it should be enforced. There are many reasons why the judicial system may not consider a contract enforceable. These reasons are referred to as defenses to a contract.
Defenses to a contract are intended to provide people with a level of protection from unfair bargaining processes or terms in a contract that are not equitable. If there is a valid and legitimate defense for the contract, it may be voidable in court. This means the party of the contract who is subject to the unfair terms may have the right to revoke the contract. In some instances, the injustice of the contract is so extreme, the court will declare the contract void, meaning no contract was ever legally formed.
Defenses to a Contract
For an individual to be bound by a contract, he or she must have the legal capacity to enter into a contract. In California, this capacity is referred to as capacity to contract. One person may be too young. Another may have diminished mental faculties. Neither may have the ability to fully comprehend what he or she is agreeing to when executing a contract.
For instance, someone who has a legal guardian because of mental illness or impairment is without the capacity to knowingly enter a contract. As a result, the contract would be voidable by the person with the mental illness if he or she is able to prove that illness.
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© 2018 Verhagen Bennett LLP — This article is for general information only. The information presented should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.