There are many reasons a contract can be rendered unenforceable. Of course, these reasons are going to depend on the facts and circumstances present in a case or dispute. Lack of capacity is one example that can render a contract unenforceable. Typically, this involves someone lacking the mental ability to enter into an agreement. Some examples where lack of capacity can be at issue is a person’s age, (being under the influence of drugs or alcohol, or simply not having the mental ability to enter into a contract. Keep in mind, it does not necessarily have to be illegal drugs to affect capacity, and can even be certain medications affecting ones mental capacity to enter into a contract.
Incompetence, which can include dementia, Alzheimer’s, and other diseases can render a contract unenforceable. This often occurs when someone who is old or on their deathbed deals with wills and trusts. Duress or undue influence is another example of a situation where a contract can potentially be unenforceable. When entering into an agreement or contract, both parties have to be entering under their own free will and cannot be forced to sign something or enter into an agreement through some outside force or influence. Violence or threat of violence would be the common example of duress, and it is not just violence aimed directly towards the person entering into the contract, it can also be the threat to someone closely related to a person, For example, someone stating they will hurt your family members if you do not sign a contract.
Undue influence is when a situation arises where somebody is in a position of unequal power or influence over someone. A boss to employee relationship is an example of this. Misrepresentation and fraud could render a contract unenforceable. Fraud is intentional, so in contract law, that’s typically deceiving another party about something material to the agreement. This can be done by lying, merely telling a half-truth, or not telling the whole truth. Misrepresentation is an untrue statement that would induce someone to agree, but it’s not always necessarily fraud. The bottom line here is that if a contract is entered through either misrepresentation or fraud, it can be rendered unenforceable depending on the facts. Illegal contracts or anything that’s a violation of law or public policy that you’ve contracted to do is going to be unenforceable. This could be a contract to sell illegal drugs or narcotics. That’s against the law, so, therefore, the contract is unlawful and void.
Probably, the one that is going to come up the most is a statute of frauds. Statute of frauds covers specific categories of contracts required to be in writing and signed by the party against whom enforcement is sought. These are contracts for marriage, real property, guarantees, or surety-ships. A few more categories are a little rarer, but the statute of fraud says for certain transactions, agreements, or contracts that these things have to be in writing, and they have to be signed.
Lastly, situations where a party or the parties are mistaken can possibly render a contract unenforceable.
Ultimately, unenforceability is going to be very fact-specific. You’re going to need an attorney to analyze the facts, the situations, and the contract itself to determine if something is unenforceable and then take the next steps.
What Are Some Remedies To A Breach Of Contract?
There are quite a few remedies that can be sought when a contract is breached. These remedies are going to turn on the type of contract, transaction, or agreement you have. The most typical is going to be compensatory or, in other words, money damages. Sometimes these are referred to as actual damages. There are two types of compensatory damages – general damages and special damages. General damages are covering a party’s direct loss when another party’s breach has harmed them. A good example might be you contracted with a party to provide them with certain services, and that party agreed they would pay you X amount of dollars for those services. You performed your part of the contract, and now that party is refusing to pay you. The money that you owed would be your general damages.
Special damages, or sometimes as they’re referred to consequential damages, are not typically predictable but still a result of the breach of contract. Another way of understanding this concept, is that these damages are indirect harm caused by the breaching party. Typically to recover special damages, the breaching party needed to be aware of the unique circumstances when the contract was entered into. A good example here might be a product needing to be delivered by a specific date to the purchasing party for that purchasing party’s business to complete other things within their business model or structure. It wouldn’t be fair to the breaching party if they were unaware of this to penalize them or make them pay damages.
Another area of remedy for breach of contract is specific performance. Specific performance is when a party can be required to perform their duties under a contract. You are most likely going to see the application of this in real estate law or contracts.. Real property is considered unique, and each piece of land and property is deemed to be original. Therefore, if a party tries not to sell or buy that piece of land for some reason, a court can step in and rule on the unique situation. There is the opposite effect in labor contracts because of constitutional concerns and the fact that you cannot force someone to provide labor. If a party is contracted to provide labor and refuses to do so, you cannot get specific performance because the law cannot force someone to do labor.
But, what you might have is as an injunction against that party. This comes up in the entertainment industry a lot. If an actor or actress might be considered a unique talent and you’ve hired that specific person and they refuse to fulfill their obligations pursuant to the contract, the court can’t put them in handcuffs and make them come to the set to perform. But what one can do, is file for an injunction. If the breaching party was trying to provide their services somewhere else, a court can enjoin and prohibit that from happening until you figured another way to settle the matter.
Another remedy to breach of contract is rescission. This is essentially just canceling a contract. It terminates both parties’ contractual duties. It is similar to the legal idea of reformation, where a court can change the contract’s substance to correct or alter the agreement when one party is suffering from the contract itself. However, it’s important to note that courts typically do not like to interfere with mistakes that could have been avoided by pre-investigation before entering into a contract. I think the good rule of thumb here is if you could have discovered something by doing your due diligence when agreeing to the contract, the court is not necessarily going to step in to save you from your own lack of due diligence and/or mistake.
Another property issue that can cause a party to seek a remedy arises when there is a zoning issue. For example, if you were to purchase a piece of property and wanted to start a certain business that it wasn’t zoned for Or maybe you would needed some type of government approval. You bought that property thinking you could use it for a commercial purpose but never actually looked into whether it was an acceptable use of the property, only to discover after the contract that it was not, and then wanted to cancel or undo the contract. The court will not step in and can’t correct the contract because you didn’t look into any zoning issues or land issues.
Restitution is another remedy in contract law. Restitution puts the parties back where they were or, more importantly, the injured party back to their prior position before the contract, as if it never happened. A good point here is if you are going after restitution damages, you can typically not recover lost profits or earnings under this method of recovery only because you are going back to your original position.
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