Los Angeles Employment Lawyers Explain What You Need To Know Before Entering Into An Agreement
If you are involved in abusiness agreement, one of the first things to determine is whether the promise or agreement at issue will be considered anenforceable contractunder the law. While contracts usually involve promises to do something (or refrain from doing something), not all promises are contracts. How does the law determine which promises are enforceable contracts and which are not?
Is an Agreement a Contract? Contract Definition
Courts look at a number of factors to determine whether a business or employment agreement should be enforced. The court must initially determine whether the agreement constitutes as a contract or not. In order for an agreement to be considered a valid contract, it must satisfy certain requirements:
- One party must make an offer and the other party must accept it.
- There must be a bargained for exchange of promises, meaning that something of value must be given in return for a promise.
- The terms of a contract must be sufficiently definite for a court to enforce them.
Enforcement and Contract Defenses
If a court determines that a contract exists, it next must decide whether that contract should be enforced. There are a number of reasons why a court might not enforce a contract. These are called defenses to the contract. Contract defenses are designed to protect people from unfairness in the bargaining process or in the substance of the contract itself. If there is a valid defense to a contract, the contract may be voidable, meaning the party to the contract who was the victim of the unfairness may be able to cancel or revoke the contract.
In some instances, the unfairness is so extreme that the contract is considered void, in other words, a court will declare that no contract was ever formed. What are some of the reasons a court might refuse to enforce a contract?
Contract Defenses: Capacity to Contract in California
In order to be bound by a contract, a person must have the legal ability to form a contract in the first place. This legal ability is called capacity to contract in California. A person who is unable, due to age or mental impairment, to understand what he or she is doing when signing a contract may lack capacity to contract.
For example, a person under legal guardianship due to a mental illness completely lacks the capacity to contract. Any contract signed by that person is void.
In other situations, a person may notcompletelylack the capacity to contract. The contract would then be voidable at the option of the party claiming incapacity, if he or she is able to prove the incapacity.
Is the Business or Employment Contract I Made Enforceable?
It depends. The court will look at several factors to determine if you, the contract writer, are able to form an enforceable contract. For instance, a minor generally cannot form an enforceable contract. A contract entered into by a minor may be canceled by the minor or by his or her guardian. After reaching the age of majority (18 in most states), a person still has a reasonable period to cancel a contract entered into as a minor. If, however, he or she does not cancel the contract within a reasonable period of time, the contract will be considered ratified, making it binding and enforceable.
If a person forms (or signs) a contract while drunk or under the influence of drugs, can that contract be enforced? Courts are usually not very sympathetic to people who claim they were intoxicated when they signed a contract. Generally, a court will only allow the contract to be voided if the other party to the contract knew of the intoxication and took advantage of the intoxicated person, or if the person was somehow involuntarily intoxicated, (e.g. someone spiked the punch).
Is a Contract Void If Forced to Sign? Contract Defenses: Signing Under Duress, Undue Influence or Misrepresentation
Coercion, threats, false statements or improper persuasion by one party to a contract can void the contract. The defenses of duress, misrepresentation, and undue influence address these situations:
To claim the defense ofsigning under duress, a party must show that assent or agreement to the contract was induced by a serious threat of unlawful or wrongful action. He or she must also show that they had no reasonable alternative but to agree to the contract. Blackmail is an example of duress.
Undue influenceis a type of improper persuasion that causes a person to enter an unfair transaction. Undue influence is often defined as unfair persuasion by a person who, because of his or her relation to the victim, is justifiably assumed by the victim to be one who will not act in a manner that is inconsistent with the victim’s welfare.
The contract defense ofmisrepresentationfocuses on dishonesty in bargaining. A misrepresentation may be:
- A false statement of fact
- The deliberate withholding of information in which a party has a duty to disclose
- An action that conceals a fact – For example, painting over water damage when selling a house.
