Contracts are a crucial aspect of any business relationship as they lay out the terms and conditions between parties. However, not all contracts are enforceable by law. An unenforceable contract is one that is essentially invalid and unenforceable in court. In other words, it cannot be enforced by either party, and neither party can sue the other for breach of contract.
There are different reasons for a contract to be unenforceable. The following is an example of an unenforceable contract:
Illegal Contracts – Contracts that involve or promote illegal activities are not enforceable. This is because the law does not recognize agreements created for illegal purposes, and it would not be appropriate to provide legal protection for them. For example, a contract between two parties to smuggle illegal drugs across borders would be considered an illegal contract and cannot be enforced.
Fraudulent Contracts – Contracts that are formed based on fraudulent activity are considered unenforceable. A fraudulent contract is one where one party intentionally misrepresents or hides facts relevant to the agreement. For example, in the case of a real estate contract, if the buyer signs the contract based on fraudulent information provided by the seller, the contract may be considered unenforceable.
Contracts without Consideration – Consideration refers to something of value exchanged between parties to a contract. If one party agrees to do something in exchange for nothing, that contract is unenforceable. For instance, if a friend promises to give another friend a car as a gift but fails to do so, the promise cannot be considered a contract as there was no consideration.
Contracts Against Public Policy – A contract that goes against public policy is also considered unenforceable. This may include contracts that serve to harm public welfare or violate the morals of society. For instance, a contract between two parties to commit murder or any other illegal act goes against public policy and cannot be enforced.
In conclusion, there are different reasons why a contract may be unenforceable. Contracts that involve illegal activities, fraudulent activity, lack consideration, or go against public policy are all examples of unenforceable contracts. It is essential to know the different types of contracts and the reasons for their unenforceability to ensure you draft legally binding contracts as a business owner or client.