An unenforceable contract is a legally binding agreement that cannot be enforced by a court of law due to various legal deficiencies. While the contract may have been validly formed, it cannot be upheld or executed by the judicial system.
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Unenforceable contracts are legally binding, but cannot be enforced by the courts due to technical deficiencies or legal defects.
Common reasons for a contract being unenforceable include violation of the Statute of Frauds, lack of consideration, or the contract being against public policy.
Unlike void contracts, unenforceable contracts are not inherently illegal or invalid, but simply cannot be judicially enforced.
Parties to an unenforceable contract may still voluntarily perform their obligations, but cannot compel the other party to do so through legal action.
Unenforceable contracts can become enforceable if the defect is cured, such as by obtaining a written memorandum to satisfy the Statute of Frauds.
Review Questions
Explain the key distinction between an unenforceable contract and a void contract.
The primary difference between an unenforceable contract and a void contract is that an unenforceable contract is legally valid, but cannot be enforced by the courts due to technical deficiencies, while a void contract is completely invalid and unenforceable from the outset, often due to illegality or lack of legal capacity. An unenforceable contract may still be voluntarily performed by the parties, while a void contract is deemed to have never existed in the first place.
Describe the role of the Statute of Frauds in rendering contracts unenforceable.
The Statute of Frauds is a set of laws that require certain types of contracts, such as those involving the sale of land or promises to pay the debts of another, to be evidenced by a written document. If a contract that falls under the Statute of Frauds is not properly memorialized in writing, it will be deemed unenforceable, even though the contract may have been validly formed. The Statute of Frauds is intended to prevent fraud and perjury by ensuring that important contracts are not based solely on oral testimony.
Analyze how an unenforceable contract can become enforceable, and the implications this has for business transactions.
An unenforceable contract can become enforceable if the underlying defect or technical issue is cured. For example, if a contract fails to satisfy the Statute of Frauds due to a lack of written documentation, obtaining a written memorandum signed by the party to be charged can rectify this and make the contract enforceable. This flexibility allows businesses to potentially salvage transactions that were initially unenforceable, providing opportunities to enforce contractual rights and obligations. However, it also highlights the importance of ensuring contracts are properly formed and documented from the outset to avoid potential enforceability issues down the line.
A voidable contract is one that is legally valid, but can be rescinded or declared void at the option of one of the parties, such as in cases of misrepresentation or duress.
The Statute of Frauds is a set of laws that require certain types of contracts to be evidenced by a written document, otherwise they are deemed unenforceable.