How to Determine if a Contract is Enforceable
Was the Agreement Legal?Feb. 05, 2010
A contract is simply an agreement between two people. However, not all contracts are binding or legally enforceable.
For example, Mr. Helpless may fall short of rent and he may go to his neighbor Mr. Loan Shark and ask for a short loan so he can pay his rent. Mr. Loan Shark may agree to loan the money to Mr. Helpless at an interest rate of 30% per day with the entire balance being due within the next 7 days which coincides with Mr. Helpless' next pay day. Mr. Helpless agrees. Although we have a bargained for exchange between two consenting people, this contract is void because it is against public policy. The law in California is clear that Mr. Loan Shark could not charge interest at the rate of 30% per day. That amount is called "usurious" (unless you are exempt from the Usury law, such as a credit card company).
Was the Contract Supposed to Be Memorialized In A Writing?There are some contracts that the law requires to be in writing. For example, land sales must be in writing. The California Commercial Code and/or the Uniform Commercial Code lists the types of contracts that must be put in writing in order to be binding.
Even if the Contract was Supposed to be Written but it Wasn't, Can I Still Sue?Even if a person attempted to purchase land and the seller and buyer did not enter into a written agreement, all is not lost if the seller absconds with the buyer's funds and there is no land. In that case, the buyer has other remedies. However, if he only pleads an action for breach of land contract, his case could be dismissed for failure to state a valid claim for relief.
Is An Oral Agreement Enforceable?Yes. Most contracts can be either oral or written. However, if you wait longer than two years to seek judicial relief on an oral contract it could be barred by the statute of limitations in California. A common mistake made in litigation is trying to measure the two year statute properly. The two years is measured from the date of breach and not the date the contract is entered into.
Is There Another Defense Against Enforcing the Contract?There are other defenses to the enforceability of a contract also. For example, one party may have been under duress, unduly influenced, there was a mistake or fraud, lack of consideration, impossibility (such as war or other catastrophe) and the like.
Consequently, if you do not know or follow the rules of the road, you may not be entering into a legally binding agreement. Furthermore, you may find yourself losing a case because you did not make the correct analytical determination that is needed to see if the contract was enforceable, the lawsuit was timely or it pled the correct causes of action.
Copyright 2010 Law Offices of Lenore Albert