Contracts are the backbone of the business world: businesses use contracts to purchase supplies and materials, hire and fire employees, make sales to customers, and engage with others to complete capital improvement projects. At its core, a contract is nothing more than a written set of promises that can be enforced in court if need be. When two parties contract with one another for goods or services, they are making a set of mutual promises with one another. If one person breaks his or her set of promises (called “breaching” the terms of the contract), the other party may file a lawsuit in court and ask the court to hold the breaching party accountable for paying monetary damages resulting from the breach.
Courts generally uphold and enforce contracts: if courts did not, there would be little incentive for individuals to keep the promises they make when making contracts and the value of a contract for personal or business purposes would be substantially reduced. Nevertheless, there are several circumstances in which a court will refuse to enforce the terms of a contract and refuse to award the non-breaching party any monetary compensation for its losses:
At its core, a contract is nothing more than a written set of promises that can be enforced in court if need be.
- Unconscionable terms: If the contract is between parties of vastly different bargaining power – a large, powerful corporation and a sole proprietor, for example – and the terms of the contract clearly indicate that the larger, more powerful party is using its bargaining power to take advantage of the smaller, less-powerful party, a court may refuse to enforce the terms of the contract. Unconscionable terms are terms that appear to be blatantly unfair to one party and only serve to protect or enrich the other party, such as a substantial limitation on the smaller party’s right to seek certain legal remedies.
- Mutual mistake of fact: A basic principle necessary for enforceable contracts is that there must be a “meeting of the minds” regarding the material terms of the contract. If there is no such meeting of the minds, then there is no contract. A mutual mistake of fact occurs when each party to the contract is mistaken as to a key provision. For example, suppose contracting parties A and B enter into a written contract in which A agrees to sell to B a certain particular product called a widget. The description of the product in the contract is vague, however, and the parties do not discuss in-depth the product B is after. If A believes the widget B is after is a small, inexpensive product it mass manufactures and B is actually wanting a high-quality, custom-made widget, there may be a mutual mistake of fact if A delivers the wrong type of widget.
- No capacity to contract: Individuals who are not in full possession of their mental faculties because of an illness or condition or those who are under the age of 18 years do not have the legal ability – called “capacity” to enter into contracts. If a 16-year-old signs a purchase order agreement to purchase a certain custom-made product but then refuses to pay once the product is made, the 16-year-old may be able to assert his or her age and have a court invalidate the contract he or she entered into.
How a Business Law Attorney Helps During Breaches of Contracts
Patrick J. Monahan and the Monahan Law Firm, PLC can assist you if you are a party to a contract and the other party has failed to live up to his or her obligations. Let us review the facts and circumstances of your situation and advise you whether a court is likely to enforce your contract or whether a court will invalidate the contract and release the other party from its obligations. A short consultation can often save you significant time and resources. Contact us today at (623) 385-3190.
If you are struggling with a business contract dispute, call Monahan Law Firm, PLC at (623) 385-3190. We serve businesses located throughout the Phoenix metropolitan area, including Avondale, Buckeye, Chandler, Glendale, Mesa, Peoria, Phoenix, Sun City, Surprise, Tempe, and all of Maricopa County.