Make Sure Your Business Contracts Are Enforceable
When entering into a business deal, you need to know whether or not your agreement will be enforceable under Florida law. Believe it or not, some mutually agreed upon contracts are not valid under the law. If you are entering into a major business agreement, it is best to hire an experienced West Palm Beach commercial litigation attorney who can draft or review your contracts to ensure that they fully protect your interests.
The Top Five Reasons an Agreement Becomes Unenforceable
- Lack of capacity: A Florida agreement is only enforceable if both parties have the legal capacity to enter into a contract. As an example, children are not able to enter into contracts. For businesses, the capacity issue usually arises when dealing with a specific representative of another company. Not every employee at a company has the legal authority to bind their company to a contract. Some have limited power, while others have no power at all. You should always make sure you are dealing with the appropriate representative.
- Fraud: Fraudulent agreements will not be enforced. Any agreement made under duress, undue influence or involving misrepresentation is unenforceable. Misrepresentation is the most frequently litigated fraud-related issue. Misrepresentation includes not just false statements, but also the intentional omission of materially relevant facts.
- Unfairness: Florida courts will not enforce contracts deemed to be ‘unconscionable’. This means that extreme unfairness within the process, and within the contract itself, can make a contract invalid. A recent example of unconscionability can be found in 2009 case Basulto v. Hialeah Automotive. A Florida court disallowed a contract that included a mandatory arbitration provision because the customer who signed it only spoke Spanish and the sales team used high pressure tactics to get the customer to sign a contract that was only in written in English. Most agreements that have been found to be unconscionable are those where there was a vast difference in the bargaining power of each side. Florida courts are very reluctant to overturn contracts on fairness grounds when two experienced business people agreed the deal, but it is something that always needs to be considered.
- Illegality: Contracts that involve illegal actions cannot be enforced. This also includes contracts that ‘violate public policy’. While illegal actions are often clear, for instance you certainly cannot contract for the purchase of illicit drugs, violations of public policy are often more complex. As an example, if there was an auction on a foreclosed property, and two parties made an agreement not to bid against each other, a Florida court will not enforce that agreement as a valid contract. While that type of agreement is not strictly illegal, it attempts to injure a third party and violates Florida public policy of promoting competitive markets.
- Mistakes: Finally, a mutual mistake can actually render a contract unenforceable. If a misunderstanding leads both parties to have differing, but good faith, assumptions about a materially relevant aspect of the contract, courts may deny enforcing the contract. This is why comprehensive contract review is so important. Do not let a simple mistake make your contract unenforceable.
Contact An Experienced West Palm Beach Commercial Litigation Attorney
Your company will always benefit from an attorney review of any contracts. At Pike & Lustig, LLP our legal team has extensive experience drafting and reviewing Florida business contracts. We will also aggressively represent our clients if a dispute arises. If you have any questions about contract enforceability, or Florida business contracts in general, please call our West Palm Beach Office at (561) 855-7575 today for more information.