What does enforceability mean?
Enforceability means that an agreement consists of the necessary components in order to be able to be imposed under law. Depending on the type of agreement, these components can vary. If only one vital part is missing or wrongly written, the agreement may not hold up in court. This can have negative consequences for either party in an agreement.
Basic conditions for enforceability
In order for an agreement to be enforceable under law, it needs to include an offer, a consideration and the parties involved need to be mentally capable of understanding the contents of it.
Some agreements must be written to guarantee enforceability. This includes the following, among others:
- Marriage agreements
- Prenuptial agreements
- Agreements that take longer than a year to be completed
- Real estate purchase or sales agreements
- Insurance agreements
As already stated above, an agreement is only enforceable if the parties involved are mentally capable of understanding the contents, or: “competent”. If a breach occurs and the breaching party’s competency at the point of signing the agreement is in doubt, a court may declare the agreement null and void.
The following are the basic criteria defining competency in a legal sense:
- Capacity to contract: A person must be legally capable to enter into an agreement. Otherwise, no agreement they are party to can be considered legally binding. Minors and people with mental disabilities require the consent of a parent/legal guardian.
- Undue influence, duress, misrepresentation: Agreements that are formed while one party is pressured or otherwise coerced into signing are not legally enforceable. The same is true for agreements formed with one party withholding information.
- Unconscionability: This refers to a disparity due to a difference in authority or a specific competence needed to consciously enter into an agreement. This can mean that one party’s authority implicitly pressures the other party to agree. Or that one party is illiterate, for example.
- Public policy and illegality: If an agreement violates public policy or is unlawful, it can not be legally enforced. This is to protect public interest.
- Mistake: If both parties have made errors based on the contents of the agreement and these errors have a noticeable effect on the agreed upon transaction, the agreement may be rescinded because of that.