Contracts are essential in the business world. Enforceable contractual agreements will hold companies or individuals legally accountable for promises to perform certain actions or payment obligations. At the same time, mistakes can be made in preparing and executing contractual agreements. This can result in the contract, or portions thereof, being held unenforceable, or it could lead to your business being required to do something against your intentions.
A contract can be deemed unenforceable for several reasons. One reason would be if someone was forced to sign the document against his or her will. This is referred to as “duress” or “undue influence” in the law and it will invalidate a legal agreement. It can also be held invalid if the person signing the contract did not have legal authority to bind the company that would have been a party to the contract.
Likewise, a party to a contract is not allowed to misrepresent what the contract contains or hide essential information that the other person should know before signing the agreement. An example would be if a party knowingly fails to disclose a large debt while negotiating a sale of his or her business. Further, certain contract terms are considered illegal because they are against public policy. For instance, you cannot ask an employee to sign an agreement that prohibits the employee from working for a competitor upon a termination of employment.
California does allow oral contracts without written documentation. However, it is important to note that there are certain exceptions to this rule. One exception is contracts that cannot be performed within one year, meaning if the lease is longer than a year, must be in writing.
Please note that even though contracts do not need to be in writing under California law, it is in your best interest to do so in most circumstances. If there is a dispute with your business partner for example, it can be difficult to prove what the terms of your agreement were without written documentation.
Missing and Ambiguous Terms
When drafting a contract, it is important to make the terms as straightforward and easy to follow as possible. In fact, most disagreements arise over terms that one person thinks are either missing or ambiguous. Provisions that most people call “boilerplate” are often the most litigated provisions. These include governing law and venue, whether the contract can be assigned without the other party’s consent, whether the contract supercedes all prior agreements and negotiations, and how the contract can be amended or modified. An experienced contract attorney such as Afshin Hakim of Hakim Law Group can help you to ensure that there are no confusing or misleading terms that may cause issues with your business down the line.
Not Reading the Contract
It is not uncommon for businesses to enter into contracts without fully reviewing the terms. This can create problems, particularly if the terms happen to conflict with what was verbally agreed to prior to signing the document.
Further, contracts are often lengthy and include confusing legal language that can be difficult to comprehend. Hence, it is in your best interest to consult with an experienced business attorney in Los Angeles before signing anything, to make sure that you fully understand what you are agreeing to.