Abusive Contracts

A valid contract only exists when two or more parties come together to agree on certain terms. Both parties must be legally and mentally competent to be bound by the contract. If you were forced, pressured, or tricked into signing a contract, it is not considered valid under the law. Below is a breakdown of the circumstances that deem a contract invalid.

When Is a Contract Illegal?

Several reasons make a contract illegal. The following are some of the common reasons courts will not enforce a contract:

• Illegal purposes: contracts that are formed to perform illegal activities are not enforceable. For instance, contracts for selling illegal goods or drugs;
• Lack of capacity: both parties need to be of sound mind and fully comprehend the conditions in the contract;
• Mistaken interpretation: If either or both parties have an incorrect understanding of the terms of a contract;
• Misrepresentation and fraud: If a contract consists of false statements.

Generally, there are two categories of illegal contracts. One of them briefly mentioned earlier that anything done to contract illegal acts is against the law. For instance, you cannot contract to hire a hitman. A court will not require either party to hold up their end of the deal.

Another type of illegal contract is an agreement that requires a person to break an existing contract. This is more common in employment situations in which a potential employee goes to work for a new employer while still under contract with the current employer. The courts would rule that the employee must first satisfy the initial contract before entering into a new one, and the second agreement would be considered an illegal contract, deeming it void.

Furthermore, there are other ways a person can force another individual to sign a contract. This is referred to as duress and there are two types of duress: physical duress and duress by improper threat. Several types of threats can induce someone to enter into a contract. These threats are made to commit a crime, to instigate criminal prosecution, and to instigate civil proceedings. Lastly, any contract induced by physical violence is void.

What Does It Mean to Sign a Contract Under Duress?

Signing a contract under duress means you are signing it against your will. A person can be forced to sign it through threats of physical violence or even death. There could be mental pressure involved in these situations and lies to coerce an individual to sign it. However, it is not easy to detect duress in every situation, and the coercion can be more subtle.

Below are some examples of how one person may use duress to compel another person to sign a contract:

• Extreme economic pressure;
• Threats against personal liberty and of violence;
• Unconscionability, or bad faith, in the bargaining process or terms.
• Fraud or deception;
• Concealment of material facts of the contract and;
• Terms that are impossible to satisfy.

The main objective of determining is to understand if the duress impacted or impaired the alleged victim’s ability to make an informed decision. The courts will look at the specific facts of the case and examine the relationships within the context. As a legal matter, the judge will consider the standard of a “reasonable person” and how they would have reacted in a similar situation.

Duress can occur at any time leading up to the actual signing of the contract. It does not necessarily mean that the threat needs to happen when the signature takes place. It can happen during the bargaining process as well as the end stages of the contract.

In terms of economic duress, not all jurisdictions recognize this claim. This type of duress happens when one party threatens the economic loss of another individual. Likely, these people are already in contract with one another. There is no other option available, and one party may threaten to cancel the contract unless the other party agrees to new demands. The duress is caused by no other viable option and flexibility available in the negotiation.

The legal element of the alleged duress is that it forced the defendant’s conduct. This means that the duress involved a wrongful act that forced the victim to have no other reasonable alternative. Courts have determined bad faith in scenarios that involved blackmail, threats to sue, or asserting false claims. Furthermore, threats to breach a contract in bad faith are considered unlawful conduct. Judges will look at each case and facts to figure out what type of duress was present.

Beyond claiming these statements of economic duress, the party must present proper evidence to back the claims. This cannot be used to merely assert a party’s legal rights. There needs to be grounds for legal action, and the party filing the claim must present the proper applications. The party must demonstrate that the improper threat could have caused the economic loss that the other party threatened.

Lastly, the party does not have a viable reasonable alternative. Meaning, the party threatens in a way that forces the other party to choose them over everyone. It creates a situation where no other option is available for them to pursue.

What Is Undue Influence?

Undue influence deals more with persuasion and how that can result in a person signing a contract. This can be far more subtle than actual force. The court gives more emphasis to the dynamics of the relationships involved. They further consider the behavior patterns and figure out if it is undue influence or just a few instances of the action.

For instance, an elderly person is far more vulnerable to undue influence than a young adult. The person can use the elderly person to gain their advantages. Even a friendship can turn into undue influence, especially if that person intends to gain power over them.

Some hospice care providers can also create relationships that result in undue influence over the person they are taking care of. The individual can make remarks on needing financial assistance but must persuade the elderly person to name the individual as an heir.

The courts adhere to certain guidelines when determining the validity of a contract and look to the following factors:

• Victim’s vulnerability: the judge will consider the victim’s age, mental capacity, isolation from others, level of dependency, and if the individual accused of undue influence knew or should have known about the victim’s vulnerability;
• Authority Status: the person influencing them and their relationship with the victim. Someone’s status as a family member, fiduciary, clergy, or care provider. In what way did the person influence the victim;
• Influencer’s Conduct: Did the influencing individual have control over medications or other necessities of life. How did they treat the individual, did they use affection or intimidation, or make financial changes without their knowledge or permission;
• Consequences: What happened in the situation and how the influencing individual’s actions impact the outcome.

When Do I Need to Contact a Lawyer?

If you are a victim of an abusive contract, you need to contact a local contract lawyer immediately. In any case, there will be warning signs that will indicate that fraud has occurred.

To ensure your rights are protected, seek assistance from a local contract attorney to file a claim under contract law. LegalMatch can help connect you with the right attorney for your needs.