When Are Contracts Unenforceable? [No. 86]

Summary

This script delves into the nuances of contract law, highlighting that not all agreements are enforceable despite appearing valid. It discusses contracts against public interest, such as slavery, and those involving individuals lacking contractual capacity, like those with schizophrenia or minors. The law aims to protect society's values and ensure rational, mutually beneficial exchanges. However, it also acknowledges the potential negative consequences of overprotection, such as reluctance to engage with those deemed less capable.

Takeaways

• 📜 Contracts may appear valid with offer, acceptance, and consideration but can be unenforceable at law.
• 🚫 Agreements against public interest, like slavery, are unenforceable regardless of consent.
• 🧩 Contracts can be void if made by individuals lacking the capacity to contract due to mental incapacity or intoxication.
• 🤔 The essence of contract law is to facilitate rational bargains that improve parties' conditions and social welfare.
• 🔍 Contracts with incapacitated individuals are void as they do not understand the agreement they are entering.
• 👶 'Infants' or individuals under the age of majority can only incur voidable obligations, which is meant to protect them.
• 🚗 The ability to void contracts can discourage businesses from dealing with minors, impacting their opportunities.
• 💭 The purpose of contract law is to let people declare their values through reasoned transactions in the marketplace.
• ⚖️ Unintended consequences must be considered when using contract law to protect individuals, as it can affect societal interactions.
• 🛑 Enforcing obligations where a party is not fully capable due to age or incapacity does not fulfill the purpose of contract law and may be deemed unenforceable.

Q & A

What makes a contract appear valid on the surface but not enforceable at law?

A contract may appear valid if it superficially has the elements of offer, acceptance, and consideration or alternatives like promissory restitution or promissory estoppel, but it might not be enforceable if it goes against public interest or involves parties lacking the capacity to contract.

Why are contracts against public interest, such as slavery, unenforceable?

Contracts that are against public interest, like those involving slavery, are unenforceable because they are considered abhorrent to societal values, and courts will not honor them even if the parties involved desire them.

What is the significance of a person's capacity to contract in the enforceability of a contract?

A person's capacity to contract is crucial because if they are incapacitated, such as due to a mental disorder like schizophrenia, they may not understand the agreement they are entering. Contracts entered into by such individuals are unenforceable.

How does being extremely drunk affect a person's ability to enter into a legally binding contract?

If a person is extremely drunk and signs a contract without knowledge of what they are signing, they are not entering into a voluntary and informed exchange. This lack of understanding and volition makes the contract unenforceable.

What is the core principle behind contract law according to the script?

The core principle behind contract law is that parties enter into bargains that they believe will rationally improve their situation, contributing to the efficient allocation of property and increasing overall social welfare.

Why are contracts with individuals under the age of majority often voidable?

Contracts with individuals under the age of majority (often 18) are voidable to protect young people who may not fully understand the implications of the agreements they are entering into.

What is the potential negative effect of statutes protecting minors in contract law?

The potential negative effect of such statutes is that other parties may be wary of dealing with minors, as they can void their obligations at any time, which could adversely affect the financial interests of the other party.

How does contract law aim to facilitate the declaration of personal values?

Contract law allows individuals to use their reason to declare what they value most by entering into transactions that they believe will improve their value, thus facilitating personal and societal benefit.

What happens when a party enters the marketplace without full faculties, and why are such contracts often deemed unenforceable?

When a party enters the marketplace without full faculties, due to young age or incapacitation, they cannot fulfill the purpose of contract law, which is to improve personal value through rational transactions. As a result, such contracts are often deemed unenforceable.

What is the role of unintended consequences in the application of contract law as per the script?

Unintended consequences play a significant role in the application of contract law, as seen in the example of minors being able to void contracts, which can lead to reluctance from other parties to engage in agreements with them. This highlights the need for careful consideration in how contract law is used to protect individuals.