The validity of a contract depends upon the different terms associated with contract formation.
First and foremost, a contract must contain the 3 basic elements:
Only after the presence of these elements can a contract come into existence. However, the mere entering into contract is not enough. Numerous other elements determine the validity of a contract.
It is a key component in case of a lawsuit. Jurisdiction is used to determine the state court wherein the lawsuit or claim may be filed. For example, if the party to whom the offer was made resides in California, the Court of the State of California will look into any disputes that may arise. Another way to put this is that the case would fall under California jurisdiction.
Any given contract is enforceable in the state court under the following circumstances:
If there is a failure of any party in fulfilling contract obligations, they are still eligible to claim defenses related to the contract enforcement by the law. These defenses can also nullify contracts, implying that the contractual obligations made by the parties will not be enforced by the court, making the aggrieved party incapable of being recovered.
Following are the defenses that make a contract non-enforceable, thus nullifying the recovery of damages:
If the terms of the contractual agreement are illegal in nature, the contract is unenforceable.
If a party has been made to enter contract by fraud, the party that has been defrauded can nullify the contract. Fraud, in this case refers to an action wherein a party makes untrue representation of fact, with full knowledge of its status with a purpose to induce the other party into contract.
This occurs when one party forces acceptance of the contract by the other party using wrongful practices such as threat or coercion. For example, a contract is said to exist under duress when one party has threatened the other to pin criminal charges against them for not agreeing to the contract. Duress can be proved in court thus relieving the latter of responsibility.
A contract which is unreasonably unfair to any one of the parties and for this reason, will not be entered into by a party is called an unconscionable contract. Often actions such as fraud, mistake or duress lead to this type of a contract.