Contracts are how most businesses operate and work with other vendors, clients, and customers. However, not all contracts are enforceable. There are circumstances under which a contract may be void or rendered unenforceable.
A Texas business litigation attorney at Massingill can help you understand your contractual rights and responsibilities and explain how to get out of a business contract.
Business Contracts in Texas
A contract is a legally binding promise between two parties that sets out each party’s rights and responsibilities. Business contracts govern transactions between parties in an industry or commercial setting.
There are several requirements business contracts must meet to be enforceable.
Offer
A contract starts with an offer. Both parties agree to enter into a mutually beneficial agreement, and one party makes an offer to the other. The language of the offer must be clear and unambiguous, so each party knows what they are agreeing to and what to expect from the other party.
Acceptance
A valid contract must include acceptance of the offer. The party that provided the offer can reject or ask to modify it, but there is no contract without acceptance. There must be mutual assent or a “meeting of the minds.”
While it is generally not required that contracts be in writing, it is advisable to have a written agreement to ensure the parties are aware of and understand the terms.
Consideration
Each party to a contract must provide consideration for it to be valid. Consideration is a thing, action, or promise that has value to the receiving party. Consideration is often monetary but can also include:
- Property,
- Employment,
- A promise to refrain from performing an action (i.e., forbearance), or
- A promise to undertake an action.
Some promises and actions, such as gifts or blackmail, are not deemed consideration and don’t count as a requirement for an enforceable agreement.
Capacity, Legality, and Intention
In addition to the above elements, capacity, legality, and intention must also exist. For capacity, all parties must be legally competent to enter into a binding agreement. They must be at least 18 and have the mental wherewithal to understand the contract terms.
Legality means the purpose and subject of the contract cannot violate laws or public policy.
Intention means that all parties involved must intend to agree to the contract terms.
If you are unsure if you have a valid contract, consult a business contract attorney. An experienced attorney can review the terms of the contract and help you understand if it is enforceable.
Voiding or Dissolving a Contract
The parties may no longer want to be part of the contract in certain instances. In this case, the parties may utilize the concept of voidability. Voidability occurs when one or both parties void or invalidate the agreement under certain circumstances. When a contract is void, it is as if it never existed, releasing the parties from their obligations.
There are several grounds for voiding a contract.
Lack of Capacity
As noted above, capacity is a person’s legal ability to understand the contract’s nature and terms. If the party is a minor, an individual with mental incapacity, or is under the influence of drugs or alcohol, they generally lack the capacity to enter into a contract.
Duress
Duress is when one party forces the other to enter into an agreement against their will. A contract is void if one party forces the other to agree using physical, emotional, or financial threats or coercion.
Undue Influence
Undue influence is similar to duress as it involves one party taking advantage of the other’s vulnerability, mental incapacity, or emotional dependence to pressure them into signing the contract. This often occurs with elderly or disabled parties.
Illegality
If the purpose of the contract is illegal or violates the law or public policy, the contract is void and unenforceable.
Minority
The contract may be void if one party was under 18 when they entered the agreement. Individuals under 18 are minors and can’t enter binding contracts.
Mistake
The contract may be void if both parties were mistaken about a material fact when signing the agreement. If there is a mutual mistake and it is significant enough to impact the terms of the contract, either party may seek to void the contract.
Misrepresentation
If one of the parties misrepresents a fact or statement that causes the other party to enter into the contract, it could void the contract. The misrepresentation can be intentional or unintentional. The person induced to enter the contract must show they relied on the misrepresentations and wouldn’t otherwise have signed it.
Unconscionability
A court can deem a contract unconscionable if it is unfair or unjust to one party. This often occurs when one party has more power in the agreement than the other and can use that power to assert unfair terms for the other party.
Other Ways to Get Out of Your Contract
In the business context, there may be a few other ways to get out of your contract:
- Send a letter to the other party asking to cancel the contract,
- Assert the Texas three-day right of rescission rule, or
- Breach the contract.
If you’re wondering, Can you break a contract? The answer is yes. However, if you break or breach the contract, you may also be responsible for paying damages to the other party.
The party arguing that the contract is void must prove why, including providing evidence to support their claim. If you want to void, dissolve, or terminate your contract, be sure to work with a business litigation attorney in Texas to understand each option and determine which is best for your situation.
Massingill Are Your Business Contract Professionals
If you have entered into a contract and are wondering how to get out of it with minimal consequences, consult Massingill. A Texas business litigation attorney from our office can review the terms and conditions of your contract, assess your circumstances, and develop a strategy for you to get out of it.
Our experienced attorneys are contract professionals who have helped hundreds of clients navigate contractual issues.
As a small law firm, we provide each client with one-on-one, individualized attention. Our firm has received nearly 200 five-star reviews from clients for our professionalism and results-driven service.
We pride ourselves on fighting for and protecting your rights. Contact Massingill today to learn how we can help you with how to get out of a business contract.
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Joshua Massingill
Joshua Massingill is an attorney practicing in Austin, Texas. He serves on the Texas State Bar’s Law Practice Management Committee, the Leander Educational Excellence Foundation (LEEF) Board of Directors, and the Success-Werx Board of Advisors. He mentors young entrepreneurs in Leander ISD’s INCubatorEDU program and is active in his church.
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