Errors that Make Contracts Void or Voidable

At first glance, entering into a contract seems fairly straightforward. However, there are often situations in which mistakes are made and contracts can be deemed void or voidable. When a contract is deemed void, it is an unlawful agreement that legally cannot be enforced from the start. A voidable contract, on the other hand, is an agreement that is valid but a party can invalidate it or a provision of it when there are certain circumstances that impact the legitimacy of the agreement. Below, our Utah business law attorney outlines some of the most common mistakes to avoid.

Mutual Mistakes

A mutual mistake arises when all parties to a contract share the same incorrect assumption about a basic fact or essential term. Under Utah law, if a mutual mistake significantly affects the agreed-upon terms, the contract may be declared void or subject to rescission. For example, if both you and a vendor believe that a piece of equipment is a specific model, but it is later discovered to be a different model, either party may have the right to void or renegotiate the contract.

Unilateral Mistakes

In contrast to mutual mistakes, unilateral mistakes occur when only one party to a contract is operating under an incorrect assumption about a material fact. Under Utah law, a unilateral mistake may provide grounds to void or rescind a contract if enforcing it would result in undue hardship to the mistaken party. However, the law also protects against abuse therefore if the other party knew, or reasonably should have known, about the mistake and attempted to take advantage of it, the mistaken party generally has the right to withdraw from the agreement. Courts may also consider factors such as the significance of the error, the ability to correct it, and whether the contract terms were fair and equitable at the time of formation. Understanding these nuances is critical for both drafting and enforcing contracts to ensure fairness and minimize risk.

Intentional Misrepresentation

Intentional misrepresentation happens when someone knowingly provides false information or hides a key fact to get the other party to agree to a contract. If one party is misled, that party may be able to cancel the contract and recover any losses.  For example, if you purchase a vehicle online based on the seller’s statement that it has never been in an accident, but you discover it was, you may be entitled to cancel the sale, return the vehicle, and receive a refund. Addressing intentional misrepresentation promptly is essential to protecting your legal and financial interests.

Undue Influence

Like intentional misrepresentation, undue influence is not a mistake, but rather an intentional act by one party to the other. Undue influence is the improper use of power or trust by one party to persuade the other party to act against their own free will and enter a contract. If a contract involves undue influence, it can be deemed voidable. For example, if someone threatens to hurt your business unless you accept unfair contract terms, this is undue influence. Even if you enter into the contract, you  may have grounds to have it deemed unenforceable if you can prove undue influence was involved.

Our Business Law Attorney in Utah Can Help You Avoid These Common Mistakes 

Contracts really do form the foundation of so many relationships in business. However, making even the simplest mistake can void the very protection you thought you had or can be used to uphold your rights. At AGS Law, our Utah business law attorneys can draft the contracts you need, or review the contracts you are presented to ensure they do not include any mistakes and that you and your business are protected. Call us today at 801-477-6144 or fill out our online form to schedule a consultation and to learn more about how we can help.

Source:

le.utah.gov/xcode/Title25/Chapter5/25-5-S6.html