We have all heard the saying that something is “not worth the paper it is written on.” This is usually said about a contract that is unenforceable or even if enforceable, it may have no value because the party has no ability to pay or perform under the contract. Many times the clearest illustration of a legal concept can be found using the most outrageous of examples.
Example 1. A billionaire CEO of a technology company walks up to you out of the blue and says, “I’d like to give you $5,000.” Pleasantly surprised, you ask him why, and he replies, “Just because.” As he does not have any cash on him, you ask him to write down his promise and sign it. For good measure, you sign it as well. A week later you coincidently see him again and ask about the $5,000 he promised to give you. He replies, “I changed my mind. I’m not giving you any money.” Remembering that you have it in writing and you both signed it, you consult an attorney about whether you can enforce this “contract.” The likely answer is the “contract” will be deemed unenforceable for lack of what the law calls “mutual consideration.” Though the CEO promised to give you something, he was not receiving anything from you in exchange. He is free to withdraw that promise. Simply put, both parties must give something or give up a right they would normally have for a contract to ultimately be deemed enforceable.
Example 2. A seemingly homeless man with a shopping cart strikes your parked car with his cart causing $5,000 worth of damage to your car. He says he will pay for the damage and you write a quick “contract” wherein he agrees to pay you the $5,000 in one week for the damage he caused and in exchange you will not sue him. You both sign the agreement. Is it enforceable? Probably yes, as a court would likely find there was mutual consideration. He promised to pay and you promised not to sue (a right you would otherwise have). The next question is key: is it worth pursuing? If the man is truly homeless and does not, and will not, have a penny to his name, a judgment against him for $5,000 will be worthless. If the seemingly homeless man, however, was actually not homeless at all, but rather the same billionaire CEO from Example 1, then the judgement would likely be worth pursuing.
Ideally, an attorney would be involved early enough in a matter to help a client navigate the sometimes tricky legal issue of ensuring an agreement is enforceable from the onset to avoid possible pitfalls. Sometimes the most valuable service an attorney can provide a client is helping them determine if, when and how a matter is ultimately worth pursuing. As corporate transactional and business litigation attorneys at The Strong Firm P.C., we regularly advise clients regarding properly documenting a proposed contract to ensure it is enforceable. In the unfortunate case when a contract is breach, we assist by evaluating the method and feasibility of pursuing a cause of action under a breached contract and would be happy to do the same for you.
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