Legally Unenforceable Contracts

Contracts may become legally unenforceable for various reasons. In this article, we will focus on two specific causes: lack of consideration and seemingly immaterial breaches of contract.

Lack of Consideration: Nudum Pactum or Bare Contract.

A bare contract, also known as Nudum Pactum, is a contract that lacks consideration and is therefore not legally enforceable. Consideration is the mutual exchange of something of value between the contracting parties. Without it, no enforceable legal obligation exists.

For example, if John hires a translator to translate a document from English to French for $100, and the translator agrees to perform the service in exchange for the fee, this agreement includes consideration. Both parties exchange promises—John promises to pay $100, and the translator promises to deliver the service. However, if John’s neighbor casually promises to translate the documents as a favor and John later offers $100 as a token of appreciation, no legally enforceable contract exists. In this case, the promises are considered gifts rather than a contract, as there is no mutual exchange of value. Even if the neighbor translates the documents, they cannot compel John to pay, as the court would not enforce such an agreement.

Seemingly Immaterial Breach of Contract

Contracts may initially be legally enforceable but can become unenforceable due to a seemingly immaterial breach. A breach occurs when one party fails to perform their obligations as specified in the agreement, such as within the agreed timeframe or following outlined procedures. If this breach is deemed material, the other party may be relieved of their contractual obligations and may even seek damages.

For instance, if John contracts with Tim to wash his car between 4 and 5 PM for $20 because John has a date at 6 PM, but Tim washes the car the following day, Tim cannot demand payment. Although Tim performed the service, his failure to adhere to the agreed timeframe constitutes a material breach. John is legally entitled to withhold payment, and the court would not enforce the contract.

Similarly, if a school contracts with a teacher to teach 20 hours per week for a monthly salary of $2,000, and the school fails to pay the teacher on time, the teacher may cease teaching and sue for damages. The school cannot legally compel the teacher to continue performing their duties due to the material breach, and the teacher retains the right to claim unpaid wages and other damages.

Key Takeaways

A contract may be unenforceable either at its inception or during its performance:

1. At Inception: A contract lacking consideration, such as a bare contract, is unenforceable. Neither party can sue for non-performance.
2. During Performance: A material breach, even if it appears immaterial initially, can render the contract unenforceable. The aggrieved party may sue for damages and is not obligated to fulfill their part of the agreement.

Understanding Bare Contracts

A bare contract refers to a promise that lacks legal enforceability due to the absence of consideration—a mutual exchange of value. Contracts can take two forms:

1. Bilateral Contracts: Both parties exchange promises. For example, Ann promises to paint Tim’s house, and Tim promises to pay $100. Failure by either party to perform can lead to a breach of contract claim.
2. Unilateral Contracts: One party makes a promise contingent on the other’s action. For example, Tim promises $100 if Ann paints his house. The contract becomes binding only when Ann begins or completes the painting.

Determining Consideration

Consideration must involve a mutual exchange of value. If one party’s promise lacks reciprocal value, the agreement is a bare contract and unenforceable. For instance, if Tim promises Alice $100 without requiring anything in return, there is no consideration. Similarly, if Alice paints Tim’s house without a prior agreement or promise of payment, Tim is not obligated to pay her.

Examples of Bare Contracts

1. Prior Obligations: If Tim offers Ann $100 to refrain from underage drinking, this is a bare contract. Ann’s obligation to comply with legal drinking age laws cannot serve as consideration.
2. Illusory Promises: If Ann agrees to paint only “as much of the house as she deems dirty,” her promise is illusory and does not constitute enforceable consideration.

Legal Recourse for Bare Contracts

Although bare contracts are generally unenforceable, courts may occasionally provide remedies based on equity (fairness). It is advisable to seek legal counsel to determine available options in such cases.