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Feb

17

Is My Legal Form Valid and Enforceable (Part 3): Procedure

Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only. If you need legal advice with respect to drafting, negotiating, or resolving a dispute concerning an agreement, you should seek professional assistance (e.g. make a post on Dynamic Legal Forms). We have Toronto, Ottawa, Brampton, Hamilton, and other Ontario family law lawyers registered on Dynamic Legal Forms who can offer information, advice, and assistance with respect to your agreement.

As a follow up to my two other blogs on the topic of “Is My Legal Form Valid and Enforceable”, in this blog I’ll be discussing the various ways in which a party can challenge a legal form based on the process it was entered into. Typically, a party will make an argument that there wasn’t sufficient consent or the agreement was not entered into freely or voluntarily. This may be based on threats, special relationships, or an imbalance of power that allows a party to take advantage of the other party. A party may also claim there was a mistake or misrepresentation which caused it to enter into the agreement. So without further adieu, let’s get into it…

Duress
DURESS is a legal doctrine that allows a party to challenge an agreement on the basis that they were so seriously coerced by another’s party’s illegitimate exercise of power such that they could not freely consent to entering into the agreement. Examples of duress include threats or acts that are unlawful (e.g. criminal, tortuous, breaches of contract, etc.) or illegitimate (e.g. threatening to refuse to enter into a contract or to terminate a contract lawfully unless…). Basically, if there’s some kind of unlawful or illegitimate pressure that isn’t in the normal course of market forces, then it could amount to duress. Specific examples could include:

  • A party threatening another party’s life or limb unless they enter into an agreement;
  • A party threatening to sue another party unless they enter into an agreement; and
  • A party threatening to call the police on another party unless they enter into an agreement.

Undue Influence
UNDUE INFLUENCE is similar to duress as it is concerned with the adequacy of a party’s consent to enter into the agreement. Unlike DURESS, however, undue influence may exist without violence or threats of violence against a party. Undue influence depends on the RELATIONSHIP between the parties which causes one party to confide in the other and leads the other to take advantage and exert a natural influence over the other. Undue influence can be used to challenge a contract on the basis that a weaker party was dominated by or unduly influenced by the other party. Examples of relationships that could lead to challenging contracts based on undue influence include: doctor-patient, parent-child, trustee-beneficiary, priest-churchgoer, etc. So there’s a special relationship that involves trust, confidence and influence. To get around this type of challenge, a party could try to argue that the other party received full disclosure, had independent legal advice, and had only a minor disadvantage when it came to unequal power.

Unconscionable Bargain
Agreements which amount to UNCONSCIONABLE BARGAINS can be challenged. This doctrine relates to an unfair advantage gained by an unconscionable use of power by a strong party against a weaker party. So there are substantive and procedural elements here. The substance is the contract itself: how fair were its terms? The procedural element has to deal with how it was entered into. The defence of unconscionable bargain may apply to situations where there is no unlawful threat (duress) or domination (undue influence). So to recap: there is an inequality of bargaining power and one party has taken undue advantage of that inequality. That inequality in bargaining power may result from poverty, age, ignorance, emotional vulnerability or mental infirmity of one party. This doctrine is not meant to simply undue bad bargains. It looks at factors such as fairness, relationship between the parties, their respective knowledge and weaknesses, sources of power, conflicts of interest, grossly inadequate consideration in the contract, etc.

Misrepresentation
A MISREPRESENTATION is a material statement which is false and which an innocent party reasonably relies upon to their detriment to enter into the contract. The false statement could have been made fraudulently (i.e. where a party knew it was false, but said it anyways with the intention of having the other party rely upon it as being true), negligently (where a party was careless or reckless in knowing the truth of the statement, but says it anyways), or innocently (a party was innocent of fault in making a misrepresentation). If there has been found to have been a misrepresentation, then the contract can be challenged and rendered invalid and unenforceable (in whole or in part).

So what’s with all the “in whole or in part?” Well, if the contract is not wholly undone or struck down as a result of its defect (and this will depend on how it is challenged and the degree to which that challenge is successful), then parts of it may survive. If you don’t want to leave it up to a judge to make that decision, then be sure to include a SEVERABILITY CLAUSE in your agreement. This clause generally says that it, if part of the contract is found to be invalid and unenforceable, the rest of the contract will still survive and be valid and enforceable.

Mistake
An agreement may be challenged in whole or in part on the basis that there was a mistake. Mistakes get made all the time. Sometimes, only one party makes the mistake (UNILATERAL MISTAKE). Other times, both parties make the same mistake (COMMON MISTAKE). And other times, both parties make mistakes but their mistakes are different (MUTUAL MISTAKE). Interestingly, a contract may actually contemplate that there is a mistake and how it ought to be dealt with. Sometime, the parties claim that there was a radical or fundamental difference between the document they thought they were signing and the document actually signed (in terms of character, contents or otherwise). But the signer cannot raise that defence if they failed to use reasonable care in signing the document.

So, overall, there are many ways that a contract can be challenged and struck down – in whole or in part. Specific examples include (but are not limited to):

  • Vague or missing terms
  • Lack of Consideration
  • Duress
  • Undue Influence
  • Unconscionable Bargain
  • Misrepresentation
  • Mistake

Note, that there are other ways in which a contract can be challenged – for example pursuant to the doctrines of promissory estoppel (i.e. where a party makes a clear and unequivocal promise or representation to another party that it will not insist on its strict legal rights under the contract, and the other party alters its position in reliance on the promise or representation, the first party may be estopped from asserting its strict legal rights) or frustration (i.e. something outside the parties’ control makes it impossible for one or all of them to carry out their obligations in the agreement).

If you have any concerns over the validity and enforceability of your legal form – in whole or in part – based on the principles of contract law outlined above or otherwise, you should consult with a lawyer (e.g. by making a post on Dynamic Legal Forms). Remember: an ounce of legal prevention can save you a pound of pain later on.

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