What Is the Meaning of Defective Contracts?
There are a number of ways in which a contract may be considered defective. An agreement may be defective in the sense that it fails to contain all the essential elements necessary for a binding contract to be formed. A contract may be also be construed as defective if it fails to clearly express the mutual intention of the parties to be bound by its terms.
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Offer and Acceptance
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Under the common law principles of contract formation, for a communication to constitute an offer, the offer must describe with certainty the material terms of the agreement. For example, A's offer to deliver goods to B must contain the price, the quantity and the time for delivery. An acceptance must not supersede the terms of the original offer. If the acceptance in any ways changes the terms and conditions of the original offer, it will be construed as a counter offer, and at common law, no binding contract will be formed.
Bargained For Exchange
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For a binding contract to be formed, something of value must be exchanged between the parties in consideration for their mutual promises to perform. For example, A promises to paint B's house in exchange for B's promise to pay A $500. Where there is no exchange of value (consideration), no contract is formed.
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Ambiguous Terms
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The terms and conditions of a contract should be clearly and unambiguously stated. A contract that is poorly drafted may be faulty or defective if one or more of its essential terms or conditions is susceptible to different interpretation by one or both of the parties. In this sense, any contract that requires judicial intervention to ascertain how the parties intended to be bound could be considered as defective.
Oral Contracts
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With the exception of contracts for the sale of land, there is nothing under the traditional rules of contract law that requires an agreement to be in writing to be valid. Thus oral agreements, if they contain all of the requisite elements necessary for the formation of a contract, are binding. However, since there is no written evidence of the manner in which the parties agreed to be bound by its terms, oral agreements, though not legally defective, may be difficult to enforce.
Implied Contracts
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Often times, to prevent injustice, courts will attempt to cure a defective contract even though under common law rules of construction, no express contract could have been formed. An example would be where a worker agrees to paint a home but the owner refuses payment because the parties didn't agree on a price at the time the contract was formed. In these situations, most courts would find that an implied contract was formed and, to avoid unjust enrichment, would hold that worker is entitled to the fair value of services rendered.
Unenforceable Contracts
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A defective contract could also refer to an agreement that would be difficult or impossible to enforce. Some of the reasons a contract might be unenforceable include an agreement with individuals who lack the legal capacity to enter into a contract, such as a minor or an individual who lacks sufficient mental capacity to express an intention to be legally bound. An agreement to perform an illegal act is defective, as it is void as a matter of public policy.
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