{"id":176077,"date":"2022-09-27T12:48:17","date_gmt":"2022-09-27T11:48:17","guid":{"rendered":"https:\/\/legalvision.co.uk\/?p=176077"},"modified":"2024-05-07T01:45:08","modified_gmt":"2024-05-07T00:45:08","slug":"unenforceable-commercial-contracts","status":"publish","type":"post","link":"https:\/\/legalvision.co.uk\/commercial-contracts\/unenforceable-commercial-contracts\/","title":{"rendered":"Understanding \u2018Unenforceable\u2019 Commercial Contracts in England"},"content":{"rendered":"\n<p>When you agree to commercial contracts in business, you expect them to result in a legally binding <a href=\"https:\/\/legalvision.co.uk\/services\/commercial-contracts\/\">contract<\/a> between the contracting parties. However, if your contract terms contain poorly phrased clauses, a court could rule your commercial agreements invalid in English law. This means that certain types of contracts could be unenforceable commercial contracts. Therefore, your business cannot rely on or enforce your business contract and any contractual obligation with the other party. This article will explore when a contract might be unenforceable and identify certain terms that are necessary for a <a href=\"https:\/\/legalvision.co.uk\/employment\/legal-obligations-contracting\/\" target=\"_blank\" rel=\"noreferrer noopener\">legally binding agreement<\/a>.<\/p>\n\n\n\n    <div class=\"my-7 lg:my-10 border-y-2 border-gray-100 py-7 lg:py-10 flex flex-col sm:flex-row items-start gap-10\">\n                    <img decoding=\"async\" class=\"w-52 mx-auto my-0! rounded\" src=\"https:\/\/img.legalvision.com.au\/wp-content\/uploads\/sites\/4\/2022\/09\/06164254\/uk-startup-manual-290x410-1.jpg\" alt=\"Front page of publication\"\n                 loading=\"lazy\" width=\"208\" height=\"298\">\n                <section>\n            <div class=\"text-2xl font-bold\">UK Startup Manual<\/div>\n            <div class=\"body-text\">\n                <p>LegalVision&#8217;s Startup Manual is essential reading material for any startup founder looking to launch and grow a successful startup.<\/p>\n            <\/div>\n            \n\n<a href=\"https:\/\/go.legalvision.co.uk\/uk-startup-manual.html\" class=\" block px-5 py-3.5 max-w-fit bg-orange button__hover transition rounded text-white font-bold text-lg no-underline uppercase leading-tight text-center\" target=\"\" rel=\"\">Download Now<\/a>        <\/section>\n    <\/div>\n\n\n\n\n<h2 class=\"wp-block-heading\">Unenforceable Contracts<\/h2>\n\n\n\n<p>As a business owner, you must understand if your commercial contracts are unenforceable in English law. If your contracts have an unenforceable clause, they will have no legal weight in court if there is a <a href=\"https:\/\/legalvision.co.uk\/disputes-litigation\/challenging-adjudication-award-commercial-dispute\/\">contract dispute<\/a> between contracting parties.\u00a0<\/p>\n\n\n\n<div  class=\"box box--icon box--info\">\n    <p>For example, if one of the parties tries to sue your business under an unenforceable contract clause, they will be unsuccessful.<\/p>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">When is a Clause Unenforceable?<\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400\">One of a lawyer&#8217;s primary responsibilities is to <\/span><a href=\"https:\/\/legalvision.co.uk\/commercial-contracts\/lawyer-company-contracts\/\"><span style=\"font-weight: 400\">advise<\/span><\/a><span style=\"font-weight: 400\"> whether a draft written agreement is likely to be an unenforceable or a legally enforceable contract. A lawyer will consider certain factors, including:<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400\">(a) the particular type of contract;<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400\">(b) whether both parties receive a benefit (called &#8216;consideration&#8217;) from the contract; and<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400\">(c) whether there is an overly severe or absurd &#8216;penalty clause&#8217;.<\/span><\/p>\n\n\n\n\n<a href=\"#content-next\"\n   class=\"block p-4 mt-10 text-xl font-bold text-center text-white no-underline bg-gray-800 rounded-t-xl\">\n    Continue reading this article below the form\n    <i class=\"text-xl fa-regular fa-arrow-down\"><\/i>\n<\/a>\n<div class=\"px-6 pt-10 pb-12 mb-10 text-center bg-gray-100 rounded-b-xl sm:px-12 test\">\n    <div class=\"mb-8 text-2xl font-bold text-orange\">\n        Need legal advice?\n        <br>\n        <span class=\"text-lg not-prose\">\n                            Call <a 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This is because some forms of contract contain stricter clauses than others.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400\">For example, a construction contract that agrees on demolishing and rebuilding one of your company&#8217;s buildings will have stricter clauses on the consequences of breach of contract than a contract with a caterer to have lunch delivered for a meeting. This is because:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400\">\u00a0the financial impact of the construction-related breach is much higher; and\u00a0<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">severely worded breaches of contract clauses are more common within construction contracts.<\/span><\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Consideration<\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400\">A court will consider the benefit in a contract because contracts are only usually enforceable if both parties receive a benefit. This is otherwise known as consideration.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400\">This does not mean that the benefit has to be a good business deal.&nbsp;A company could knowingly sell an item at less than it is worth. For example, selling your printer to another company for \u00a310 when it still has a value of \u00a3100.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400\">However, if your contract states that the printer is free, the deal may be unenforceable due to a lack of consideration. Note that this does not apply to genuine donations to a charity.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400\">However, courts are reluctant to strike out many clauses as enforceable as they recognise the importance of the actual bargain struck between businesses. Instead, they wish to target only the most extreme examples. Also, courts can tone down unenforceable clauses.<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Excessive Penalty Clause<\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400\">A penalty clause in a contract will pre-calculate the sum due to your business if the other party breaches a contract term. However, a court will check whether the penalty clause is overly harsh in the circumstances. If it is, it is an unenforceable penalty clause.<\/span><\/p>\n\n\n\n<div  class=\"box box--icon box--info\">\n    <p>For example, consider a penalty clause requesting payment of \u00a310,000. In the event of a contract breach, it would be reasonable and enforceable, where the financial loss to your business is likely to be thousands of pounds. However, this kind of penalty would be unenforceable if your business only stands to lose a nominal amount, such as \u00a3100.<\/p>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Inserting Unenforceable Clauses<\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400\">Sometimes it is wise for your business to insert strongly-worded clauses in a written agreement, even if they may not be legally enforceable. While you might suspect that a court will rule the clause unenforceable, you might still wish to include a harsh penalty. Ths may be to motivate the other party from breaching the contract. However, keep in mind that if the other party breaches the contract, you put your business at risk if a court strikes out the unenforceable term. You might not have any avenue to seek compensation for the other party\u2019s breach.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400\">Your business could consider agreeing to a written contract containing an \u2018unenforceable\u2019 second clause. Some reasons for this are:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400\">if your company had suggested the clause as a deterrent;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">if the other business suggests the clause and you agree in the knowledge that it is unlikely to be effective in practice; or<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">because the bargaining power makes the contract non-negotiable.<\/span><\/li>\n<\/ul>\n\n\n\n<p><span style=\"font-weight: 400\">There will be situations where lawyers acting for companies will trade off clauses against each other. This means you can have \u2018that clause\u2019 if we keep \u2018this clause\u2019. For example, you could benefit from allowing another business to keep a term you believe to be \u2018unenforceable\u2019 in exchange for your business keeping a clause you believe to be legally binding.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Key Takeaways<\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400\">You must ensure that your business contracts are enforceable and, therefore, do not contain unenforceable clauses. This ensures that your contracts are legally enforceable. However, there are instances where you may intentionally include an unenforceable clause in your business contracts, such as when you need it as a deterrent.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400\">If you need help ensuring written agreements are fully enforceable, our experienced <\/span><a href=\"https:\/\/legalvision.co.uk\/contract-lawyers-lp\/\"><span style=\"font-weight: 400\">commercial contract lawyers<\/span><\/a><span style=\"font-weight: 400\"> can assist as part of our LegalVision membership.&nbsp;For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on <a href=\"tel:+448081968584\" class=\"AVANSERnumber dynamic-number\">0808 196 8584<\/a> or visit our<\/span><a href=\"https:\/\/legalvision.co.uk\/membership\"><span style=\"font-weight: 400\"> membership page<\/span><\/a><span style=\"font-weight: 400\">.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Frequently Asked Questions<\/span><\/h2>\n\n\n\n<div class=\"schema-faq wp-block-yoast-faq-block\"><div class=\"schema-faq-section\" id=\"faq-question-1664213731862\"><strong class=\"schema-faq-question\"><strong>Is it common for business contracts to be unenforceable<strong>?<\/strong><\/strong><\/strong> <p class=\"schema-faq-answer\"><span style=\"font-weight: 400\">Most contracts between businesses are enforceable and binding, and only a small number of clauses are unenforceable.<\/span><\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1664213760349\"><strong class=\"schema-faq-question\"><strong>Can contract clauses be toned down to ensure enforceability?<\/strong><\/strong> <p class=\"schema-faq-answer\">In some circumstances, yes.\u00a0Judges tend to strike out clauses for being too harsh in practice, so a less severely worded clause would stand a better chance.<\/p> <\/div> <\/div>\n","protected":false},"excerpt":{"rendered":"<p>When you agree to commercial contracts in business, you expect them to result in a legally binding contract between the contracting parties. However, if your contract terms contain poorly phrased clauses, a court could rule your commercial agreements invalid in English law. This means that certain types of contracts could be unenforceable commercial contracts. Therefore,<a href=\"https:\/\/legalvision.co.uk\/commercial-contracts\/unenforceable-commercial-contracts\/\">Continue reading <span class=\"sr-only\">&#8220;Understanding \u2018Unenforceable\u2019 Commercial Contracts in England&#8221;<\/span><\/a><\/p>\n","protected":false},"author":13349,"featured_media":3207,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_relevanssi_hide_post":"","_relevanssi_hide_content":"","_relevanssi_pin_for_all":"","_relevanssi_pin_keywords":"","_relevanssi_unpin_keywords":"","_relevanssi_related_keywords":"","_relevanssi_related_include_ids":"","_relevanssi_related_exclude_ids":"","_relevanssi_related_no_append":"","_relevanssi_related_not_related":"","_relevanssi_related_posts":"2398,773,874,767,2395,498","_relevanssi_noindex_reason":"","editor_notices":[],"footnotes":""},"categories":[37],"tags":[20,549,550,597],"class_list":["post-176077","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-commercial-contracts","tag-small-business","tag-binding-contracts","tag-contract-law","tag-contractual-breach"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.5 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Unenforceable Commercial Contracts in England | LegalVision UK<\/title>\n<meta name=\"description\" content=\"You must avoid unenforceable commercial contracts for your business. 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This article helps you to understand unenforceable contracts in England.","breadcrumb":{"@id":"https:\/\/legalvision.co.uk\/commercial-contracts\/unenforceable-commercial-contracts\/#breadcrumb"},"mainEntity":[{"@id":"https:\/\/legalvision.co.uk\/commercial-contracts\/unenforceable-commercial-contracts\/#faq-question-1664213731862"},{"@id":"https:\/\/legalvision.co.uk\/commercial-contracts\/unenforceable-commercial-contracts\/#faq-question-1664213760349"}],"inLanguage":"en-GB","potentialAction":[{"@type":"ReadAction","target":["https:\/\/legalvision.co.uk\/commercial-contracts\/unenforceable-commercial-contracts\/"]}]},{"@type":"ImageObject","inLanguage":"en-GB","@id":"https:\/\/legalvision.co.uk\/commercial-contracts\/unenforceable-commercial-contracts\/#primaryimage","url":"https:\/\/img.legalvision.com.au\/wp-content\/uploads\/sites\/4\/2022\/05\/24122035\/business-image-0522148.jpg","contentUrl":"https:\/\/img.legalvision.com.au\/wp-content\/uploads\/sites\/4\/2022\/05\/24122035\/business-image-0522148.jpg","width":988,"height":659,"caption":"Legal Guide to Executing Agreements in the UK | LegalVision UK"},{"@type":"BreadcrumbList","@id":"https:\/\/legalvision.co.uk\/commercial-contracts\/unenforceable-commercial-contracts\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/legalvision.co.uk\/"},{"@type":"ListItem","position":2,"name":"Commercial Contract Articles","item":"https:\/\/legalvision.co.uk\/category\/commercial-contracts\/"},{"@type":"ListItem","position":3,"name":"Understanding \u2018Unenforceable\u2019 Commercial Contracts in England"}]},{"@type":"WebSite","@id":"https:\/\/legalvision.co.uk\/#website","url":"https:\/\/legalvision.co.uk\/","name":"LegalVision UK","description":"LegalVision is a commercial law firm in the UK with a commitment to innovation","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/legalvision.co.uk\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-GB"},{"@type":"Person","@id":"https:\/\/legalvision.co.uk\/#\/schema\/person\/46d22f7d1b4ba321fe5b1cdc648cc5d2","name":"Thomas Sutherland","image":{"@type":"ImageObject","inLanguage":"en-GB","@id":"https:\/\/legalvision.co.uk\/wp-content\/uploads\/sites\/4\/2022\/05\/cropped-Thomas-Sutherland-96x96.jpg","url":"https:\/\/legalvision.co.uk\/wp-content\/uploads\/sites\/4\/2022\/05\/cropped-Thomas-Sutherland-96x96.jpg","contentUrl":"https:\/\/legalvision.co.uk\/wp-content\/uploads\/sites\/4\/2022\/05\/cropped-Thomas-Sutherland-96x96.jpg","caption":"Thomas Sutherland"},"description":"Tom is an Expert Legal Contributor for LegalVision. He has particular expertise in Commercial and Employment litigation, as well as data protection and privacy regulations. He is a qualified Solicitor in England and Wales and has a decade of legal experience, including advocacy within civil courts and Tribunals. Tom specialises in civil and employment litigation. He has extensive experience in advising employers and companies as to the requirements of employment law and data protection rules, as well as day-to-day advice on smooth running from a commercial perspective. Qualifications: Professional Skills Course - Law, University of Law; Legal Practice Course - Law, College of Law; Bachelor of Laws, University of Southampton.","sameAs":["https:\/\/www.linkedin.com\/in\/tom-sutherland-72b4509b\/"],"url":"https:\/\/legalvision.co.uk\/author\/thomassutherland\/"},{"@type":"Question","@id":"https:\/\/legalvision.co.uk\/commercial-contracts\/unenforceable-commercial-contracts\/#faq-question-1664213731862","name":"Is it common for business contracts to be unenforceable?","acceptedAnswer":{"@type":"Answer","text":"Most contracts between businesses are enforceable and binding, and only a small number of clauses are unenforceable.","inLanguage":"en-GB"},"inLanguage":"en-GB"},{"@type":"Question","@id":"https:\/\/legalvision.co.uk\/commercial-contracts\/unenforceable-commercial-contracts\/#faq-question-1664213760349","name":"Can contract clauses be toned down to ensure enforceability?","acceptedAnswer":{"@type":"Answer","text":"In some circumstances, yes.\u00a0Judges tend to strike out clauses for being too harsh in practice, so a less severely worded clause would stand a better chance.","inLanguage":"en-GB"},"inLanguage":"en-GB"}]}},"_links":{"self":[{"href":"https:\/\/legalvision.co.uk\/api\/wp\/v2\/posts\/176077","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/legalvision.co.uk\/api\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/legalvision.co.uk\/api\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/legalvision.co.uk\/api\/wp\/v2\/users\/13349"}],"replies":[{"embeddable":true,"href":"https:\/\/legalvision.co.uk\/api\/wp\/v2\/comments?post=176077"}],"version-history":[{"count":9,"href":"https:\/\/legalvision.co.uk\/api\/wp\/v2\/posts\/176077\/revisions"}],"predecessor-version":[{"id":187551,"href":"https:\/\/legalvision.co.uk\/api\/wp\/v2\/posts\/176077\/revisions\/187551"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/legalvision.co.uk\/api\/wp\/v2\/media\/3207"}],"wp:attachment":[{"href":"https:\/\/legalvision.co.uk\/api\/wp\/v2\/media?parent=176077"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/legalvision.co.uk\/api\/wp\/v2\/categories?post=176077"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/legalvision.co.uk\/api\/wp\/v2\/tags?post=176077"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}