What Do You Mean The Contract Doesn’t Protect Me?

People doing good business generally think they can rely on contracts.  Thankfully, they usually can.  Unfortunately, what many in business don’t realize is that there are many times contracts are not enforced, or are not enforced in the way business people think they will be.

Contractual obligations often are not enforced when, for example, the parties suffer from a mistaken belief at the time they enter into the contract, when performance is impracticable, or when one party is deemed to have exerted undue influence over the other in reaching the contract.  Similarly, contracts often are not enforced in the manner anticipated when the consequences tied to one party’s breach are deemed too onerous, or when a court determines that one party waived the other party’s failure to perform.

One of the most problematic areas where contracts are not enforced as expected, however, relates to contractual representations that a contracting party is not relying on any information or representation other than the information and representations set forth in the contract.  Contractual clauses in this vein often read something like “this Agreement embodies the entire agreement between the parties, cannot be waived or amended except in a writing signed by both parties, and neither party has relied upon any information not expressly set forth in this Agreement.”  In many cases, courts determine that such clauses are not sufficiently specific, and, therefore, that the clause affirming nonreliance on any other information is not an adequate defense to the other party’s claim that facts were withheld to convince it to enter into the contract.  Accordingly, business professionals should recognize that their contracts may not mean what they think, and should take care to make nonreliance clauses clear and specific.