An example of an illusory contract would be if a seller agrees to sell "all the goods he wants to" to a buyer. In this case, the promisor has no actual obligation clearly stated. The language used in this type of agreement makes it unclear whether the promising party must perform due to the lack of clarity in the language used.
Even if the party is compensated, the language does not make that clear. Because the agreement does not clearly outline the performance required by one party and appears to bind the other only to pay or perform, the agreement is unenforceable in a court of law.
An example would be a situation where one person states that he or she "may" sell you an item if you pay a specified amount of money. The seller's use of the word "may" allows them to perform or not perform, meaning they may or may not sell you the item. This type of promise is illusory. A valid contract contains a promise for one party to perform services or provide goods. The other party must pay a specified sum for these goods or services or provide another form of compensation in return.
An illusory contract , however, only contains the illusion of a promise. This holds true whether it is an oral or written agreement. A consideration can be:. For there to be a mutual obligation in a contract, the promises made by both parties must be supportive of each other, and the promises must be real and meaningful.
For a contract to be deemed enforceable , it must contain mutual obligations, which include performance, valid consideration, and something of value provided.
When only one party is obliged to perform and there is nothing of value being promised in return, the contract is illusory. When a contract is disputed, the court generally takes into consideration the parties' intent when the contract was created. If the parties had the intent of creating a valid or enforceable contract but due to non-specific language failed to do so, the court may attempt to determine what the parties were trying to accomplish with the contract.
Although there may be a lack of specific language in the contract, if it is shown that the party made a reasonable effort to fulfill the promise, it is not considered illusory. When some contracts contain a clause that releases a party from their obligation to pay if they're not satisfied with the provided goods or services, this creates an illusory contract.
Courts are inclined to take the actual intent of the contract into consideration and require the act of "good faith" by the paying party. If you need help with an illusory contract, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.
If the parties entered into a contract in good faith but failed to draft the contract properly or did not include certain terms to clarify their obligations, the court may look at the pre-contractual context to assess the intention of the parties.
On the other hand, if a party deliberately drafted the contract in vague terms, uncertain obligations or without consideration for the other, the court may declare the agreement to be an illusory one.
If parties enter into a contract where a party has the right to terminate the contract for any convenience and demand from the other party full contract value, that may be considered an illusory contract. In essence, a party commits to an obligation in exchange for payment but retains full discretion to terminate the contract at-will and demand full price from the other party without executing any of its obligations.
If a party enters into a contract but has full discretion to perform the obligations outlined in the contract while the other party is bound to perform, you may have an illusory contract. Regardless of whether the party has an option to actually perform its obligations or not, the other party is bound to execute. An illusory contract is a type of contract that is not enforceable due to its indefiniteness or lack of mutuality. The courts indicate that when a party has the option to perform an obligation or not, then no contract can be formed and neither side can be bound to its terms.
If you enjoyed this article on illusory contracts , we recommend you look into the following legal terms and concepts. Sign in. Log into your account. Privacy Policy. Password recovery. About Me. Forgot your password? Get help. By Editorial Staff.
0コメント