Tricked into Signing a Contract? Your Legal Rights

A person you thought was a “friend” has a great idea for a business venture. He brings you a contract that looks legal enough, so you sign it. Within a matter of weeks, you discover things are not quite on the up and up. So you start looking for ways to terminate the contract and ask yourself:

• What is considered a valid contract?; and
• if I signed a contract because its terms were misrepresented to me, what are my legal rights?

A valid contract has an offer, an acceptance, and consideration. If a contract meets your states requirements for a binding legal agreement, you are generally bound by the contract.

Each state provides its own set of exceptions. One generally accepted exception is fraud. Depending on the nature of the fraud and the extent of your damages, if any, you may have criminal or civil remedies.

Your first step in a contract dispute is to determine if there is even a valid contract. It must include all the basic elements of a binding contract: an offer, an acceptance, and consideration.

An offer is a manifestation of present contractual intent imparting definite and certain terms communicated to the other party. This means that the intent to establish a contract must be definite and evident. Basically, it’s clear that you and the other person intended to enter a contract.

“Certain terms” refers to the essential terms of the contract. The essential terms of a contract identify the parties to the contract, the subject matter of the contract, the contract price, and the time for performance of the contract.

For example, if Smith tells Jones, “If you want to buy my blue chair for $100, let me know by next Thursday”, this offer identifies the parties (Smith and Jones), the subject matter (blue chair), price ($100), time for performance (by next Thurs) and therefore contains the elements of a valid offer.

Acceptance is assent to the terms of the offer communicated to the person who made the offer. When Jones accepts Smith’s offer by agreeing to its terms and communicates that acceptance to Smith, a valid contract has been formed.

“Consideration” is a bargained for exchange, a promise for a promise. Here, Smith is selling a blue chair to Jones and Jones is paying $100 for the chair. This is consideration – a promise for a promise. Therefore, a valid contract exists between Smith and Jones.

If there is not a valid offer, a valid acceptance, or a valid consideration, there is not a valid enforceable contract.

Even if the contract appears to be binding and enforceable on its face, you may have relief through exceptions in your state’s laws. If you signed the contract based on a misrepresentation by the other party, you may be able to claim that the contract is voidable.

Fraud is a defense to the enforcement of the contract. To perfect a fraud defense, you must demonstrate more than a misunderstanding or a failure to read the contract before you signed it.

To void a contract, you must show the misrepresentation was intentional and fraudulent. There are different types of fraud that may apply to your situation:

• If your signature was forged, you have a defense of fraud in the execution. The contract is void and there is no valid contract.
• If you signed the contract based on intentional misrepresentation of the terms, this would be a fraud. In other words, you were induced to sign the contract based on intentional misrepresentation. In this situation, the contract would be voidable.

To end a contract, you may need to file a civil suit to have the contract declared officially void.

If you and another person accumulated assets through a business, the suit may also be combined with a suit to dissolve the organization and divide the remaining assets.

If you lost money because of the misrepresentations, you may also have an additional suit for fraud or deceptive trade practice. Your damages would be the monetary value of your losses.

If your damages are more extensive and the factors clearly demonstrate an intent by the other party to obtain a fraudulent benefit, you may also have criminal remedies. Some states recognize criminal offenses like “theft by deception” and “securing execution of a document by deception”.

Before you choose a civil or criminal remedy, consult with an attorney who specializes in contract law. They can advise you on whether you have entered a valid contract and which remedies are best for your situation.