A contract may be ruled to be illegal by any court of law. Illegality can become an issue even if the normal requirements of acceptance of offers, consideration, contractual capacity, are present. Illegal contracts typically do not result in any liability for the involved parties. The courts may rule an illegal contract exists regardless of whether or not the parties involved in the suit raise the issue, even if the two parties believe the contract to be legal.

A severable or divisible contract may be formed by the parties to the contract or may result from actions of the courts. The parties can create a severable contract by including a severence clause into the original contract. A severance clause is a clause which states that if there is one other contractual clause that would cause the contract to be considered illegal, then the offending phrase should be stricken from the contract, so long as the removal of the clause does not substantially alter the original nature of the contract. 

Divisible contracts are similar contracts entered into by the same parties which have similar terms but can be completed independently of each other. A court may form a severable contract by utilizing a blue pencil test. If the offending phrase in a contract can be removed from the contract without enacting any change besides turning an illegal contract into a legal one, then the change passes the blue pencil test.

In order for an allegation of fraudulent misrepresentation to be sustained there must be an intent to deceive on behalf of the accused party. The element of intent also requires that the deceiver must know that the information they are spreading is false or that the withholding of the information would constitute a fraudulent action.

The technical term for this intent to do wrong is known as scienter. Scienter is related etymologically to the word science. Both words refer to the possession of knowledge.

Laws concerned with fraud in contracts may find that scienter exists if one of the parties to the contract knows that one of the material facts that affect the contract in question is not true as they are stated in the contract.

Scienter is also determined by laws governing contracts to exist if one of the parties to the contract makes statements without any regard to whether the statements they utter are true or false. Laws regard this willful ignorance of the validity of the individual’s statements to rise to the level of fraudulent representation.

Scienter may also be found to exist if the party accused has claimed that their statements are based on personal knowledge or research when this knowledge or research has no actual basis in reality.

An unconscionable contract is unenforceable. It is immaterial whether a waiver is explicit or implicit. Procedural unconscionability also gives rise to an unconscionable contract if one of the parties is in a vastly superior bargaining position.

An unconscionable contract may also contain substantive unconscionability if the terms of the contract are excessively harsh or would be oppressive to implement. An unconscionable contract can also result if the party selling the goods marks up the price tremendously and attempts to hide how great the mark up is.

Whether a contract is conscionable or unconscionable can only be determined by a judge and never by a jury.

A contract can be challenged by one of the parties to the contract if they claim their assent was not genuine because they were subject to undue influence. Undue influence is said to exist if an inordinate amount of pressure is placed upon a party to enter into a contract against their best interests. Undue influence cannot be invoked by a party simply because they are in a detrimental contract. 

Undue influence is usually only claimed in the event that the party is in a relationship wherein another person is able to influence their decisions. Normally undue influence can only be successfully claimed by a minor or an elderly person who has a guardian responsible for overseeing their legal or financial obligations.

Other relationships in which undue influence may arise include attorney-client relationships, doctor-patient relationships, and the relationships between the beneficiaries of a trust and the individual responsible for managing the trust.

An occurrence of undue influence can be difficult to establish conclusively in court. There is sometimes an automatic presumption of undue influence by the courts. A presumption of undue influence can be established if the party in the superior position influenced the dependent party to agree to a contract that benefited the superior party.

If the dependent party challenges a party that they were influenced to create by their guardian, the courts are likely to issue a presumption of undue influence because they believe that if the contract did not arise due to undue influence, then the dependent would not be challenging the contract.

The guardian involved in a court case in which the genuineness of assent in a contractual dispute involves a presumption of undue influence often bears the responsibility of disproving the charge filed against them by their ward. The undue influence charge is often repudiated by presenting evidence that the ward inquired about the terms of the contract or was afforded the opportunity to consult with an independent party that did not have a direct stake in the contractual negotiations that are being challenged.

The guardian can disprove that there has been an occurrence of undue influence even if there was a benefit conveyed to the guardian if they can demonstrate that the ward received a full disclosure of the benefit that the guardian would derive from the contract. If the guardian can prove that full disclosure was presented to the ward, that the ward obtained independent analysis of the benefits that all involved parties would receive, then the presumption of undue influence can be disproven.

In the event that undue influence is found to have existed by the courts, the courts will declare the contract to be voidable by the ward. Undue influence, however, cannot be claimed by a ward that acted upon the innocent advice of their guardian yet was harmed by the contract in a way that did not benefit the guardian.

A person is assumed to have the capacity to enter into a contract. An intoxicated person, minor, or mentally incapable person has two options available to them after entering into a contract which affects the validity of the contract into which they have entered. The first option they have is to disaffirm a contract. Disaffirming a contract reveals a desire by an individual to no longer be bound by the contract. The disaffirmation can be verbal or active.

The other action that can affect the validity of a contract is ratification. Ratification reveals a willingness to be bound by the terms of the contract. As with disaffirmation, ratification can be verbal or active. If a person continues to use an item after they would otherwise be released from the contract, they have ratified the contract by action.

Ratification takes precedence over disaffirmation. If a person attempts to disaffirm a contract from which they have already received substantial benefit, the courts will not allow them to disaffirm the contract. The fact that the individual has benefitted from the contract is considered proof of acceptance to being bound by the contract.

It is impossible for anyone to disaffirm a contract they entered into in order to obtain essential services. Contractual obligations for necessary services cannot be avoided under any circumstance.

A severable contract is a contractunenforceable that can still remain in effect despite those provisions which are void. In order for the blue pencil test to be satisfied, the phrase stricken by the court must not result in a change to the purpose for which the contract was created by the parties. The contract must still make grammatical sense after the edits have been made to the contract. Otherwise the contract will not be considered to have become a severable contract.

A severable contract can be formed if the parties who entered into the contract do not consider it essential that all the actions be performed together. Divisible contracts may exist if a convenience store orders the soda, chips and candy it sells from the same company in three separate clauses. An indivisible contract is formed if the store hired a vendor to provide the soda, chips, and candy in a single clause. 

Whether divisible contracts or indivisible contracts have been formed can often be determined by examining the terms under which consideration has been provided. If the set of contracts provide the consideration in a lump sum, it is usually an indivisible contract. If consideration is itemized for each thing exchanged, a severable contract often exists.

If a contract contains both legal and illegal clauses, the court will attempt to enforce only the legal clauses in the event the contract is already a severable contract. If the court can employ a blue pencil test to create a severable contract, it will.

Contracts that are adjudicated to be contrary to public policy may result in portions of the contract being declared unenforceable.

An exculpatory clause is a provision of a contract that releases one party of the contract from all liability no matter who is at fault. Exculpatory clauses are normally permitted to remain in effect if the contracted party is engaged in an enterprise that is not considered essential to the public good, such as the operation of a recreational facility. However, with a clause that releases a company from liability which functions in a business that is considered essential to the public good, the courts w