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.

An exculpatory clause is a clause of a contract in which one of the parties releases the other party from liability for their actions. An exculpatory clause may or may not be considered contrary to the public interest depending upon what field the party seeking the release of liability typically operates.

A contractual clause which limits liability is not automatically grounds that the contract will be declared unenforceable during a contract dispute. Limited liability clauses are permitted in many contracts. The only time they may become an issue is if the contract dispute involves an exculpatory clause that seeks to invalidate the liability claim regardless of which party is at fault.

An exculpatory claim in which the liability for all personal injury or monetary damage will frequently be upheld if the party seeking relief is a private business, such as an amusement park, health club, or general recreational facility. Relief is often granted from suits filed against parties that are not considered essential to the public good or involved in public health. For these types of companies, exculpatory clauses are generally held to be enforceable. 

A contract dispute with a public utility company, a bank, or a company which carries public goods in which an attempt is made to invoke an exculpatory clause is usually bound for failure. The courts have generally invalidated exculpatory clauses in these contracts because of the belief that allowing these companies to escape liability would be detrimental to the public good.

If a lease contains an exculpatory clause it may be enforceable or unenforceable depending on the purpose for which the property is leased. If an exculpatory clause is present when there is a contract dispute regarding the lease of a commercial property, the exculpatory clause will usually be enforced.

If the property is residential, the exculpatory clause in the contract dispute will usually be considered unenforceable by the courts. This distinction is made because it is generally considered more detrimental to the public good to inflict harm against individuals than is harming a commercial enterprise.

A mistake of fact which affects the genuineness of the assent given to the terms of a contract may be bilateral or unilateral. Mistakes of fact apply when the party concerned was operating under a mistaken understanding of the facts involved in the contract.

A mistake of fact is unilateral when only one party is mistaken. A bilateral mistake of fact occurs when both parties to the contract are operating under a mistaken reality. Bilateral mistakes are also known as mutual mistakes or common mistakes.

A mistake of fact that is unilateral in nature is not normally a reason to set aside a contract or a reason that will allow a plaintiff in a civil trial to seek damages. A unilateral mistake of fact will result in an enforceable voidable contract.

For example, a contract would be voidable at Luke’s discretion if Ben took advantage of Luke’s unilateral mistake regarding the purchase of a painting Luke thought was genuine. If Ben did not know that Luke thought he was buying the genuine painting, then Luke’s unilateral mistake would not prevent the contract from being enforceable.

A bilateral mistake would result in a contract that could be voided by both individuals in the event that Luke and Ben both believed the forgery was a genuine work by Dali. If Ben believed Luke intended to buy an artificial Dali painting, and Luke believed Ben was selling a genuine work by Dali, a mutual mistake has again been made because there was no intention to defraud and both parties made a mistake of fact.

Mistakes of fact should not be confused with mistakes of value. A mistake of value would occur if Jim sold Jack a random painting that he believed had only a slight value for $50. If Jim later learns that the painting was in fact done by a famous artist and worth $500, he cannot sue Jack to make up the $450. This sort of mistake is not permitted because the value of an object is not a fact. It can change. In order for a mistake to provide the basis to overturn a contract, the mistake must be of a fixed and provable nature.

 

Blue laws are a diminishing category of law in the United States. Despite being present in thirty-one states, the exact contents of each blue law varies from jurisdiction to jurisdiction. A law is classified as a blue law if it restricts commercial activity on a particular day. 

Normally a blue law prohibits the ability of a business to operate on a Sunday. The prohibition on commerce on Sunday derives from Christian religious tradition. As a result, blue laws in some states instead preclude businesses from being open on consecutive weekend days out of respect for different Sabbath observances by different religious groups.

Most states that contain blue laws apply them to the sale of alcohol. Alcohol sales may be restricted from being sold at all on Sundays. In blue law states which do not prohibit the sale of alcohol entirely on Sunday, limitations may be placed upon the hours during which alcohol may be sold. These blue law restrictions typically preclude the sale of alcohol to hours during which church sessions would not be held.

A blue law can also restrict the sale of alcohol between certain hours during the week. Restaurants in some blue law jurisdictions can obtain permits to allow the sale of alcoholic beverages so long as a particular percentage of their revenues come from food sales.

Depending on the State, towns may be allowed to opt out of observing blue laws. Some states allow local jurisdictions to opt in or out of blue laws by a majority vote. Other states restrict the ability of a local jurisdiction to opt out of blue laws based on particular criteria. In South Carolina, for example, an area can only opt out once it can demonstrate a certain level of sales tax receipts.

Blue laws may be supported for a variety of reasons. Car dealerships sometimes support blue laws because it allows them to afford their employees a day off without being concerned that a competitor is open.

There may not be support among voters to repeal blue laws. This is the situation in Bergen County in New Jersey, the only part of New Jersey with blue laws that prohibit commercial activity on Sundays. Despite pressure from the State Government to join the rest of the State in repealing blue laws, some Bergen County residents enjoy the fact that the large commercial centers in the county are relatively empty and peaceful on Sundays.

Fraudulent misrepresentation by silence may result during a long contract negotiation if one of the parties to the contract withholds material information they learned during the negotiation process.

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.