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Validity of Contracts

For a contract to be valid, it must meet the following criteria (required elements):

* Mutual agreement: There must be an express or implied agreement. The essential requirement is that there be evidence that the parties had each from an objective perspective engaged in conduct manifesting their assent, and a contract will be formed when the parties have met such a requirement. For a contract based on offer and acceptance to be enforced, the terms must be capable of determination in a way that it is clear that the parties assent was given to the same terms. The terms, like the manifestation of assent itself, are determined objectively.

* Consideration: There must be consideration given by all the parties, meaning that every party is conferring a benefit on the other party or himself sustaining a recognizable detriment, such as a reduction of the party's alternative courses of action where the party would otherwise be free to act with respect to the subject matter without any limitation.

* Competent, Adult (Sui Juris) Parties: Both parties must have the capacity to understand the terms of the contract they are entering into, and the consequences of the promises they make. For example, animals, minor children, and mentally disabled individuals do not have the capacity to form a contract, and any contracts with them will be considered void or voidable. Although corporations are technically legal fictions, they are considered persons under the law, and thus fit to engage in contracts. For adults, most jurisdictions have statutes declaring that the capacity of parties to a contract is presumed, so that one resisting enforcement of a contract on grounds that a party lacked the capacity to be bound bears the burden of persuasion on the issue of capacity.

* Proper Subject Matter: The contract must have a lawful purpose. A contract to commit murder in exchange for money will not be enforced by the courts. It is void ab initio, meaning "from the beginning."

* Mutual Right to Remedy: Both parties must have an equal right to remedy upon breach of the terms by the other party

* Mutual Obligation to Perform: Both Parties must have some obligation to fulfill to the other. This can be distinct from consideration, which may be an initial inducement into the contract.


Voiding a contract

There can be four different ways in which contracts can be set aside. A contract may be deemed 'void', 'voidable', 'unenforceable'or 'ineffective'. Voidness implies that a contract never came into existence. Voidability implies that one or both parties may declare a contract ineffective at their wish. Unenforceability implies that neither party may have recourse to a court for a remedy. Ineffectiveness implies that the contract terminates by order of a court where a public body has failed to satisfy public procurement law. To rescind is to set aside or unmake a contract.

If all the above required elements are present, the contract is valid (not void), but could possibly be voidable.

We reduce the risk of voiding the contract by giving eMediate exclusive authority to decide if the contract is void or voidable. However, the other party to your contract can claim that you exercised coercion, undue influence, fraud, or that the contract is unilateral.

A contract is voidable when the consent of one or more of the parties to a contract is obtained by coercion, undue influence, misrepresentation or fraud, or an agreement which is enforceable by law at the option of one or more parties but not at the option of others. It is not void automatically, but must be declared void for one or more of the above reasons.

Honest businesses need to be most concerned about "undue influence" (presumed or actual). They won't coerce (force) a party to sign a contract and they won't fraudulently misrepresent the terms of the contract nor make the contract apply to only one party.


Presumed Undue Influence (rebuttable) is present in the following relationships:
     Government/People
     Parent/child
     Guardian/ward
     Priest/member of parish
     Solicitor (attorney)/client
     Doctor/patient


* Portions of this article above are licensed under the GNU Free Documentation License. It uses material from the Wikipedia article "Contract". What follows below is copyrighted and proprietary to eMediate


Actual Undue Influence

A party may seek to have a contract set aside for actual undue influence, where there is no presumption of undue influence, but there is evidence that the power was unbalanced at the time of the signing of the contract. This is more likely to succeed when the "weak" party claims they had no choice except to sign. Regardless of relationship, it is in the businesses' best interest to review the contract before signing so there is no misunderstanding or disagreement. It doesn't hurt to have the contract mention that the amount of costs are based on acceptance of arbitration. You would be happy to remove that clause, but your prices would be higher to reflect the increased legal risk.

Medical practitioners and others in a "superior role" of the relationship may be able to reduce voidability of their contract by adding the following clause:

"Currently, there is no doctor / patient relationship between the parties. This contract merely contemplates initiation of that possible future relationship. Because there is no relationship, both parties are equal under the law (without any superiority or undue influence, presumed or actual). Part of the inducement (consideration) to enter into a future relationship, at the prices contemplated, is the offer and acceptance of this agreement for eMediate to arbitrate any dispute."

_______________________________
(signature)
Sample Arbitration Clause to add to your contracts


So where should your arbitration clause go? One possiblity to consider, is to place it ABOVE your case history or whatever form you have patients fill out. Then, it could say something like:

"If you don't agree to these terms, do NOT complete this form. Completion of this form constitutes explicit agreement."


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