Contracts are the backbone of business relationships. From vendor agreements to leasing, employment to service deals. Because of their importance, a contract that fails to hold up in court can lead to costly disputes and enforceability issues (not to mention lost time and money ironing out the matter). Here are five red flags that suggest your contract might not hold up and what you can do about it.
1. The Contract Uses Vague, Undefined Language
Contracts full of undefined terms, ambiguous obligations or inconsistent terminology create serious problems. Ambiguity is interpreted against the drafter and invites litigation.
If you use language like “reasonable efforts,” or make references to unspecified obligations, you create space for misinterpretation and enforcement challenges. Clarity matters, so replace vague language with precise definitions, milestones, metrics and responsibilities.
That segues nicely to our next point . . .
2. You Used A Free Online Template Or “Just Filled In The Blanks”
Yes, it may be tempting to pull up a free contract from the internet or ask ChatGPT to draw up a draft and run with it. But free resources often lack vital clauses or contain ambiguous terms. Without human oversight, you may miss obligations, exclusions or legal language critical to enforceability. We’ve seen it firsthand with clients: relying solely on generic templates increases the risk that the contract will fail to protect you when it matters.
3. Governing Documents Are Absent Or Incomplete
If your business is operating as an LLC without an operating agreement, or as a corporation without a shareholder agreement, you’re exposing yourself to risk. Internal governance rights and responsibilities must be clear, especially when contracts reference control, assignment or liability.
Without those backup documents, even a strong external contract may fail in a dispute. Be sure that internal governance documents (operating or shareholder agreements) align with your external contracts.
4. Mandatory Disclosures Or Statutory Obligations Are Omitted
When your contract overlooks required disclosures, it becomes vulnerable to attack.
In Washington for example, contractors must provide specific disclosure statements under RCW 18.27.114 before certain contracts are enforceable.
In Idaho, statutes such as Idaho Code § 67-7423 require certain vendor disclosure compliance for contracts to be enforceable.
Whether you’re entering a service agreement, vendor deal or construction contract, have a legal professional check statutory requirements for required disclosures or consumer-protection scrutiny in your industry and jurisdiction.
5. It Lacks Signatures, Clear Governing Law Or Dispute Resolution Mechanisms
Even well-drafted contracts can fall apart if they’re not properly executed or fail to outline what happens when things go wrong. Missing signatures, unclear governing law, or the absence of a dispute resolution clause are among the most common (and most avoidable) reasons business contracts don’t hold up in court.
A contract isn’t binding on a party unless they sign or consent to it. That might sound obvious, but it’s easy to overlook in fast-moving business environments. Maybe someone forgot to sign the final version, or an agreement was updated over email but never formally re-executed. Without a clear, fully signed copy, it becomes difficult to prove that everyone agreed to the same terms.
Equally important is identifying which state’s laws will govern the contract and where disputes will be resolved. For example, if an Idaho-based company signs an agreement with a vendor in Washington but doesn’t specify governing law, the parties could end up fighting over which court has jurisdiction—a dispute that can delay resolution and significantly increase legal costs.
Finally, a solid contract anticipates how conflicts will be handled. Including a dispute resolution clause—whether through mediation, arbitration, or litigation—gives both sides a roadmap for resolving disagreements before they spiral. These provisions don’t just save time and money; they also preserve working relationships and prevent business interruptions.
Before you sign, confirm that all parties have executed the same final version of the contract, that the governing law and jurisdiction are clearly stated, and that there’s a written plan for how disputes will be resolved. A good attorney can help ensure these details are addressed so that your business isn’t left exposed if a disagreement arises later.
Avoiding an Unenforceable Contract Protects More Than Just Your Business
It might be easy to view contracts as routine paperwork but when things go wrong, contracts become battlegrounds. A sound contract isn’t just about being legally enforceable; it’s about protecting your growth, relationships and reputation.
From contract creation to governance, regulatory compliance and enforcement, putting time into a contract that holds up in court frees you up to focus more on your vision and less on bad surprises.
How Malek + Malek Can Help
At Malek + Malek, our business attorneys help companies draft, review, and enforce contracts that stand up under scrutiny. With decades of combined experience, we know how to identify weak points before they turn into costly disputes.
Whether you’re forming a new partnership, revising vendor agreements, or facing a potential breach, our team ensures every clause, disclosure, and signature meets the standards for enforceability.
A strong contract protects more than your business; it protects your time, finances, and relationships.
Ready to make sure your contracts are enforceable?
Contact Malek + Malek today to schedule a consultation with our business law team.
FAQs
What makes a contract unenforceable?
A contract may be unenforceable if it includes vague language, lacks required signatures, violates state laws, or omits essential terms. Poorly drafted agreements or missing disclosures can also make it difficult to prove intent or hold the parties accountable.
Can I fix an unenforceable contract?
In some cases, yes. An attorney can review the agreement and help revise or re-execute it to correct missing clauses, clarify vague terms, or ensure compliance with legal requirements. Quick action often prevents future disputes.
How can I avoid having an unenforceable contract?
Work with an experienced business attorney to review agreements before signing. They’ll ensure the contract includes clear terms, proper signatures, governing law, dispute resolution clauses, and required disclosures.
Are contracts from online templates enforceable?
Sometimes, but they often miss important state-specific provisions or disclosures. Using a free online template without attorney review increases the risk that your contract will not hold up in court.
Why does contract enforceability matter for small businesses?
For small businesses, even one unenforceable contract can lead to major financial and operational setbacks. Ensuring enforceability helps safeguard your revenue, partnerships, and reputation.