With limited exceptions, Utah law enforces written and oral contracts. Generally, an action to enforce a written contract must be filed within six years of the breach, and an action to enforce an oral contract must be filed within four years of the breach.
Contracts come in all varieties, and are usually enforceable to the extent that all parties to the contract had a clear understanding of its meaning, had sufficient bargaining power, each gave up something of value, and the terms of contract are not illegal or contrary to public policy.
If a written contract is clear and unambiguous, it will likely be enforced according to its written terms. If the language of a contract is ambiguous, and both parties have a reasonable basis for their different interpretations, then courts may look to outside the contract to determine how it should be interpreted. Often, contracts will be interpreted against the person who drafted its language.
The law may not enforce certain types of contracts, including:
- Contracts without “consideration.” For a contract to be valid, each party to the contract must give up something of value for the contract; the thing of value that is given up is known as “consideration.” Thus, one-sided contracts and gifts may not be enforceable under contract law.
- Contracts that are contrary to public policy. The law will not enforce a contract that has an illegal or unjust purpose. Examples of this include a contract that requires one party to violate the law in exchange for payment, or a contract that unreasonably limits an employee’s right to work after being terminated.
- Contracts that must be in writing. The law considers some contracts so susceptible to fraud, that it may only enforce them if in writing. Contracts that must be in writing include those involving the sale of real estate or goods in excess of $500, those than cannot be performed in less than a year, those where somebody becomes a guarantor for another, and contracts involving consideration in marriage.
- Contracts there were entered under duress or undue influence. The law may not enforce contracts where at least one party entered the contract due to fraud, duress, or improper influence.
Severance Agreements
At times employers offer their terminated employees a severance package whereby the employer provides a payment to its former employee in exchange for the employee agreeing to waive its legal claims against the employer. If a terminated employee does not have legitimate legal claims against the employer, the severance agreement might be to the employee’s advantage. However, if the former employee has a legitimate case against the former employer, then the agreement might be a way that the employer tries to escape liability at a known cost.
Non-Compete Agreements
Some employers require their employees to enter a non-compete or non-solicitation agreement that restricts the employee from certain activities after their employment terminates. A non-compete agreement generally restricts an employee from working in the same field for a certain time and within a certain geographic area after the employment ends. A non-solicitation agreement generally restricts an employee for a limited time from actively soliciting the clients of his former employer. Courts are typically more willing to enforce a non-solicitation agreement than a non-compete agreement, but the enforceability of each contract must often be determined on a case-by-case basis.
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