It is always a healthy view to think that all agreements you sign will bind you. But even though they may be in writing, not all terms in many agreements are actually enforceable . Here are three examples that often occur:

  1. Restraint of trade provisions in employment (and other) agreements: such clauses are unenforceable, unless the party relying on them can show that they go no further than reasonable protection of its business
  2. Terms excluding or limiting liability for breach of contract: to be enforceable, many exclusion and limitation clauses will have to pass (but will fail) a ‘reasonableness’ test
  3. Clauses which provide precisely for what sum must be paid in damages if there is a breach of contract: so called ‘liquidated damages’ clauses must be proper estimates of loss to be enforceable. Many fail because as drafted, they provide for a payment of a sum far in excess of what any likely loss would be.  Such ‘penalty clauses’ are unenforceable.

There are, of course, other examples but these three are common and demonstrate the point well. Just because you sign an agreement, it does not automatically follow that all terms will be enforceable.

So if you sign an agreement, must you comply with it? Not always!

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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.