Legal Remedies for Unenforceable Contracts in Commercial Disputes

I frequently work with Houston businesses involved in contract disputes where an agreement falls apart under legal scrutiny. In Texas, as in many states, not every written agreement stands up in court. 

Some contracts fail to meet legal standards, some contain illegal terms, and others lack the mutual intent necessary for enforcement. When a contract becomes unenforceable, business owners often feel like they’re left with no recourse. But Texas business law offers several remedies that can still provide relief.

These situations arise more often than many think. Two parties may enter into an agreement with full intention to follow through, only to find out later that the terms were vague, the contract violated a statute, or that a required element—such as consideration—was missing. 

Whether a contract fails due to lack of capacity, illegality, fraud, or uncertainty, Texas courts may still provide remedies rooted in fairness and equity.

Understanding what remedies exist when a contract becomes unenforceable is a key part of business law in Texas. These remedies often depend on the specific circumstances of the case and the conduct of both parties. 

Over the years, I’ve guided clients through disputes involving failed real estate deals, service agreements, supplier arrangements, and more. Each situation is different, but the principles of business law offer a clear path to resolution.

The Foundation of Enforceability Under Texas Law

Before exploring remedies, it’s helpful to understand what makes a contract enforceable in the first place. 

Under Texas business law, an enforceable contract typically requires an offer, acceptance, mutual assent, and consideration. Additionally, the contract must have a lawful purpose and must be clear enough that a court can interpret and apply it.

When one of these elements is missing or defective, the contract may not be upheld in court. For example, a handshake deal between two companies for ongoing services, with no written terms and no clear scope, may be unenforceable for vagueness. 

A contract made under duress or fraud may be deemed voidable. Similarly, an agreement with an unlicensed contractor in a regulated industry may be void altogether.

Despite the lack of enforceability, business law doesn’t leave the harmed party without tools for relief. In fact, several equitable doctrines and legal principles exist precisely to deal with these situations.

Quantum Meruit and the Value of Services Rendered

One common remedy I pursue for clients is called quantum meruit. In basic terms, it allows a party to recover the reasonable value of services or goods provided, even when no enforceable contract exists. 

Texas courts recognize this principle when someone confers a benefit on another with the expectation of compensation, and the recipient knowingly accepts that benefit.

In a recent matter I handled, a subcontractor provided labor and materials under an informal agreement, but the general contractor later denied the existence of a contract. Because the work had been done and accepted, and it added value to the project, my client was able to recover under quantum meruit. 

Business law protects against unjust enrichment, and quantum meruit is a powerful tool for doing just that.

This remedy becomes especially useful in industries like construction, logistics, and consulting, where informal deals sometimes substitute for formal contracts. While I always encourage clients to get agreements in writing, business law also recognizes that value shouldn’t be given away for free simply because of a procedural failure.

Promissory Estoppel in Cases of Reliance

Another equitable remedy under Texas business law is promissory estoppel. This applies when one party makes a promise that the other reasonably relies on, and that reliance leads to harm. 

If the promise was such that the person making it should have expected the reliance, and injustice can only be avoided by enforcing the promise, a court may offer relief—even if there’s no binding contract.

In commercial disputes, I’ve seen promissory estoppel come into play when a party takes costly steps in anticipation of a deal closing—such as ordering custom materials or hiring staff—based on a clear promise that later falls through. 

If the promise was definite and the reliance was foreseeable, Texas business law allows the harmed party to recover damages tied to that reliance.

Promissory estoppel doesn’t create a contract, but it can make a promise enforceable for purposes of avoiding unfair outcomes. Courts apply it cautiously, but when used correctly, it gives my clients a way to recover what they’ve lost.

Restitution and Unjust Enrichment

Restitution is a legal remedy used in business law when one party receives a benefit that would be unfair to retain. Unlike other claims that focus on the value of services provided, restitution targets the benefit that was unjustly gained. 

This remedy often applies in commercial disputes where agreements fall through or obligations aren’t fulfilled.

Common situations where restitution may apply include:

• A payment is made in advance for a deal that fails to materialise

• Goods or services are delivered, but the receiving party doesn’t provide compensation

• One party retains funds or materials without a valid contractual basis

In Texas, courts will order restitution to prevent a party from profiting unfairly at another’s expense. It serves as a protective measure in cases where contracts are incomplete, void, or unenforceable, helping to restore financial fairness in business transactions.

Declaratory Judgments and Contract Interpretation

Sometimes, the dispute centers not on whether a contract exists, but on whether it’s enforceable in part. In these situations, I may seek a declaratory judgment under Texas law. 

This allows a court to determine the rights and obligations of parties to a disputed agreement. While not a remedy in the traditional sense, it can clarify legal standing and prevent future harm.

In business law, contracts often contain multiple clauses, some of which may be enforceable while others aren’t. A non-compete clause might be too broad, but the rest of the agreement may be valid. By pursuing declaratory relief, I help clients gain certainty about what they’re allowed to do—and what risks they face.

This approach is especially helpful when a client wants to continue a commercial relationship but needs a court to sort out a contested provision. Business law is as much about clarity as it’s about remedies, and declaratory actions can provide that clarity.

Reformation and Modification of Defective Contracts

In certain situations, an unenforceable contract may be revised rather than discarded altogether. Reformation allows a court to modify a written agreement to reflect the actual intent of the parties when a mistake or ambiguity has distorted the original understanding. 

This remedy isn’t available in every case, but it’s a valuable business law tool when both parties want to continue the relationship.

Reformation typically requires clear evidence of mutual mistake or fraud, and courts are cautious in applying it. In one matter, I represented a company that entered into a lease agreement with a key commercial partner. 

A clerical error misstated the square footage, which affected the rental rate. Because both sides acknowledged the error, I was able to petition the court for reformation, and the corrected terms were enforced.

Texas courts aim to uphold contracts when possible, and business law provides a path for correction rather than cancellation if fairness demands it.

Avoiding Unenforceable Agreements from the Start

While business law offers remedies for unenforceable contracts, my goal is always to help clients avoid these situations in the first place. 

I encourage businesses to document agreements carefully, spell out terms clearly, and review contracts regularly. But even when those precautions are taken, disputes happen, and some agreements still fall short of enforceability.

When that happens, Texas law gives businesses more than one avenue for relief. Whether through equitable doctrines like quantum meruit or restitution, or legal actions such as declaratory judgments and reformation, I help clients focus on outcomes that protect their interests. 

Business law doesn’t guarantee that every deal will work out, but it does provide tools for resolving disputes fairly.

Protect Your Best Interests

At the Law Office of Keith D. Peterson, CPA, J.D., I’ve worked with businesses across Texas facing the fallout of unenforceable contracts. I’m proud to serve individuals throughout Northwest Houston. Call today.