Could 'Bad' Terms Come Back to Haunt You?

Q: I lease property to a wide variety of tenants, and I have leases that are technical and complicated. If a term or terms in one of these leases turned out to be illegal, what effect would it have on the rest of the agreement?

A: So-called “bad” contract terms—those that are too vague, impose an unfair penalty, are illegal, or are disfavored by the courts—are treated differently in different states. And the effect of such terms on an agreement will vary, depending on what kind of agreement is at issue. In some circumstances, these terms may have the effect of voiding the contract altogether. In other cases, these terms may make the agreement “voidable,” which means that the court has the option of voiding the agreement or accepting the agreement but removing or modifying the “bad” term.

If you’re concerned that some of your leases may contain illegal terms, you should speak with your attorney to find out whether that’s true and, if it is, what effect that may have on the rest of your leases. You should also have an attorney assist in preparing any future agreements to reduce the likelihood of using a term that may be too vague or disfavored by the courts in your jurisdiction.