Ultra Vires of Agreement

  • Post author:
  • Post category:Uncategorized

The term “ultra vires of agreement” refers to a legal concept where an agreement or contract goes beyond the powers or authority of one or more parties involved. In simpler terms, it means that a party included terms or clauses in an agreement that were not within their legal rights to do so.

The term “ultra vires” is a Latin phrase that means “beyond powers.” This legal principle applies not only to contracts but also to other legal documents, such as articles of incorporation and bylaws of a company.

When an agreement is deemed ultra vires, it is considered void or unenforceable in the eyes of the law. This means that any party that was affected by the agreement may challenge it in court.

Here are a few examples of ultra vires clauses that can appear in an agreement:

1. Restrictive Covenants: These clauses often appear in employment contracts and restrain an employee from working with a competitor for a certain period after they leave the company. However, if the company does not have a legitimate business interest in doing so, these clauses can be considered ultra vires.

2. Excessive Penalties: When an agreement includes provisions for excessive fines or penalties for a breach, it can be considered ultra vires if they are not in line with the parties` reasonable expectations.

3. Unlawful Provisions: Any clause that breaks the law or contradicts public policy can be considered ultra vires.

4. Non-existent powers: When a party in an agreement takes on a role or responsibility that they do not have the legal authority to perform, it is considered ultra vires.

The consequences of including ultra vires clauses in an agreement can be significant. It can lead to legal challenges, fines, and even reputational damage. Therefore, it is essential to ensure that all clauses in an agreement are legal, enforceable, and within the parties` legal authority.

In conclusion, understanding the concept of ultra vires of agreement is crucial to creating legally binding and enforceable contracts. A professional should ensure that their clients` agreement is free of any ultra vires clauses and includes only the relevant and legally binding terms. This will ensure that the agreement is valid and enforceable, and their client`s interests are protected.