Enforceable and Unenforceable Mental and Behavioral Health Contract Requirements
A Discussion Paper
An enforceable measurement and value-based contract ensures that all key elements of a valid contract are met: clear offer and acceptance, mutual consent, consideration, capacity, legality, possible performance, clear terms, proper documentation, compliance with formalities, and enforceability clauses. These elements provide a framework for transparency, accountability, and collaboration, ensuring the contract serves its intended purpose and benefits all parties involved.
In contrast, an unenforceable contract fails to meet these essential elements. It might include vague terms, lack mutual consent, be based on illegal purposes, or be impossible to perform. Such contracts lack the necessary clarity and legal grounding to hold parties accountable, leading to disputes, legal challenges, and failure to achieve the intended outcomes of the value-based payment model. The absence of enforceability clauses further complicates the resolution of conflicts, undermining the contract's effectiveness and trustworthiness.
An unenforceable contract is voidable. Proving that contracts are unenforceable is not the solution. Ensuring that a contract is enforceable and not voidable supports a collaboration and removes distrust and contract “gaming”. The goal is to increase enforceability and reduce the risk of gaming as Oregon moves toward increased quality of care. It is important to increase enforceability and reduce voidability before contracts are offered. A contract that is voidable is unlikely to be challenged because providers avoid conflict. A voidable contract that is not challenged will still have negative effects.
Offer and Acceptance: There must be a clear and definite offer made by one party (the offeror) to another (the offeree). The offer must be accepted unequivocally and communicated to the offeror. Acceptance must mirror the terms of the offer without modifications; otherwise, it is considered a counteroffer, which does not form an enforceable contract until accepted by the original offeror.
Mutual Consent: There must be "meeting of the minds," this implies that both parties agree to the contract terms fully understanding their meanings and implications. Consent must not be obtained through coercion, fraud, undue influence, or mistake.
Consideration: Consideration is the value that each party agrees to exchange under the contract terms. This can be a service, money, an item, or an undertaking to refrain from an action. Consideration is what each party brings to the contract as a benefit to the other party or a detriment to themselves.
Capacity: All parties must have the capacity to enter into a contract. Corporations must have the authority under their corporate rules to enter into the contract. Incorporated and unincorporated individuals and Providers group practices must be fully informed and understand what is expected and necessary in order to determine if they have the capacity.
Legality: The purpose of the contract must be legal. Contracts formed for purposes that violate law or public policy are not enforceable.
Possible to Perform: The terms of the contract must be physically and legally possible to perform. If a contract requires a party to perform an impossible task, it is not valid. The standard for possible to perform would be agreement of 2 independent auditors.
Clear and Precise Terms: The contract must clearly outline all terms and conditions involved, including duties, rights, and obligations of all parties. Ambiguities can lead to disputes and may affect enforceability.
Written and Signed (when required): Certain contracts must be in writing to be enforceable.
Proper Form (when required): Some contracts must comply with specific formalities as prescribed by law.
Enforceability: There must be a process language within mental and behavioral health contracts that allows for enforcement and remedies in to resolve potentially unenforceable contracts. This includes good faith (a) mediation, followed by (2) binding arbitration, before (c) litigation may be initiated. to include stipulating the consequences of nonperformance and the remedies that the injured party can seek. Healthplans must comply with the bill as public policy.
Enforceable and unenforceable measurement and value-based contract outline for discussion
Offer and Acceptance
Enforceable: There must be a clear and definite offer made by one party (the offeror) and accepted unequivocally by the other (the offeree), without modifications.
Unenforceable: The offer is vague, or the acceptance includes modifications that turn it into a counteroffer, creating ambiguity in the agreement.
Mutual Consent
Enforceable: Both parties fully understand and agree to the terms, with no coercion, fraud, undue influence, or mistake.
Unenforceable: One or both parties are unclear about the terms or agree under duress, misrepresentation, or significant misunderstanding.
Consideration
Enforceable: Each party provides something of value (services, money, items) that is agreed upon.
Unenforceable: The contract lacks mutual consideration, meaning one party does not provide something of value in exchange.
Capacity
Enforceable: All parties have the legal capacity and understanding to enter into the contract.
Unenforceable: Parties lack the capacity to contract, such as minors or individuals not authorized to sign on behalf of an organization.
Legality
Enforceable: The contract’s purpose is legal and does not violate public policy.
Unenforceable: The contract’s purpose is illegal or against public policy.
Possible to Perform
Enforceable: The terms are realistic and achievable.
Unenforceable: The contract requires actions that are physically or legally impossible.
Clear and Precise Terms
Enforceable: Terms and conditions are detailed and specific, minimizing ambiguity.
Unenforceable: Terms are vague, ambiguous, or incomplete, leading to potential disputes and uncertainty.
Written and Signed (when required)
Enforceable: Contracts that require written form are properly documented and signed by all parties.
Unenforceable: Lacks necessary written documentation or signatures where legally required.
Proper Form (when required)
Enforceable: Complies with all legal formalities and requirements.
Unenforceable: Fails to meet legal formalities, such as notarization or specific clauses required by law.
Enforceability Clauses
Enforceable: Includes clauses for resolving disputes through mediation, arbitration, and litigation if necessary, with clear consequences for nonperformance.
Unenforceable: Lacks clear mechanisms for enforcement and resolution of disputes, leading to difficulties in holding parties accountable.
DISCLAIMER and PURPOSE: This discussion document is intended for training, education, and or research purposes only. The information contained herein is based on the data and perspectives available at the time of writing. It is subject to revision as new information and viewpoints emerge.