The Delaware Quick Guide: 5 Tests for Contract Enforceability

Delaware contract law governs over 60% of Fortune 500 commercial agreements. Understanding the enforceability framework is not optional for any transactional attorney.

The Five-Part Test

Test 1: Mutual Assent

Delaware follows the objective theory of contracts — outward manifestations, not subjective intent. Red flag: Terms in a separate, unattached document may fail mutual assent.

Test 2: Consideration

Delaware courts rarely invalidate for lack of consideration, but they scrutinize "sham" consideration. Best practice: Use mutual promises, not nominal payments.

Test 3: Definiteness

Delaware will not enforce an "agreement to agree." Price, quantity, subject matter, and time of performance must be stated or ascertainable.

Test 4: Capacity and Authority

Check the operating agreement (LLCs) or bylaws/board resolutions (corporations). A contract signed by the wrong person is voidable — and the litigation cost of proving authority dwarfs any savings from skipping diligence.

Test 5: No Illegality or Public Policy Violation

Delaware takes a narrow view of "public policy." Key difference: Delaware enforces employee non-competes. California does not.

The Delaware Advantage

Predictability (200+ years of Chancery Court), speed (no juries), and sophistication (business-law expert judges). If you are drafting with a Delaware choice-of-law provision, you are operating in the most developed commercial law jurisdiction in the US.