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Contracts
A contract is any legally-enforceable promise or set of promises made between parties. In the civil law, contracts are considered to be part of the general law of obligations. This article describes the law relating to contracts in common law jurisdictions.
Comparison of contract and tort law
The law of obligations has traditionally been divided into contractual obligations, which are voluntarily undertaken and owed to a specific person or persons, and obligations in which are based on the wrongful infliction of harm to certain protected interests, primarily imposed by the law, and typically owed to a wider class of persons. Recently it has been accepted that there is a third category, restitutionary obligations, based on the unjust enrichment of the defendant at the plaintiff’s expense. Contractual liability, reflecting the constitutive function of contract, is generally for failing to make things better (by not rendering the expected performance), liability in tort is generally for action (as opposed to omission) making things worse, and liability in restitution is for unjustly taking or retaining the benefit of the plaintiff’s money or work [Beatson (1998) Anson’s Law of Contract, 27th ed. (Oxford: OUP), pg. 21].
Scope of common law contract law
Basic common law contract law addresses four sets of issues:
- When and how is a contract formed?
- When may a party escape obligations of a contract (such as a contract formed under duress or because of a misrepresentation)?
- What is the meaning and effect to be given to the terms of a contract?
- What is the remedy to be given for breach of a contract?
Contract formation: There must be an agreement which consists of an offer and acceptance, consideration and contractual intention for a simple contract to exist: i.e. it is not a deed - otherwise no consideration is needed.
Subject to the sine quo non of Contract Formation, other ingredients that make up a contract include:
-
- Form - In some cases, certain formalities (that is, writing) must be observed.
- Capacity - The parties must be legally capable of entering into a contract.
- Consent - The agreement must have been entered into freely. Consent may be vitiated by duress or undue influence.
- Legality - The purpose of the agreement must not be illegal or contrary to public policy.
A contract which possesses all of the above ingredients is said to be valid. The absence of an essential element will render the contract either void, voidable or unenforceable
In some situations, a collateral contract may exist.
Meaning and effect of contract terms: Many contract disputes involve a disagreement between the parties about what terms in the contract require each party to do or refrain from doing. Hence, many rules of contract law pertain to interpretation of terms of a contract that are vague or ambiguous. The parol evidence rule limits what things can be taken into account when trying to interpret a contract.
Privity: In general, only parties to a contract may sue for the breach of a contract.
Validity of contracts
For a contract to be valid, it must meet the following criteria:
- Mutual agreement - offer and acceptance There must be an express or implied agreement. The essential requirement is that there be evidence that the parties had each from an objective perspective engaged in conduct manifesting their assent, and a contract will be formed when the parties have met such a requirement. For a contract based on offer and acceptance to be enforced, the terms must be capable of determination in a way that it is clear that the parties assent was given to the same terms. The terms, like the manifestation of assent itself, are determined objectively.
- Consideration: There must be consideration given by all the parties, meaning that every party is conferring a benefit on the other party or himself sustaining a recognizable detriment, such as a reduction of the party's alternative courses of action where the party would otherwise be free to act with respect to the subject matter without any limitation.
- Competent, Adult (Sui Juris) Parties: Both parties must have the capacity to understand the terms of the contract they are entering into, and the consequences of the promises they make. For example, animals, minor children, and mentally disabled individuals do not have the capacity to form a contract, and any contracts with them will be considered void or voidable. Although corporations are technically legal fictions, they are considered persons under the law, and thus fit to engage in contracts.
- For adults, most jurisdictions have statutes declaring that the capacity of parties to a contract is presumed, so that one resisting enforcement of a contract on grounds that a party lacked the capacity to be bound bears the burden of persuasion on the issue of capacity.
- Proper Subject Matter: The contract must have a lawful purpose. A contract to commit murder in exchange for money will not be enforced by the courts. It is void ab initio, meaning "from the beginning."
- Mutual Right to Remedy: Both parties must have an equal right to remedy upon breach of the terms by the other party
- Mutual Obligation to Perform: Both Parties must have some obligation to fulfill to the other. This can be distinct from consideration, which may be an initial inducement into the contract.
Uniform Arbitration Act to facilitate the enforcement of arbitrated judgements.
In England and Wales, a contract may be enforced by use of a claim, or in urgent cases by applying for an interim injunction to prevent a breach.
Theoretical considerations
Contract theory is the body of legal theory that addresses normative and conceptual questions in contract law. One of the most important questions asked in contract theory is why contracts are enforced. One prominent answer to this question focuses on the economic benefits of enforcing bargains. Another approach, associated with Charles Fried, maintains that the purpose of contract law is to enforce promises. This theory is developed in Fried's book, Contract as Promise. Other approaches to contract theory are found in the writings of legal realists and critical legal studies theorists.
The source of this article is from Wikipedia, the free encyclopedia. The text of this article is licensed under the GFDL.