Contract Law
When you buy a movie ticket, groceries, or a parking ticket, you have entered into a contract.
Most people, however, think of a contract as a long, dry document filled with baffling legal language. It certainly can look like that, when you buy or sell a house for instance. But a contract like that might happen once or twice in a lifetime. Much simpler contracts (like buying a meal at a restaurant) are a common part of everyday life because they are the backbone that makes business-small, medium or enormous-possible.
For a contract at its simplest is an agreement between two parties to abide by a promise. Critically, that agreement is legally binding, meaning the parties have a legal obligation to keep their promise. If they do not, the courts can assist injured parties. If contracts were not binding, transactions would be impossible.
We have just seen that contracts come in many shapes and sizes. However, all contracts contain the same following elements:
- Offer and acceptance
- An intention to be legally bound
- Consideration e.g. a payment, an act or a promise to pay, and
- Legal capacity to form a contract
Contracts, are enforceable only when those four requirements have been met. When this occurs, contracts provide certainty for parties when they enter into agreements with each other. Contracts also give parties the right to sue if one party does not live up to their end of the bargain.
The heart of contract law is the concept of a "legal bargain." It would not make sense for a party to enter into a legally binding agreement for nothing.
Contracts can be oral, written or implied. A handshake agreement could be considered an oral contract that is binding and enforceable. Some laws, though require certain contracts to be written, such as the purchase or sale of a house. Implied contracts refer to the parties' mutual understanding of the contract terms expressed by actions instead of words. For example, purchasing a drink at a convenience store involves the customer making a contract with the store. The customer gives the store money in exchange for the drink. Parties do not determine what drink will be exchanged for what price or draw up a complex agreement in writing. Instead, the contract is implied by the actions of the parties.
For certain legal reasons, a party to a contract may have the right to avoid contractual responsibility or have the contract terminated or set aside, meaning deprive it of legal effect or force. This can happen because of a:
- mistake,
- misrepresentation,
- undue influence or duress, or
- illegality.
RESCISSION. Rescission is a remedy often used where a contract is found to be void, due to misrepresentation, mistake, duress, or undue influence. In these cases, the court may order that a contract be cancelled completely.
Remedies are the law's available "solutions" when a party to a contract has been harmed by another party.
Notably, the courts may also refuse to enforce contracts when that would be contrary to public policy or against the general morality of the community. For example, contracts between sex workers and clients are not enforced, even though prostitution is not illegal.
When a contract is "discharged", the obligations of the parties come to an end, and the contract is no longer operational. This occurs in five ways, number 1 being the ideal way up to number 5, which is the least ideal way.
- Performance
- Agreement
- Frustration
- Operation of law
- Breach of contract
For breach of contract-meaning a party has failed to fulfill their contractual promise-the court has three main remedies.
- DAMAGES. A court-awarded sum of money to compensate the innocent party. This is one of the most common remedies for breach of contract. When damages are not appropriate because, for example, it is impossible to calculate the monetary value of the damages, the equitable remedies below are available to the court. Unlike damages, which are available as of right, specific performance is granted at the court's discretion where damages are deemed to be an inadequate remedy.
- SPECIFIC PERFORMANCE. The court may order that the party in breach actually perform the contract as they were supposed to do. For example, if Beth offers to sell her house to Ruth, then changes her mind, the court could order Beth to sell her house.
- INJUNCTION. A court may order a party NOT to breach the terms of the contract. For example, if an actress agrees to perform exclusively for a particular movie studio and then begins taking roles with others studios, the court may order an injunction to prevent the person from acting in other productions for a period of time.
If this short introduction to contract law has whet your appetite for more, come join Mentor Law, where explanations to even the thorniest of legal concepts, is provided in clear, plain English.
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