What is a Contract?
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What is the Definition of a Contract?
A contract is basically an agreement between two parties creating a legal obligation for both of them to perform specific acts. Each party is legally bound to perform the specified duties such as rendering a payment or delivering goods.
In order for the contract to be enforceable, each party must exchange something of value (called “consideration”).
A contract may be used for various transactions, including the sale of land or goods, or the provision of services. They may be either oral or written, though courts prefer that agreements be put in writing.
What are the Requirements for a Valid Contract?
In order for an agreement to be binding in a court of law, a contract must contain the following elements:
- Mutual Assent: Each party must have a shared understanding regarding what the subject matter of the contract is. For example, for a delivery contract, both parties must understand that the word “ship” does not refer to a sea vessel, but rather means “to deliver”.
- Offer and Acceptance: One party must make an offer by clearly communicating their intent to be bound in a contract. Likewise, the other party must render their acceptance in unambiguous terms.
- Consideration: This where both parties mutually exchange something of value in order to make the agreement binding. The consideration may simply be a formality, such as giving $1. Sometimes contracts can be enforced in a one-sided promise where only one party renders consideration.
How can a Contract be Breached?
Contract claims are best thought of in a timeline. The entire formation of the contract begins with negotiations and may undergo several modifications before a final agreement is reached. This means that there are several points in time when the contract may be breached. A breach of contract means that one or both parties has failed to perform their duty.
Some common types of breach include: non-performance of duties, impossibility (one party makes the other party’s duties impossible to perform), breach of an implied duty, and anticipatory breach.
A breach may either be total or partial, and each will yield different legal consequences.
What Types of Remedies are Available in Contract Claims?
There are a multitude of remedies available should the contract be breached. Both legal and equitable remedies are available, depending on the type of breach.
Legal remedies imply that one party must pay the other monetary damages for their economic losses. Some types of legal remedies include: compensatory damages (reimbursing the non-breaching party for the contract amount), consequential damages (reimbursements for losses indirectly caused by the breach), and liquidated damages (damages that are written into the contract itself).
Equitable remedies are designed to compel one party to take action in order to correct the breach. These may include contract rescission (canceling the old contract and writing a new one) and contract reformation (rewording the old agreement).
Bear in mind that any type of remedy in a contracts claim can be potentially complicated. This is because calculations often involve determining the value of a particular property or services.
Do I Need a Lawyer for a Contract Issue?
Whether you making plans to enter into a contract or are already dealing with a breach, it is essential to work with a lawyer every step of the way. A competent contracts attorney can help you draft a suitable agreement, as well as prepare your arguments in the event that a breach occurs. Contracts are powerful tools that create binding legal obligations, and a lawyer can help you understand what your rights are under contract laws.
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Last Modified: 08-07-2013 12:35 PM PDT
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