A legal contract is an agreement that is enforceable under contract laws. The majority of legal contracts are written and signed, although some jurisdictions recognize oral agreements as legal contracts. However, it’s generally best for a contract to be formalized in writing, especially for considerably valuable subject matters or especially complex arrangements.
Legal contracts can be used by individuals as well as organizations, such as businesses and corporations. Any legal contract must be entered into in such a way that is fair to both parties, and is also free of any fraud, coercion, and/or misrepresentations.
In order for a contract to be legally valid, it must fulfill the requirements for a valid contract which are set forth by state and federal laws. These requirements include:
- Offer and Acceptance: One party must make an offer, and the other party must accept the offer. Both the offer and acceptance must be done in such a way that is clear and unambiguous;
- Assent: Both parties must mutually assent, or agree, to the terms of the contract. They should be clear with each other regarding the terms, words, and definitions that are used in the agreement; and
- Consideration: Each party must exchange something of value, such as how one party is generally providing a service or goods in exchange for monetary payment.
It is important to note that some contracts must be in writing in order for them to be legal. An example of this would be contracts for the sale of real property, as well as contracts for the sale of goods worth over a certain amount, generally $500 or more.
What Is A Breach Of Contract?
A breach of contract most commonly occurs when one of the aforementioned requirements was not met. An example of this would be how if only one party assented to the agreement, the contract is not legally binding.
The court may declare a contract to be void; what this means is that the contract is canceled, as if it never existed, and the parties could be released from their duties. Under other circumstances, the court may declare the contract “voidable.” This means that the parties can cancel the contract as they wish. Because the difference between void versus voidable contracts is especially technical, it could require the help of a lawyer.
A breach of a legal contract is considered to be a legal violation. A breach generally results in a lawsuit between the two parties, with the non-breaching party suing the other party for any damages caused by the breach of contract.
Alternatively, the court may issue an injunction which requires the breaching party to fulfill their contract obligations, such as delivering a shipment of goods. Remedies for breach of contract will be further discussed later on.
What Is An Installment Contract?
An installment contract is a specific type of contract in which the payments are made in a series, or installments, rather than in one large lump payment. Alternatively, an installment contract can involve deliveries of goods or the provision of services that are done in a series, rather than all at once.
Installment contracts are commonly used because they benefit the consumer, who might not have sufficient funds in order to make a one-time payment. Sellers are also benefited when the sale of goods or distribution of services can only occur on a cyclical basis.
Some of the most common examples of when installments contracts can be used may include:
- Contracts for the sale of a plot of land;
- Vehicle sales;
- Contracts in which the goods are subject to seasonal cycles, such as produce or agricultural goods;
- Computer or other technology services which must be updated regularly; and
- Retail installment contracts, in which the seller purchases “in-style” or “in-season” clothes from a wholesaler.
Regardless of the content, the contract should be clearly written in order to include the specific details regarding how the installment payments or deliveries will work. Doing so can reduce the likelihood of a breach or other legal issues later on.
What Happens When An Installment Contract Is Breached?
In most breach of contract cases, the non-breaching party will be entitled to a damages award for at least the current installment that was breached.
In other cases, the non-breaching party may be required to pay a damages award that will cover the remaining installments or deliveries. This most commonly occurs when the breach makes it appear that the other party will likely breach on the remaining installments.
In order to prevent confusion associated with contract terms, the parties should include a section in the contract that addresses breaches of installment terms. An example would be how the parties may choose to include a “grace” provision for a first-time breach. Another example would be to include a provision stating that any breach at all will result in a damages award for the remaining payments.
Generally speaking, there are two types of remedies that a party can receive for a breach of contract: legal remedies or equitable remedies. Legal remedies refer to monetary award damages, such as compensatory, nominal, and liquidated damages.
Alternatively, equitable remedies are issued by a court when a legal remedy will not sufficiently compensate for the damage done. This most commonly includes remedies such as specific performance, reformation, or rescission.
The difference between the remedies that are awarded will determine what the non-breaching party can expect to receive, as well as what the breaching party will be required to do as punishment. An example of this would be when a person who is selling their house refuses to hand over the keys and property to the buyer at their closing. In such cases, the buyer may sue for specific performance, meaning that the court can force the seller to give up their property to the buyer.
The type of legal remedy that is awarded will also determine how to calculate the amount of damages that the plaintiff should receive. An example of this would be if a buyer has already paid for certain items to be shipped to them, but the company who owns the products never sends the order and keeps their money. The buyer could sue for breach of contract and collect compensatory damages from the seller, or they might seek restitution for the missing merchandise instead.
Some other examples of damages could include:
- Expectation;
- Reliance;
- Consequential; and
- Punitive damages. It is important to note that punitive damages are rarely ever awarded. However, when punitive damages are awarded, the defendant can expect to pay a much higher amount of fees. This is because punitive damages are meant to punish and deter the defendant and others from behaving in a similar way in the future.
Do I Need A Lawyer For Help With An Installment Contract?
If you are involved in an installment contract, you should consult with a qualified contract lawyer in your area. They can assist with drafting, reviewing, and editing an installment contract.
Additionally, your contract attorney can help you understand your legal rights and options under your state’s specific contract laws. Finally, an attorney will also be able to represent you in court, as needed, should any legal issues arise.
