Contract law is a mainstay of most legal activities and almost all business undertakings, that guarantees that contracts have been arrived at legally and that people receive what they bargained for. Be it a short service contract or a long business transaction contract, the terms and conditions of both the parties are defined there in black and white. However, legal issues related to contractual law are complex thereby giving rise to numerous problems if handled inadequately. In this article the author is going to attempt to define the essential aspects of contract law and discuss some of the potential issues that may occur during the process of the contract formation and performance.
These are the various aspects that should be taken into consideration while defining certain essential characteristics of a valid contract:
According to the legal requirements, there are prominent basic necessities that is must be fulfilled by any reasonable contract so as to qualify for legal enforcement. These aspects are the fundamentals of contract law and guarantee that the agreement is legal as well as enforceable in a court.
1. Offer and Acceptance
The first requirement that must be full filled for a contract to be considered valid is consideration and an acceptance. Precisely, the warrant must come from one party that makes a clear offer, which is also definite and contains the terms and condition of the particular contract in question. The offer can be express or implied and it can also be made orally, in writing or through conduct. However, the offer has to be specific that the other party is in a position to determine or understand what is being offered to them.
The second party then has to accept the offer so that a contract is formed There must be a meeting of the minds. Acceptance also has to be unconditional and the message of acceptance delivered to the person offering it. Any conditions which are written and inserted during acceptance can be looked upon as a counter offer and thus changes the entire process of contracting.
Thus, for instance if a company is contracted to offer a certain service for a particular fee and the client agrees to their terms without negotiating the terms of the contract, a contract results. But if the client further comes back at the offer by asking that they pay less fee or that they include some more service, then it will be a counter offer and not acceptance.
2. Consideration
Consideration is anything of value that is tendered by the parties of the contract in contracting. It can be money, goods, services or a promise made or an undertaking not to perform certain act, in this case a promise to pay. Bargaining Is what makes a difference between contract and a mere contract and a mere promise or a gift.
This is so because in every contract, both parties are supposed to offer consideration so that the contract becomes legally enforceable. It may not even be equal but it needs to be of legal sufficiency that is acceptable by the common consent of the two concerned parties. For instance, when one of the parties offered $500 in exchange for a certain product, then the $500 is consideration in exchange with the buyer while the product being offered by the seller is consideration.
3. It is now customary to distinguish an intention to create legal relations where Section 4 of the docks statutes states as follows:
In order for the contract to be enforceable, the parties to the contract need to have the intention to be legally bound by the agreement that was made. This means that both the parties should go to the contract with the understanding that the resultant agreement should be legally binding and not a ‘mere agreement to agree’.
As for business people, the starting point is generally different, for business people are taken to have the intention of entering legal relations. By the same token, the social or domestic promises, especially those in commercial relations and family affairs, are deemed not legally enforceable save for when it is provided.
4. Capacity to Contract
According to the law, there is always extent of capacity that the involving parties have to negotiate for a contract. Closely related to comprehension, capacity entails capacity of the parties to legally comprehend the terms in the contract and the implications arising from the contracts formed by the agreement.
The most common disabilities that may disqualify people from contracting include; Minorities, that is anyone below the age of 18 years in most jurisdictions, people with mental illnesses, and anyone under the influence of drugs or alcoholic content. Such persons’ transactions may be rendered voidable or unenforceable in case the other party could prove that the individual lacked capacity to appreciate the contract.
5. Legality of the Contract
Contracts should be lawful and all the contractual processes must also be lawful. Contracts that contain prohibited activities or are in total violation of public policy shall not be legal. For instance, a contract that is containing an unlawfulness such as fixing the sale of narcotics and any form of agreement that demands the breach of law is null and void at law.
The contracts should not violate all the laws and regulations and the content of the contract should not be unlawful in the region of formation of the contract.
Outline of the Paper II: Common Pitfalls In this part of the paper, the author will discuss basic issues arising in Contract Law.
It is nevertheless important to note that when entering into the essential elements of a contract, there exist several risks that may be encountered at the drafting, negotiating or signing stages of the contract. These mistakes are typical and before the contract triangle between the parties, it can trigger conflicts, misunderstandings, or even, make the contract null and void.
1. Ambiguity in Terms
Probably one of the misunderstandings that are most recurrent when it comes to contract law is the one related to the use of imprecise expressions. If the conditions of the contract are not clear then there may be misunderstandings as to meanings of the signed contract. For example, measures such as ‘reasonable endeavours,’ ‘reasonable steps,’ or ‘due diligence’ are more ambiguous and therefore parties may well be able to come to different interpretations as to exactly what those terms are in the real world.
In order to reduce the amount of controversy, all contracts should be done by clear and accurate language. Each of those terms, each obligation and condition should be spelled out as clearly as possible so that there can be no argument over interpretations.
2. This means that individual reports were received based on the agreement or a lack of one when the worker failed to put the agreement in writing as required by organizational policy.
Although, an oral agreement can at times be legally enforceable, it becomes very difficult to prove due to the absence of a written document. It also means that when the main points and meetings are based only on verbal agreements there may be a misunderstanding of what was actually agreed upon.
Some types of contracts need to be in writing, to be valid in most states of the US. These include the contracts in sale of land, contracts which cannot be performed within one year period and guaranty. In any kind of business, it may almost be impossible to do business strictly without a written contract but even where it is not totally necessary to have one, it is always wise to have a document in black and white to safeguard both parties.
3. Lack of Consideration
Recall that reflection is one of the vital components of a contract and this makes consideration vital as well. If one party provides no consideration or if the consideration was inadequate then such a contract is invalid or maybe legally unenforceable.
One traditional mistake that people make is that they never properly define what the consideration is in the transaction. For instance, if one party agreed to supply certain service while the modes of payment are not clearly defined, then such a contract could be a subject of consideration with, or without consideration.
4. Mistakes and Misunderstandings
Contracts may be considered as being void for mistake if they were made because either or both parties made huge errors. These errors can be on the type of the contract, the participants or the content of the contract.
For instance, if a seller sells a product which he or she believed to be original only to realize that it was a counterfeit, the buyer has legal grounds to cancel the contract on the basis of mutual mistake.
5. Duress and Undue Influence
If a contract has been negotiated under pressure or threats or under influence or coercion then the injured party can have the contract set aside. Duress, on its part, is acknowledged where one party makes the other enter into a contract against his or her will by the use of force while undue influence is recognized where one party takes advantage of another due to a position of power normally in vulnerable circumstances.
It must also be noted that coffering cannot be carried out at the instance of one party, but should be done voluntarily by both the parties. In a court of law, the agreement entered in to is likely to be null and void if one party was coerced to sign the agreement.
6. Breach of Contract
default takes place when one of the contracting party fails to perform the contractual duty that he had agreed to perform. They can be classified into partial breach where one party does not fully meet his contractual obligations while the other extreme is a material breach where the offending party does not perform his obligations in any way. Essentially in cases where there is a demonstrable material breach of contract the innocent party will also be empowered to repudiate the contract and seek further remedies.
Some of the leading reasons that trigger breach consist of non-delivery, non-payment or failure to conform to the agreed quality. Thus, contracts must be constructed in a way, which shall reduce the likelihood of breach by suggesting compliance time frames, performance expectations, and penalties in case of breach.
Conclusion
It is essential that anyone that gets into a legal agreement have prior knowledge of basic aspects of contract law, and most importantly, the likely pitfalls. These contracts are very important especially in an attempt to set relations, duties and liabilities between individuals, business organizations or between business and individuals. Making certain that a contract has legal force and that it is adequately written helps avoid problems for the benefit of the interested stakeholders.
Willing the rudimentary components of formation of contracts such as offer, acceptance, consideration, intention, capacity and legalities reduces the likelihood of contractual risk and uncertainties and if avoided and overlooked aspects of the contracts such as ambiguity, lack of consideration and non-documentation of contractual agreements the contractual formation will effectively pass the legal test.
