In this presentation we will discuss contract law. at the end of this we will be able to:
• Define what a contract is
• Describe the law merchant
• List and describe the four elements of a contract
• Discussed the reasons for contract law and
• List the contracts that must be in writing to be enforceable
A contract itself is going to be a type of an agreement. it's an agreement between two or more individuals. We have to have at least two individuals or more in order to have a contract. We must have mutual promises between the two individuals or more individuals to either do something or refrain from doing something and that act, the acts that we are either doing or refraining from, must not be illegal. Because we're talking about law we can't have a legal contract for something that would be illegal. We'll talk more about the elements of the contract that under the legal system that are necessary to make the contract binding but on the most basic level the contract is mutual promises between two or more individuals.
Once we have that mutual promise then from a law standpoint we can say that the individuals have a duty under the contract and we can then enforce that contract and talk about whether that duty has been fulfilled or not, given the mutual promises, given the contract.
Control law arise historically from the business. The act of doing business is going to have a necessity for contracts because the business people involved, like merchants involved within transactions, need some way to know amongst it themselves to enforce contracts. From a historical standpoint the idea of business being business itself and needing to have exchanges and needing to have some kind of format to have those exchanges be more trustworthy lead to some kind of law to arise, some type of agreement to be formalized so that we can know what could be expected. As we go through time we know that these rules for contracts became more formalize. Contracts help us know what can be expected and as we know what can be expected, as with the idea of contract law grows, it facilitates trust between merchants. Trust will increase trade and that is generally the idea. Contract came from the practice of trade through merchants looking for a better way to set the system up. Then those best practices were finally brought into a formalized legal system.
This concept of law being derived or coming from the practice of doing business is typically a good practice because merchants are the one that are really involved and know the need for type of laws requires. In other words, it is usually good practice for the people affect by a certain law like contract law to be involved in making those laws because they have the most insight as to what is needed.
Contract law, like most laws, generally includes a goal of consistency. We want to make sure that the law will be consistent as we think about contracts, the formation of contracts, and the enforcement of contracts. We would need some type of consistency for people to understand what they would be getting into and therefore be more likely to enter contracts with that knowledge about what is to be expected.
Once we have a set of rules and practices that have become more formalized then we're going to need some kind of way to enforce problems in the law. When someone breaks a certain customer or rule that is going to be generated then there needed to be some type of way to make judgments and enforcements.
There are four elements needed for a contract to be binding. As we go through these four elements we can think through how each one would enhance the contracts in general, how it helps trade in general, and ho contracts help business and help trade. The four components are going to be mutual and consent, consideration, capacity, in legality.
The concept of mutual consent means that both individuals involved have some type of consensus. There has been an offer. There's been an acceptance and both individuals, both parties, have mutual consent to it. Sometimes this mutual consent is referred to as a meeting of the minds, there's a meeting of the minds and it consented to the contract.
When there is not mutual consent, if we have a contract there's something wrong with the mutual consent component, then it could be due to undue influence, if someone was under duress or during the signing of the contract, then that would be a situation where we could say there wasn't really a mutual consent on both sides. Also, if it was a mistake or if there was some type of deception, some type of fraud, within the formation of the contract or there was an equal knowledge between the parties in the contract, then we could say there wasn't really a meeting of the minds.
The concept of consideration is the idea that there must be something of value given and received by both parties within a contract. A contract means that there's some give-and-take, there's value in both sides of the contract. This concept of consideration does not mean currency only. It could be just time given up, but when we look at the elements of the contract we're assuming that the two-people going into the contract had a mutual self-interest as they go into the contract and therefore they're going to provide a good or service and receive a good or service in return.
The next component is capacity. Do the two-people involved or the individuals or parties involved in the contract have the capacity to make that contract, a legal ability to make the contract. Typically, we would think that individuals would have that legal ability to make contracts. Individual can make generally make contracts for themselves but there are some cases where we would there is not an ability to make contracts. For example, minors may not have the ability to make contracts because they have not achieved the legal age, the concept of the legal age being that someone doesn't have the developed mental capacity and/or experience at that age to make a contract. Also, if and individual has some kind of mental condition or something like that, we can question whether they have the capacity to make contracts. If someone is having some type of mental conditions, then oftentimes they'll you know relinquish that capacity to a caretaker.
The forth component to a binding contract is legality. We can't make a legal contract to do something illegal. For example, we couldn't make a contract to harm someone in a way that would be against the law. That would be a contract that would be illegal and therefore not enforceable.
Defining these elements of a contract help us determine whether a contract is a valid contract. Once a valid contract is made than the tools involved have a duty to the contract and then if there's a breach of contract we can then see how we are going to rehabilitate the party that has been injured through the breach of contract.
Typically, when we think about how we're going to compensate the injured party we are going to try to monetize the amount, using dollars to compensate for what has been lost through the breach of the contract. We generally want to reimburse the individuals for the losses that have been incurred. It is possible however to have incidental damages as well and that's the idea of making up or paying for any expenses by the victim to prevent additional losses. Compensatory damages are to rehabilitate damages that have happened already for the breach of contract and incidental damages are really looking into the future to see if we can prevent any additional losses and look to compensate for that
We also have the concept of punitive damages which could apply here as well. Punitive damages are going to be damages above and beyond what would be compensating for the loss that happened through the breach of contract. The point of punitive damages is actually punishing the individual that breached the contract in order to deteriorate the likelihood of that happen again both by that individual and to a message that there will be punitive damages.
The Uniform Commercial Code that UCC has a set of laws designed to govern pretty much all of the commercial transactions. The UCC will cover many types of contracts because business contracts are going to be a very prevalent but note that we do have contracts that would fall outside of business contracts and therefore fall outside of the Uniform Commercial Code the UCC. Many of these contracts may be handled or covered by common law rather than be covered by the Uniform Commercial Code.
It can at times be confusing as to whether something is an agreement or a contract and many people think that the major difference is that the contract is in writing and an agreement would not be. Note that a contract being is writing not one of our four elements of a contract so it's not the fact that something is in writing that's going to distinguish whether a contract is a contract or not. A contract must have the four elements of mutual assent, consideration, capacity, and legality. There are some contracts that will need to be in writing and we'll discuss that soon but note that it isn't one of the four elements. Social agreements, like an agreement to meet for dinners, is not considered a contract.
When considering the idea of contracts, we need to understand the concept of agency as well. Agency is going to be the concept that we have one individual, possibly if we're talking about an individual that works for a business or a corporation, that can make agreements for the organization. We can see how that will be applicable when we think about contract agreements, especially when we talk about business contract agreements, especially when business contract agreements are for corporations.
We're going to have to have some type of agent, some type of employee for the corporation, to act as an agent who can then make contracts or make decisions for the corporation that are binding to the principle that they are representing in that example that being the business, that being the corporation.
There are many other examples of an agent agreement. We may hire someone at to have be our real estate agent to make certain types of decisions on real estate decisions. We might hire someone to represent us in a legal mater as an agent.
When considering the terminology of a contract we first start with a valid contract. If we've met the four conditions of a contract, we can say that the contract is legally valid, and binding to the people involved in the contract. A void contract then, on the other hand, is going to be a contract that has no legal effect. It's not legally binding. There's no legal consequence for breach of a void contract.
We could also have a voidable contract. A voidable contract happens when one of the parties to a contract is not thought to have the mental capacity to create a binding contract. For example, if someone had a mental condition or if someone was a minor and they went into a contract, without that mental capacity condition of the contract being fully met, they don't have the ability to enter a contract fully, therefore the contract does not meet the four conditions of a contract. Rather than the contract being completely void we may say it is voidable, meaning that if the miner wanted to continue with the contract and then got consent to do so then it's possible that we can rule that the contract could still be valid. On the other hand, it could be voidable by the miner who then decides that they do not want the contract and then say it's an invalid contract based on the fact that they are a miner.
We also have an unenforceable contract and that's going to be a contract that meets all the rules of a contract but for some reason, for some law, it can't be upheld by a court of law.
We also have the concept of a unilateral contract and that's going to be the idea that one party makes a promise to do something in return for something else, meaning there's not going to be a consideration on both sides necessarily at the point of the unilateral contract but if some condition is met then there will be exchange. For example, if there's a contract that if you find my lost dog then I'll give you compensation for that. Under these circumstances there hasn't been an exchange at the point of the contract, the lost dog isn't found, but if that condition is met then then compensation would happen at that point in time.
It's important to note that a contract does not necessarily need to be an extensive written document in order to have a binding contract. An express contract would be where there is some type of agreement, which could be in writing, but it can be an oral agreement as well that is expressed. We could even have an implied contract and that's going to be the idea that there is an applied contract by the conditions and the actions that are happening between the parties involved. For example, if two individuals are clearly acting in such a way that you would think there would be a contract in place then we can assume that there is an implied contract in those conditions.
The four elements of a contract will be enough for an informal contract even if that contract is an oral contract, not in writing, even if the language is not a formalized language. There are some contracts, if we want to qualify it for a formal contract, however which may be necessary in certain conditions and may be suggested in other types of contractual conditions would need to be in writing. A forma contract is in writing, signed, witnessed, and it's delivered. a formal contract often requires a seal as well which is going to be some type of indication on the contract that expresses that it was accepted in a formal manner.
Contracts that typically need to be in writing to be enforceable are going to be contracts to deal with the sale of land or possibly more long-lasting contracts. If there's going to be a contract that's going to last more than a year, then these are types of examples where the written contract would be a component. Note that if we're having any type of formal contract it is probably a best practice, if not a requirement by law, to have a written contract. It's possible to engage in a contract and not have it be in writing, so don't make the mistake of assuming that if we enter into a contract but don't put it down in paper that we don't have to abide by the contract. That's not necessarily true if the four conditions were met. From a practical standpoint if we want a contract to be as explicit as possible and probably come to the best outcomes and have both parties involved know what is expected, which is typically the goal of any type of agreement, or any type of contract, then we probably would want to put it out in writing. We want to include as much detail about the term as possible into that writing so that both parties know what is expected, so that we can fulfill the contract, and so that everybody is happy with the results of the contract