Contract law lies at the center of our legal system and serves as the basis of our whole society. Our society relies on free exchange in the marketplace at every stage. Contract law is what makes this probable. Exchanges in the marketplace always rely on voluntary agreements between people. These voluntary agreements would never if there wasn't contract law. Contract law works to make these agreements enforceable, which typically means that it permits one party to a contract to get money damages from the other party upon demonstrating that they have breached the contract. If there wasn't contract law, these voluntary agreements would immediately become unreasonable and impracticable. Since such agreements lie at the center of our civilization and economy, and since they depend upon contract law. It is this scheme of contract law that underpins and makes possible the numerous private, voluntary agreements by which exchanges of goods and services are done in our culture at every level. No exchange is excused from the contract law, which is often referred to as the cornerstone of marketplace civilization (Markham, 2002).
A contract is a legally enforceable agreement that takes place between two or more people. The center of most contracts is a set of shared promises known as consideration. The promises made by the parties describe the rights and obligations of each party. Contracts are enforceable in the courts. If one party meets its contractual duty and the other party doesn't, the non-breaching party is permitted to receive relief by way of the courts. Normally, the non-breaching party's remedy for breach of contract is money compensation that will put the non-breaching party in the location it would have benefited from if the contract had been carried out. Under certain circumstances, a court will order the breaching party to carry out its contractual obligations. Since contracts are enforceable, parties who enter into contracts can depend on contracts in structuring their business associations (Radcliffe, 2011).
Minors and those who are mentally inept lack the legal capacity to enter into contracts. All other people are usually assumed to have full power to bind themselves by entering into contracts. In most states, the legal age for entering into contracts is eighteen. The test for mental capacity is whether a person understands the nature and consequences of the transaction in question. Corporations have the power to enter into contracts. They make contracts by way of the acts of their agents, officers, and employees. Whether a particular worker has the power to bind the corporation to a contract is determined by an area of law called agency law or corporate law. A corporation has a separate legal existence from its founders, officers, and employees. In general, the people associated with a corporation are not themselves responsible for the corporation's debts or liabilities, including liability for breach of contract (Radcliffe, 2011).
A deal done on a handshake is a contract, since it is a legally enforceable agreement involving an exchange of promises. Most contracts are enforceable whether they are oral or written. Nevertheless, one should always have written contracts for their business relationships. There are several reasons why written contracts are better than oral contracts:
The procedure of writing down the contract's terms and signing the contract forces both parties to think about and be exact about the obligations they are undertaking. With an oral contract, it is too easy for both parties to say yes and then have second thoughts about it.
When the stipulations of a contract are written down, the parties are likely to generate a more complete and thorough agreement than they would with an oral agreement. A quickly made oral agreement is likely to have holes that will have to be resolved later - when the relationship may have declined.
With an oral contact, the parties may have dissimilar recollections of what they agreed on. A written agreement gets rid of disagreements over who promised who what (Radcliffe, 2011).
Characteristically, in order to be enforceable, a contract must contain the following fundamentals:
Mutual Consent - The parties to a contract have a shared perceptive of what the contract has to do with.
Offer and Acceptance - The contract entails an offer or more than one offer to another party, who accepts the offer. The buyer's acceptance of that offer is an essential part of creating a binding contract. A Counter-offer is not an acceptance, and will normally be treated as a refusal of the original offer.
Mutual Consideration or the mutual exchange of something of value - in order to be official, the parties to a contract must trade something of value. While the validity of consideration may be subject to question on the basis that it is illusory, or that there is a failure of consideration, these defenses will not let a party to a contract get away the consequences of a bad negotiation.
Performance or Delivery - in order to be enforceable, the action considered by the contract must be finished. In a typical breach of contract action, the party claiming the breach will say that it performed all of its duties under the contract, while the other party failed to perform its duties or obligations.
Good Faith - It is implied within all contracts that the parties are acting in good faith.
No Violation of Public Policy - in order for a contract to be enforceable, it cannot violate public policy. If the subject matter of a contract is illegal, one cannot enforce the contract. It is important to remember that public policy can change.
Traditionally, many states have refused over the years to honor gambling debts that were incurred in other jurisdictions. But, as more and more states have allowed gambling within their own borders, that policy has mostly been abandoned and gambling debts from legal enterprises are now normally enforceable (Larson, 2010).
When a party fails to carry out the stated obligation in a contract, the party is said to be in breach of contract. The injured party has several recourses that they can take. The injured party may withdraw the contract or release the other party from the obligations stated in the contract. Also, the parties may agree on novation. Any of these three resolutions may be put into place without litigation. The injured party may sue the other party for money damages or for specific performance. Specific performance may be ordered if the party thinks money damages are an unjust form of compensation. When someone seeks the remedy of specific performance, the party is asking the court for the equitable remedy of compelling performance of the contract (Contract Law, n.d.).
The remedy that is most frequently used for a breach of contract is the remedy of damages or payment in one form or another, made by the breaching party to the non-breaching party. There are numerous types of damages, and generally speaking damages may be very exact to the kind of breach that has taken place. The following are some guidelines on damages:
Compensatory damages aim to put the non-breaching party in the position that they had been if the breach had not taken place.
Punitive damages are payments that the breaching party must make, above and beyond the point that would fully compensate the non-breaching party.
Nominal damages are token damages awarded when a breach takes place, but no actual money loss to the non-breaching party was established.
Liquidated damages are exact damages that were previously identified by the parties in the contract itself, in the event that the contract is breached.
Specific Performance -if damages are inadequate as a legal remedy, the non-breaching party may seek an alternative remedy called specific performance.
Cancellation and Restitution - a non-breaching party may cancel the contract and sue for restitution if the non-breaching party has given a benefit to the breaching party (Contract Law, n.d.).
An alternate action for the injured party is to sue for injunctive relief, which forbids the other party from performing some specific act. In other words, the injured party may stop the other party from performing any connected transactions until the agreement is settled. As for the party accused of breach of contract, several recourses exist. The party may claim that the contract was not valid, because one of the essential elements was missing from the agreement. Further, the contract may now, be impossible to perform, if one of the parties has died or the object of the contract has been lost or destroyed (Contract Law, n.d.).
When interpreting contracts courts tend to avoid questions concerning the intent of the parties involved in the contract and rely on the contract itself, particularly when the contract is in written form. Under the plain meaning rule, the words of a contract are to be read according to their plain, everyday meanings, with the exception of terms that have been specifically defined in the contract. To dampen the drafting of deliberately vague language, any vague terms in a contract is interpreted in a way…