Updated November 3, 2020:

Contract law Michigan refers to a set of laws governing the formation, execution, and breach of contracts in Michigan. If you are entering into a contract with an individual or organization in Michigan, it is important to know how the state's contract law differs from that of other states. With such knowledge, you will be able to create a contract that meets all the criteria for enforceability and avoid disputes and other issues in the future.

What Is a Contract?

A contract is a legally enforceable agreement between individuals or entities. It can have an effect on certain aspects of your business or personal life. Contracts may govern how sales and purchases are made or how agreements to provide goods, services, benefits, and insurance are formed and enforced.

Elements of a Contract

A contract must have certain elements in order to be legally binding, including:

  • Parties who are competent enough to enter into a contract
  • Proper subject matter
  • Consideration
  • Mutuality of agreement
  • Mutuality of obligation

There are contract cases that also require clear and convincing evidence to prove certain elements. These include:

  • Oral contracts
  • Modification of existing contracts
  • Avoidance of contracts
  • Waiving of existing contractual terms
  • Reformation of contracts

Offer and Acceptance in Contract Law

The essence of a contract, whether it is written or oral, is a valid offer and acceptance. There must be sufficient information about the offer and its acceptance in order for the court to determine what is being offered and what is being asked for in return. The court must be convinced that there is a meeting of the minds, which means that there must be enough evidence showing that the participating parties have both agreed to the same thing.

If the contractual terms are reasonably clear and unambiguous, a meeting of the minds exists even if one party subjectively understands the terms differently. However, when there is an actual misunderstanding due to ambiguity in the agreement, a meeting of the minds does not exist. In the absence of a formal contract, the court may enforce an obligation based on equitable principles, giving one party an unfair benefit or the other party an unfair burden.

Mutual Benefit in a Contract

A contract is only legally binding if it is mutually beneficial to both parties involved. This is commonly referred to as consideration. When a party promises to do something without getting something in return, the deal will usually be unenforceable in court. This commonly happens when a party tries to renegotiate an agreement strictly for his or her own benefit.

Contractual Rights and Obligations

A court must consider the intention of the contracting parties when determining their contractual rights and obligations. In order to carry that intention into effect, a contract must always be properly construed. When a written contract contains clear and unambiguous words that have a definite meaning, there is no reason for the court to look to external evidence to determine the intent of the words.

If the language of the whole contract is unambiguous, there will be no opportunity for construction by the court. In such a situation, the language must be held to convey the intention of the contracting parties, and the court does not need to search for meanings or conduct inferences to determine the intention of the parties.

Language of a Contract

A contract is regarded as ambiguous when its language is subject to multiple reasonable interpretations or inconsistent on its face. If this happens, a factual development is required to determine the intention of the contracting parties.

In general, a contract's language has to be construed against its drafter. Also known as the rule of contra proferentem, the act of construing a contract against its drafter to resolve ambiguous language is only applicable if the intention of the parties cannot be determined through the implementation of all conventional interpretation rules, including an evaluation of relevant external evidence.

Breach of Contract

A breach of contract refers to a failure to fulfill a material term of a contract. Although an intentional and willful contract breach may have additional consequences, a contract is typically not about intent; it is either performed or not performed. There are three types of breach of contract, including:

  • Material breach of contract
  • Anticipatory breach of contract
  • Substantial performance

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