Contract Law Summary: Everything You Need to Know
Contract law summary provides an overview of the legislation and judicial decisions that give contracts their legal powers.3 min read
Contract law summary provides an overview of the legislation and judicial decisions that give contracts their legal powers. Knowledge of contract law is vital for anybody that wishes to enter into contractual agreement to avoid falling into legal troubles.
Why Is Contract Law Important?
Contract law is vital for several reasons, including:
- It facilitates voluntary agreements which are the bedrock of business transactions in the marketplace.
- It provides legal backing for agreements between contracting parties, making it possible to seek legal redress where a party breaches the terms of the contract.
- It makes all parties to a mutually binding contract responsible for keeping their obligations to the agreement.
- It helps to protect the interests of the contracting parties.
Breaking a Contract
Typically, a party exiting a contract has to compensate the other parties before the contract can be broken.
What Is Contract Law?
Contract law is derived from the common law and equity court system which Great Britain passed on to America. The focus of American contract law is to enforce contracts in circumstances where enforcement is the most equitable course of action. However, the courts generally modify contracts if enforcement will be too harsh on one of the parties.
Uniform Commercial Code
The Uniform Commercial Code, or UCC, is an effort geared towards making commercial law the same all over the United States of America.
The UCC has 11 articles. Every state, except for Louisiana have accepted 10 of these articles.
While every state has specific laws governing commercial activities, the UCC serves as a blueprint for the commercial laws of every state.
Objective Theory of Contracts
According to the objective theory of contracts, contracts can be enforced only if a reasonable observer during the contractual negotiations believes in the fairness of the terms of the agreement. This theory is a vital aspect of contract law as it provides a benchmark against which a court that is entertaining a contract lawsuit can compare the clauses in the agreement.
What Are the Requirements of a Contract?
Before a contract can be legally enforceable, it must contain the following elements:
- Agreement (i.e., offer and acceptance of the terms).
- The intention to uphold the terms of the contract.
- Legal eligibility to be a party to the contract.
- Formalization of the contract.
- The contract must have a legal purpose.
What Are the Different Types of Contract?
Contracts are of six types, and they are divided into three distinct categories including
- Bilateral and unilateral contracts.
- Formal and informal contracts.
- Express and implied-in-fact contracts.
How Do Courts Attempt to Enforce a Contract?
Court divide contracts into two categories for enforcement including valid contracts and invalid contracts. Invalid contracts are void. On the other hand, valid contracts include the following:
- Enforceable contracts.
- Unenforceable contracts.
How Can Quasi-Contract Be Formed?
A quasi-contract is formed when a statute forces two parties to enter into a contractual relationship or provides protection for situations which are considered to require such protection.
How Do Courts Interpret Contracts?
In their interpretation of contracts, courts often try to reach an interpretation which closely reflects the original intentions of the parties when they were forming the contract.
If the courts can't determine the original intentions of the parties, the courts choose an interpretation that's fairest to all parties to the contract.
If the courts find out that the contract was deliberately written in a vague language by the drafting party, the court chooses an interpretation which provides the best protection for the interests of the party not responsible for drafting the contract.
Can a Litigant Attack the Legality of a Contract?
A litigant can attack the legality of a contract in different ways.
- A litigant can question the legality of a contract on the basis that it does not follow the statute.
- A litigant can also argue that a contract is contrary to public policy and thus should be declared void or voidable by the courts.
- A litigant can also challenge the legality of a contract by claiming that they did not assent to it.
When Can a Contract Be Declared as Illegal?
The courts can declare a contract as illegal from the moment it is before it if the contract was formed to engage in illegal activities.
If the contract is considered illegal due to a specific clause which can be deleted without altering the core elements of the contracts, the court can enforce that particular clause or add a new one if there is no existing replacement.
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