Contract Law Terms: Everything You Need to Know
Contract law terms are necessary to understand the complicated actions taken with a business contract, While contracts vary in the terms they include.3 min read
Contract law terms are necessary to understand the complicated actions taken with a business contract. While contracts vary in the terms they include, certain terms are standard across this area of law.
What Is A Contract?
A contract is any written agreement between two parties in which one party takes an action valuable to the other in exchange for something of value. The "something of value" is also known as a consideration. Legal contracts serve as a base for most business relationships. Thus, they are an important part of business law. They can also involve a lot of complexities.
Contracts require a few key elements:
- An agreeable offer
- Acceptance of the offer by both parties
- A promise to meet contractual obligations
- Valuable consideration, in other words, some exchange of payment or services
- Time cues for fulfilling contractual obligations
- Terms and conditions that apply to each party in the contract
- Performance guidelines
Unilateral contracts are those where one party compensates the other for meeting a performance goal. For instance, the agreement could be that one party will give the other $1,000 for installing a garage door by a specific date. A bilateral contract is one where both parties take a specified action. The wording and legality of these contracts are slightly different. An example would be "I will fix your garage door by Friday and you will pay me $1,000 by Friday."
Oral contracts are possible but less common and more difficult to uphold. The time to take legal action on an oral contract is only two years, whereas holders of a written contract have four years to sue from the time a breach of contract occurs. Written contracts can get complex in the sense that they may include a series of offers and counteroffers, various documents, and correspondence. In addition, there are many different varieties of contracts:
- Conditional contracts that depend on a specific event taking place for to go into effect
- Joint and Several contracts, where both parties expect to perform certain duties
- Implied contracts, assuming a contract exists based on the circumstances; this applies in situations where a judge would deem that there is a contract between the two parties (even if there is no formal contract)
Examples of circumstances when written contracts do apply include when a party wants to supply requirements for another party's business, when one party plans to buy a significant amount of product from another party, and when both parties decide to renew their contract. Variations on these contracts are endless. However, contracts that enforce illegal activities do not apply to law and are not upheld.
General Business Contracts Terms and Definitions
- Abatements are reductions in the amount one party owes another. Abatements are typically granted by the contract holder who collects the money. An example would be a landlord giving a tenant an abatement of rent.
- Abeyances are situations requiring settlement. They suspend and inactivate the contract for a temporary amount of time.
- To abscond is to secretly withdraw or hide oneself.
- Acceptance is a binding agreement of a contract. A contract is only binding once both parties have accepted. Before both parties accept, the contract is only an "offer" and is revocable by either side. If either party wants to add conditions to an offer, the offer becomes a "counteroffer" that requires acceptance by the other party.
- Accord & Satisfaction settle a dispute and absolve one party of legal action or a contractual obligation. When two parties agree to a dispute resolution, known as "accord & satisfaction."
- Acceleration clauses dictate the terms under which payment is due immediately. For example, a missed contract payment accelerates it so that the full balance is due.
- Acquiescences are any actions taken by a party that are legally binding, even if that's not the original intention. An example would be any action that acknowledges recognition of the contract terms. it's binding as an acceptance, even if it was not a direct acceptance of the contract.
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