1. Definition of a Contract
2. Elements - Consideration and Mutual Assent
3. Required Characteristics

Legality of the contract between parties is a legal agreement where obligations are mutually agreed upon and that the law can enforce. Some states consider the element of consideration to be an acceptable substitute. There are potential remedies when a breach of contract happens such as reliance damages, general damages, specific performance, and consequential damages. Since contracts are legal, the parties can count on the law to enforce them.

Definition of a Contract

The state common law is in charge of governing contract law, and while it's frequent throughout the country, there are some particular court interpretations of a certain part of the contract that can vary between every state. If a promise gets breached, the law will provide remedies for the party who was harmed, which is often monetary damages.

There are basic elements that are mandatory to be in an agreement and are legally enforceable, which include the following:

  • Adequate consideration
  • Legality
  • Capacity
  • Mutual assent (with a valid offer and acceptance)

Elements - Consideration and Mutual Assent

Contracts happen when there's a duty to consider since it's a promise that one of the parties made. In order to be binding legally, a promise needs to be exchanged for consideration that's adequate. There are two types of consideration - the benefit-detriment theory of consideration and the bargain theory of consideration. According to the benefit-detriment theory of consideration, a valid consideration only exists when there's a promise that's made to the promisor's benefit or to the promisee's detriment. This fairly and reasonably obligates the promisor to make a promise in exchange for something that the promisee will give them.

As an example, promises are just gifts that aren't enforceable since the grantor's personal satisfaction from the act of being generous isn't usually considered enough detriment to consist of adequate consideration. According to the bargain-for-exchange consideration theory, consideration exists if a promisor makes a promise in exchange for something else. The important condition here is that the promise was specifically given something to have the promise be made. This theory is different as the focus in bargaining for exchange is the parties' main motive for making any promises in the first place.

Required Characteristics

A contract needs to have a legal purpose in order for it to be enforceable. If Steve decides to hire Paul to kill his nemesis, Susan, Steve will create an agreement with all of the responsibilities Paul has, with the main one being him getting a gun and shooting Susan in the head. The agreement will also state how much Steve will pay Paul when the task is complete. However, creating a contract of murder for hire is illegal, so if Paul doesn't do his duties, Steve cannot bring this to court. This contract is considered unenforceable.

Anyone can enter a contract with the exception of certain felons, minors, and those of unsound mind. The contract should identify who the parties are by name, but sometimes titles and addresses may be required. In an agreement such as a sales agreement, the names buyer and seller will be used to distinguish which party is which. The parties must have a meeting of the minds where they all mutually agree to the contract. One party will extend an offer and the other one will accept it.

Consent isn't considered free when it's obtained through fraud, duress, undue mistake or influence, or menace. There have been many books written about the complexities of these factors. If a person has a gun pointed at their head when they sign a contract, they didn't consent to the agreement and can revoke it. The law must apply to each individual case, as not all cases are clear-cut.

If Joe signs a contract with Tim's Tree Trimming, the contract will list what scope of work the company will perform on Joe's property. Tim and Joe sign the contract, indicating they've come to a mutual agreement about what work will be done, when it will be completed by, and for how much. Every party in the contract needs to agree that they'll give up something valuable in exchange for a benefit they'll receive from the other party.

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