Obligation of contracts is the responsibility that parties to contracts are required to bear upon entering into legally-binding agreements. A contractual obligation can come in different forms, including the completion of certain tasks, avoidance of certain acts, delivery of products or services, and the payment of consideration. Parties that fail to fulfill their obligations may face legal consequences. In certain situations, contractual obligations may be transferred to a third party.

What Is Obligation of Contracts?

Obligation of contracts refers to the legal duty of contracting parties to fulfill the promises specified in their contracts. If the obligations of a contract are in question, a person's reasonable capacity to perform or refrain from performing the required task will be taken into consideration. In a contract, the parties involved offer something valuable to one another, which can be anything ranging from a product or service to money. They are legally required to fulfill their obligations in order to complete the exchange.

How Obligation of Contracts Works

Responsibilities

One example of contractual obligations is the responsibilities of parties to a contract for the sale of a car. One party is obligated to transfer ownership of the automobile, while the other is obligated to pay for it. The terms that regulate each party's obligations will be specified in the contract, such as:

  • Amount of payment to be made
  • Method of payment
  • Time of delivery
  • Place of delivery

If one of the parties fails to fulfill his or her obligations as specified in the contract, it is considered a breach of contract. A contract breach may lead to an award of damages as reimbursement for the innocent party's financial losses. Contractual obligations usually depend on a contract's subject matter. The obligations in a sales contract may be very different from those found in a rental agreement or other kinds of contract.

Payment

In a sales contract, one party, which is the buyer, is usually legally obligated to make a certain amount of payment in exchange for a certain amount of goods or services. The contract may include obligations in regard to the payment amount and payment deadline.

Delivery

Usually, the seller in a sales contract is obligated to deliver the promised goods and services. The delivery date and method and other terms may be specified in the contract.

Quality of Goods

A contract may also contain terms that obligate the seller to provide products or services of a certain quality. This type of obligation may vary depending on the contract's specific details.

General Obligations

Besides specific obligations, each contracting party is required to comply with the general principles of contract formation. For example, parties to a contract are obligated to deal truthfully and fairly with one another and refrain from coercion or forcing the other party to establish the agreement.

Transferring Obligation of Contracts

In some situations, it is possible to transfer contractual obligations to a third party. For example, if one party to a contract is responsible for painting the other party's house, he or she may be allowed to hire a third party to perform the task. This is referred to as contract delegation.

While some obligations can be delegated, others cannot. The ability to delegate contractual obligations depends on your state's contract laws, the type of obligations being delegated, and other factors. For instance, contract obligations that require unique artistic ability or craftsmanship usually cannot be delegated. Only the specific party who has agreed to enter into the contract is allowed to perform the obligations. In contrast to the transference of contractual obligations, the transference of contractual rights is called contract assignment.

Seeking Legal Assistance

Contractual obligations can vary significantly from one claim to another. If you are facing a dispute or have a legal question about a contract obligation, it is a good idea to consult a qualified and experienced contracts lawyer. A contracts attorney will be able to provide sound legal advice to help you gain a clearer understanding of contract obligations. Also, in the event that you wish to file a lawsuit against someone for violating his or her contractual obligations, a lawyer can help you build a strong case and represent you in court.

If you need help understanding or dealing with obligation of contracts, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.