Most people in our society are involved in contractual agreements of some kind. In most, if not all, aspects of law contracts can be found. Contracts are involved in family law, corporate law, employment law, litigation and real estate.
Elements of a Contract
A void contract is no contract at all. It is not binding and no action can be maintained if it is breached. A disaffirmance is not necessary to avoid a void contract.
If a contract can be rejected by one of the perties on legal grounds, it is called a
voidable contract. A voidable contract is valid and binding unless the entitled party (the party wha has legal grounds to reject the contract) voids it. A defect exists. The defect may be cured by ratification of the entitled party.
The ability to know and understand the terms of contract is known as capacity. For a contract to be valid, all parties must have capacity. Corporations and most adults have capacity. Minors, mentally incompetent persons and those who are intoxicated do not have capacity.
Most states consider persons under the age of 18 to be minors. Minors lack capacity to enter into a contract. If they do enter into a contract, the contract is generally considered voidable. They have the right to cancel the contract at any time before reaching the age of 18. If, however, a minor cancels the contract, the benefits that he or she received must be returned.
If a person is so mentally incompetent that he or she fails to understand that a contract is being made and further does not understand the terms of the contract, that person is said to lack capacity to enter into a contract. If such a person enters into a contract, the contract may be deemed voidable or possibly void.
In the same way, if persons are so intoxicate that they cannot understand that they're entering into a contract, and are so impaired that they fail to understand the terms, they too lack capacity. These contracts can also be considered voidable or void.
When two parties have a "meeting of the minds," an agreement can said to have been made. Both parties must understand the agreement, amking sure no misunderstanding or mistakes exists between them. Such a situation usually occurs after an offer has been made by an offeror and then accepted by an offeree. A valid offer has been made when another party (or several parties) is asked to enter a defined contractual agreement.
In other words, an offeror makes a promise to the offeree, requesting form the offeree an act or the restraint of an act that the offeree has the right to perform, or a return promise.
The offer must be clear and definite. It also must be clearly communicated to the offeree. An invitation or statement may be made that appears to be an offer, but actually is not. Social invitations, offers made in excitement or offers made in jest are not considered valid offers. A social invitation, for example, usually carries no contractual intent.
Offers can be made to individuals or to the general public, such as with an advertisement. From that point, after the offer has been made, negotiations between the offeror and offeree can begin, conducted personally orthrough an agent.
A legal Object and Purpose
Breach of Contract
The injured party may sue the other party for money damageges or for specific performance. When someone sues for lost profits or for court costs, for example, it is said that a party has sued for money damages. Specific performance may be ordered if the party believes money damages are an unfair form of compensation. When someone seeks the remedy of specific performance, the party is asking the court for the equitable remedy of compelling performance of the contract.
An alternate action for the injured party is to sue for injunctive relief, which prohibits the other party from performing some specific act. In other words, the injured party may prevent the other party from performing any related transactions until the agreement is settled.
As for the party accused of breach of contract, several recources exist. The party may claim that the contract was not valid, because one of the necessary elements was missing from the agreement. Further, the contract may now, be impossible to perform, for example, if one of the parties has died or the object of the contract has been lost or destroyed.
Transfer of Contract, Rights and Duties Under some circumsatances, the rights and duties of the involved parties of a contract may be assigned to a third party. For an assignment of contract rights to take place, it must not be prohibited in the contract; it must not involve the assignment of a personal duty; and the assignment mus not affect the other original party to the contract.
The party who is responsible for assigning his or her rights and/or duties is known as the assignor. The person who receive the rights and/or duties is referred to as the assignee. The assignee has the same rights and responsibilities as the assignor, regarding the rights and duties assigned to him or her.
For example, if Lisa is renting an apartment from Susie and the rental agreement requires Lisa to pay susie $800 each month, Susie can assign the rent to David (the assignee) to repay a debt Susie owes to David. David then has the right to collect rent from Lisa per Lisa's agreement with Susie. If agreed between Susie and David, Susie could also assign him duties under the contract with Lisa, such as the duty to maintain the apartment being rented to Lisa. In such a case, David would have all of the rights and duties that originally belonged to Susie under the original rental agreement. Lisa may be required to consent to an assignment of Susie's duties under their original contract.
The Statute of Frauds has been adopted in nearly every state of the country, requiring that certain classes of contracts be in writing to be enforceable. Contracts involving the sale of goods for $500 or more, contracts for real estate and contracts that cannot be perfomed within one year are some examples of contracts that are subject to the Statute of Frauds. Any contract that is subject to the Statute of Frauds must be in writing to be enforceable.
Complimenting the Statute of Frauds is the Parol Evidence Rule. This rule requires that when a written contract is in place between parties, the written contract must contain the entire agreement between the parties. Any amendments must be done in writing. This rule safeguards against any agreement that a party might make stating that the contract had been amended by a verbal agreement.
The Uniform Commercial Code (UCC) was drafted by the National Conference of Commissioners on Uniform State Laws and the American Law Institute to govern contracts and other commercial transctions. The code has been completely or substantially adopted by all states and was drafted to promote uniformity in contract laws among the states. Uniformity was necessary as more and more commerce began to take place between the states. The Uniform Commercial Code includes topics such as sales, bank deposits and collections, commercial paper, letters of credit, bulk transfers, warehouse receipts, bills of lading and other documents of title, investment securities, and secured transactions, including sales of accounts, contract rights and chattel paper.