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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 contract is an agreement reached after sufficient consideration to do, or refrain from doing, some legal action. A contract is considered valid when two or more parties with capacity make an agreement involving valid consideration to do or to refrain from doing some lawful act. If these elements exist, the contract is valid. If one or more or these necessary elements is missing, the contract is void or voidable. In other words, it is not a true contract and therefore cannot be enforced.

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 three basic components of a contract are the offer, the consideration and the acceptance. The following are six elements that are to help to determine whether or not the basic components ar present and meet legal criteria for a valid contract:

  1. All parties must have capacity to enter the contract.

  2. An offer must be made.

  3. Consideration must be exchanged.

  4. The parties must be in mutual agreement.

  5. The contract's object and purpose must be legal.

  6. The form of the contract must meet the legal requirements.
Capacity to Contract
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.

Mutual Agreement
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.

Consideration
An exchange of consideraton must be included in any valid contract. Between the parties something of real value must be exchanged, whether it can be cash, tangible objects, the performance of an act, an agreement to refrain from performance of an act that the party has the right to perform or a promise of future consideration. The difference betweenthe exchange of consideration and a unilateral promise is that a promise to do something without an exchange of consideration is not an enforceable contract. For example, if Joe tells Jack that he will give him a ride to work, Joe has made a promise. If, on the other hand, Joe tells Jack he will give him a ride to work in excjange for parking money, consideration has been exchanged.

A legal Object and Purpose
The object and purpose must be legal for a contract to be legal. If its purpose is illegal because of statue of common law, the contract may be void. If the formation or the performance of a contract is illegal, resulting in a crime and/or tort, or opposing public policy or interest, the contract is usually considered void. For example, any contract that involves purchasing a stolen item or an illegal drug, or involves fraud or harming someone would be considered void.

Breach of Contract
When a party fails to perform the stated obligation in a contract, the party is said to be in breach of contract. The injured party has several recources. The injured party may rescind the contract or release the the other party from the obligations stated in the contract. Also, the parties may agree on novation. Any of these three resolutions may be enacted without litigation.

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.

Contract Formalities
All contract are subject to stationary formalities, such as the Statute of Frauds and the parol evidence rule. For a contract to be valid and enforceable, both of these statutory formalities must be followed.

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.

 
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