Contract. Introduction The definition of a contract Contract v. agreement Requirements for a valid...
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Transcript of Contract. Introduction The definition of a contract Contract v. agreement Requirements for a valid...
Contract
Introduction
The definition of a contract Contract v. agreement Requirements for a valid contract Void and voidable contracts Unenforceable contracts Breach of contract
Contract
A legally binding agreement between two or more parties which the court will enforce
Agreement – an exchange of promises; not every agreement is a contract
Contract – a legally enforceable agreement – the agreement that generates rights and obligations that may be enforced in the courts
Contract and agreement
The law does two things in transforming an agreement into an enforceable contract:
1. It determines whether the contract meets all the requirements of the law
2. The law, and not the contracting parties, has the final say on whether there is a contractual obligation and what the scope of the obligation is
Express and implied terms
Express terms: what the parties said or wrote Implied terms: terms that have not been
agreed by the parties, but the law makes them part of the contract anyway
Requirements for a valid contract
1. The parties must possess legal capacity to enter contract2. One party must have made a binding offer, and the other one
has to accept it3. The contract must be supported by consideration4. The resulting agreement must have been a genuine one5. Some contracts must be made in a particular form6. The object of the contract must not be disapproved of by the
law
Legal capacity
Parties must be competent Natural persons: age of majority (consent),
mental capacity Legal persons: properly registered
companies
Offer and acceptance
One party must have made a binding offer to the other, and the offer must have been accepted
Such an offer must be binding; parties must accept legal consequences.
In legal terminology, an offer is a statement of willingness by the offeror to enter into a contract if the other party accepts all the terms of the offer
Consideration
Every contract must be supported by consideration (the court only enforces a bargain, not a one-sided promise).
The doctrine of consideration: any promise not supported by consideration is unenforceable.
If the party that makes a promise gets nothing in return, the contract is unenforceable: each party must benefit.
Genuine agreement
The resulting agreement must have been a genuine one
The contract must reflect the actual exchange of promises, not a false one
Contracts in particular form
In certain exceptional cases, the contract must have been made in a particular form
- Marriage- Contracts which must be in writing: a transfer of
shares, an assignment of copyright, a contract to pay someone else’s debt...
- To enforce one of these contracts, a claimant must produce a writing signed by the other party that contains evidence of the contract
The object of the contract
The object of a contract must be approved of by the law
- f.e. “to take a contract on the rival” is not a contract in law
Such an agreement is not legally enforceable
Void contracts
Any contract that lacks one of essential requirements
It does not give rise to any legal rights or duties
It does not exist as far as the law is concerned
Voidable contracts
Valid to start with, but may be avoided at the option of one of the parties
A contract affected by a flaw (fraud, duress, misrepresentation, undue influence)
F.e. The doctrine of duress allows a party to get out of a contract when he was forced to enter into contract by threats from the other party
Unenforceable contracts
Contract that is valid in all respects, but cannot be enforced by an action in law because the party wishing to enforce it lacks some kind of evidence (evidence in writing)
Breach of contract
Contract typically creates an obligation to do or avoid doing something, or to pay a sum of money
Breach of contract is the refusal or failure by a party to a contract to perform an obligation imposed on them under the contract
If one party does not do what they have promised to do, they are in breach of contract
The injured party is entitled to a legal remedy
Remedies for breach of contract
Equitable remedies: quantum meruit, ‘as much as he deserves’ –
for partial performance; Specific performance – an order to make a
party perform his obligatons under the contract
Injunction – a court order to stop someone breaching a term of the contract
Damages
The aim of damages in contract law is to put the claimant in the position he would have been in if the contract had been performed properly
Damages are designed to compensate for the loss one has suffered
Expectation damages Unliquidated damages – the court decides how much
will be awarded in damages Liquidated damages – parties decide in advance
Vocabulary
Binding agreement – obvezujući sporazumContracting parties – ugovorne straneNatural person – fizička osobaLegal person – pravna osobaValid contract – valjani ugovorVoid contract – ništav (ništetan) ugovorVoidable contract – pobojan (poništiv) ugovorCopyright – autorsko pravoBreach of contract – raskid ugovora
Vocabulary revision
Fill in the blanks with the most appropriate words from the list below:
consideration, sue, obligation, illegal, breach, fraud, mutual, capacity
A contract is an agreement that creates a binding _________________ upon the parties. The essentials of a contract are as follows: _________________ agreement, a legal ________________, which need not be financial; parties who have legal ________________ to make a contract; absence of __________ or duress; and a subject matter that is not __________________ or against public policy.
In case of a _____________ of contract, the injured party may go to court to __________ for damages, for injunction, or for specific performance if financial compensation would not compensate for the breach.
Answer key
A contract is an agreement that creates a binding obligation upon the parties. The essentials of a contract are as follows: mutual agreement, a legal consideration, which need not be financial; parties who have legal capacity to make a contract; absence of fraud or duress; and a subject matter that is not illegal or against public policy.
In case of a breach of contract, the injured party may go to court to sue for damages, for injunction, or for specific performance if financial compensation would not compensate for the breach.