Law of Contracts

contract

contract, in law, a promise, enforceable by law, to perform or to refrain from performing some specified act. In a general sense, all civil obligations fall under tort or contract law. Torts are usually characterized as violations of duties that are imposed on all persons and that have been established entirely by law. In contracts, on the other hand, the parties determine, at least in part, what their obligations to one another will be. Special types of contracts are given separate articles, e.g., negotiable instrument, insurance, and deed.

Criteria for Enforcement

For a contract to be valid, both parties must indicate that they agree to its terms. This is accomplished when one party submits an offer that the other accepts within a reasonable time or a stipulated period. If the terms of the acceptance vary from those of the offer, that "acceptance" legally constitutes a counteroffer; the original offering party may then accept it or reject it. At any time prior to acceptance, the offer may be rescinded on notice unless the offering party is bound by a separate option contract not to withdraw. Only those terms expressed in the contract can be enforced; secret intentions are not recognized. For a contract to be binding, it must not have an immoral or a criminal purpose or be against public policy.

Other criteria for the enforcement of contracts have varied. In the earliest type of enforceable promises, it was the form of the contract (e.g., a sealed instrument) or the ceremony accompanying its execution that marked the essence of the transaction; contracts not sealed or not dignified by ceremonies held a lesser status, and were therefore not always enforceable. The importance of promises in commercial and industrial society produced a new criterion, and generally a promise is now enforceable only if it is made in exchange for consideration, i.e., a payment, for some action, or for another promise. In some jurisdictions, statutes have made certain promises enforceable without consideration, e.g., promises to pay debts barred by the statute of limitations. To be enforceable, most contracts must be in writing, to comply with the Statute of Frauds (see Frauds, Statute of).

Since a contract is an agreement, it may be made only by parties with the capacity to reach an understanding. Therefore, individuals suffering from severe mental illness are unable to make binding contracts. Until the late 19th cent., married women were also without contractual capacity, because at common law they were considered the creatures of their husbands and without wills of their own (see husband and wife); this disability has been removed by statute universally. Minors are not bound by their contracts, but they are responsible for the value of goods received in contracts made for necessities of life. Otherwise, a minor may denounce his contracts at any time and on attaining majority may elect whether to affirm or repudiate them (see age of consent).

A contract must also be the uncoerced agreement of the parties; thus, if it is procured by duress or fraud it is void. A contract can be unenforceable if it is so one-sided as to be found unconscionable, where the terms are unreasonably favorable to one party; often the material that constitutes unconscionability is buried in fine print or expressed in obfuscatory jargon. Adhesion contracts, which afford no occasion for the weaker party to bargain over their terms, are often offered to purchasers of consumer goods and services, but are not necessarily unconscionable.

Termination of Contracts

While a contract is still wholly or partly unperformed it is termed executory; contracts may terminate, however, in ways other than by being fully executed. If the object of the contract becomes impossible or unlawful, if the parties make a novation (a new superseding agreement), or if the death of one party prevents that party from rendering personal services he or she had agreed to perform, the contract is terminated. The injured party may also treat the contract as a nullity if the other party refuses to perform. The law provides several remedies for breach of contract. The most usual is money damages for the loss incurred. In cases where some action other than the payment of money was contracted for, a court may grant the plaintiff an injunction ordering specific performance. If one party is unjustly enriched by a contract that he or she then repudiates legally, restitution may be required. A typical example of this is ordering a minor who revokes a contract to restore the things of value that were obtained.

Bibliography

See studies by E. J. Murphy and R. E. Speidel (1984); H. Collins (1986); R. B. Summers and R. A. Hillman (1987); P. S. Atiyah (1988).

The Columbia Encyclopedia, 6th ed. Copyright© 2014, The Columbia University Press.

Selected full-text books and articles on this topic

Calculating Promises: The Emergence of Modern American Contract Doctrine
Roy Kreitner.
Stanford University Press, 2007
Boilerplate: The Fine Print, Vanishing Rights, and the Rule of Law
Margaret Jane Radin.
Princeton University Press, 2012
Just Exchange: A Theory of Contracts
F. H. Buckley.
Routledge, 2005
Contract Theory: The Evolution of Contractual Intent
Larry A. DiMatteo.
Michigan State University Press, 1998
Economic Analysis of Contract Law after Three Decades: Success or Failure?
Posner, Eric A.
The Yale Law Journal, Vol. 112, No. 4, January 2003
Contract Theory and the Limits of Contract Law
Schwartz, Alan; Scott, Robert E.
The Yale Law Journal, Vol. 113, No. 3, December 2003
The Limits of Voluntariness in Contract
Robertson, Andrew.
Melbourne University Law Review, Vol. 29, No. 1, April 2005
PEER-REVIEWED PERIODICAL
Peer-reviewed publications on Questia are publications containing articles which were subject to evaluation for accuracy and substance by professional peers of the article's author(s).
Contract Interpretation Redux
Schwartz, Alan; Scott, Robert E.
The Yale Law Journal, Vol. 119, No. 5, March 2010
The Secrecy Interest in Contract Law
Ben-Shahar, Omri; Bernstein, Lisa.
The Yale Law Journal, Vol. 109, No. 8, June 2000
"Freedom Of" or "Freedom from"? the Enforceability of Contracts and the Integrity of the LLC
Bacon, Leigh A.
Duke Law Journal, Vol. 50, No. 4, February 2001
Contract Law and Morality
Henry Mather.
Greenwood Press, 1999
Good Faith and Fault in Contract Law
Jack E. Beatson; Daniel E. Friedmann.
Clarendon Press, 1997
Regulating Contracts
Hugh Collins.
Oxford University Press, 1999
Binding Promises: The Late 20th Century Reformation of Contract Law
W. David Slawson.
Princeton University Press, 1996
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