Contract is legally binding–everyone knows it–it is an exchange of promises or agreement between parties that the law will enforce. If in any case an incidental or sudden termination of the contract is required, a breach of it is also recognized by law and remedies can be provided. Written contracts are required in renting or leasing a building, buying properties, goods, or services but some contracts are made orally like buying a jewelry or a food. Contracts are promises that the law will enforce as the law provides remedies if a promise is breached or recognizes the performance of a promise as a duty. A promise must be exchanged for adequate considerations like a benefit or detriment that a party receives, which reasonably and fairly induces them to make the contract legally binding.
When does a contract become valid? The offer and acceptance are the beginning steps in the contract process when one party makes an offer and another party accepts the terms and conditions of this offer, then an agreement has been reached. At this point, the only the thing needed to become a valid contract is what’s known as the consideration. The key components that comprise a legally binding contract are the agreement and consideration in which the former involves a meeting of the minds where the parties of a contract agree upon the terms of the contract. For the contract to be valid, this agreement must include some form of consideration, meaning that the contracting parties must receive something of value from the contract. The agreement aspect of a contract is a process that involves one party making an offer to the other parties involved. The offer should clearly specify any terms and conditions that are pertinent to making an agreement, including what is expected from each party and what each will receive in return as consideration for the contract.
When the responding party rejects and amends the offer, it becomes a “counter-offer.” This starts a process of negotiation where each party submits counter-offers to one another until they reach an agreement. Once an offer has been accepted and an agreement reached, then both parties have made a formal contract. Contracts may be either oral or written, yet a written contract leaves less possibility for misunderstandings and gives you a better chance of recourse should the other contracting parties breach the terms and conditions of the contract. A breach of contract is failure to perform as stated in the contract. There are many ways to remedy a breached contract assuming it has not been waived. Typically, the remedy for breach of contract is an award of money damages.
4 types of damages–(1) compensatory damages: given to the party which was detrimented by the breach of contract; with compensatory damages, there are two kinds of branches, consequential damages and direct damages, (2) nominal damages: include minimal dollar amounts (often sought to obtain a legal record of who was at fault), (3) punitive damages: used to punish the party at fault; these are not usually given regarding contracts but possible in a fraudulent situation, (4) exemplary damages: used to make an example of the party at fault to discourage similar crimes; fines can be multiplied by factors of up to 50 for such damages.
Whenever you have a contract that requires completing something, and a person informs you that it will not be completed before they begin your project, this is referred to anticipatory breach. When it is either not possible or desirable to award damages measured in that way, a court may award money damages designed to restore the injured party to the economic position that he or she had occupied at the time the contract was entered (known as the “reliance measure”), or designed to prevent the breaching party from being unjustly enriched (”restitution”).
Many contracts provide that all disputes arising thereunder will be resolved by arbitration, rather than litigated in courts. Customer claims against securities brokers and dealers are almost always resolved by arbitration because securities dealers are required, under the terms of their membership in self-regulatory organizations such as the NASD or NYSE, require use of brokerage agreements that contain arbitration clauses. Privity of contract–means that only those involved in striking a bargain would have standing to enforce it. In general this is still the case, only parties to a contract may sue for the breach of a contract, although in recent years the rule of privity has eroded somewhat and third party beneficiaries have been allowed to recover damages for breaches of contracts they were not party to.
Contract Theory–is the body of legal theory that addresses normative and conceptual questions in contract law. One of the most important questions asked in contract theory is why contracts are enforced. One prominent answer to this question focuses on the economic benefits of enforcing bargains. Another approach, associated with Charles Fried, maintains that the purpose of contract law is to enforce promises. This theory is developed in Fried’s book, Contract as Promise. Other approaches to contract theory are found in the writings of legal realists and critical legal studies theorists.
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