Before you read
Discuss these questions:
1. What do know about contracts?
2. Can we define a contract as an exchange of promises?
3. What types of contracts are used in every days life?
Key vocabulary:
to seek a remedy, breach of contract, contracting parties, inducement, tangible property, to incur legal duties, consideration, subject matter, to seek a remedy, unilateral / bilateral, valid, voidable, void,express/ implied/ quasi contracts,formal/ simple contracts,executed/ executory contracts.
Read and translate the text:
What is a Contract
A contract is an agreement, which is enforced by law. This agreement normally results from an exchange of promises. The contract creates legal obligations for both parties. Thus, there is a relationships between the rights (what one is entitled to) and the duties (what one must do) of the contracting parties. A contract gives each individual a legal duty to the other parties,but each individual also has a right to seek a remedy for breach of contract (failure of the other party to fulfill the legal duty). In brief, to be enforceable a contract must have:
Competent parties;
Legal subject matter;
Legal consideration;
Mutuality of agreement;
Mutuality of obligations.
The absence of any of these elements may render a contract unenforceable.
Competent Parties. In order to demonstrate the competence necessary to render a contract enforceable, all parties to a contract must have the ability to understand and agree to the terms of the contract.
Subject matter. The subject matter of a contract must be legal, e.g. the sale or supply of goods, providing different services and so on. Thus, one cannot form a legal contract to have a third party killed.
Legal Consideration. Consideration is the inducement to enter a contract. Although the consideration for entering a contract is often reduced to an amount of money, it can also be a right, tangible property, benefit, or some other interest.
Mutuality of Agreement. Mutuality of agreement is a meeting of the minds of all parties to a contract.It means that the parties understand and share the common purpose that certain rights or benefits will be transferred and a mutual obligation incurred.
Mutuality of Obligation. Mutuality of Obligation is especially important when it comes to a question of action for breach of contract, for unless both parties to a contract are bound, neither is bound. The parties must incur legal duties before a contract is enforceable.
Contracts can be classified as unilateral or bilateral, according to whether one or both parties make a promise. Contracts also can be classified according to enforceability as valid, voidable and void or unenforceability. Its possible to classify contracts by methods of creation, formality and extent of performance.
Method of Creation
The way a contract comes into being gives some idea of its nature. Thus, there are express contracts, implied contracts, and quasi contracts.
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Express contracts. Inan express contract, the agreement is stated in wordswritten or spoken.
Implied contracts. In an implied contract, the agreement is not stated in words. Instead, the intent of the parties is shown by their conduct and by the surrounding circumstances. For example, a schoolboy buys some fruit juice in the high school cafeteria by inserting coins into a vending machine.
Quasi contracts. In a quasi contract, the parties are bound as though there were a valid contract even though technically there is none. For example, a doctor may voluntarily give first aid to a person injured in an accident. There is no agreement. Yet the doctor may submit a bill and collect a charge reasonable for such a professional service.
Formality
A few contracts must meet strict requirements as toformality. They are called formal contracts. Most need not meet such requirements. They are called simple contracts.
Formal contracts. A formal contract is a written contract that must be in some special form to be enforceable. Examples are commercial paper and contracts under seal. Commercial paper, such as an ordinary check, must meet certain requirements to be valid. A contract under seal is one with a seal attached or with a similar impression made on the paper. Seals served to validate agreements years ago, when few people could read or write. Today, in most states, the legal effect of the seal on contracts has been limited or ended.
Simple contracts. A contract that is not formal is a simple contract. This is true whether the contract is oral, written, or based on conduct.
Extent of Performance
Contracts can be classified as either executed or executory, according to whether or not they have been completed. Many contracts are performed almost immediately; others require days, months, or years to complete. Many life insurance contracts are not completed for decades.
Executed contracts. An executed contractis one that has been fully performed. Both parties have done all they promised to do.
Executory contracts. An executory contract is one that has not been fully performed. Something as agreed upon remains to be done by one or both of the parties.
Notes:
valid contract - / ;
voidable contract - ;
void contract -
express contract - ( )
contract under seal -
implied contract - , ;
quasi contract -
formal contract - / ;
simple contract - ( );
executed contract -
executory contract -
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