Andrew Ponting Done Masters of Law from Bond University.
March 11th, 2016
Contract law is one of the major branches of legal studies. Students pursuing legal studies need to know the various aspects associated with contract law in which they need to prepare an assignment case study.
Before you embark on this mission to prepare your contract law case study, learn the most important concepts of contract law here.
What is Contract Law?
A contract refers to the voluntary agreement between two or more parties and contract law refers to the whole body of laws governing it. Every written and even oral agreement involves an exchange of goods, services, money and properties. The body of law governs the agreement and also encompasses the obligations of the parties, limitations, privities, obligation and jurisdiction and its termination (Businessdictionary.com, 2016). It also incorporates the possible remedies and legal actions in case of breach of the contract by any party. Though mainly used for commercial purposes, it also holds significance for civil purposes.
Students pursuing law are required to prepare a contract law case study assignment to exhibit their knowledge in this discipline. However, most of them do not have a firm knowledge and grip over this subject and feel helpless when they are assigned a contract law case study.
Elements of Contract
Before learning contract law, the students must have a clear idea about the different element of the contract which would help them to understand the subject better.
Offer and Acceptance
Offer and Acceptance are the most important elements for any successful contract. The offer is a statement of willingness to provide the contract on specific terms by the offerer whereas acceptance refers to the unconditional assent by the offeree with the intention of accepting the contract (Lawhandbook.org.au, 2016).
Intention to create legal relations
The parties of the agreement must enter into a legal agreement to make the contract effective. It creates a legal relation between the parties as the agreement gets enforced by law. It is also important that the offerer and the offeree understand the legal implications and consequences that will follow (E-lawresources.co.uk, 2016).
To make the contract binding, it should be supported by a valuable consideration. Consideration refers to the value promised by one party to another at agreed benefits or returns. Consideration can be money, some kind of service or right. The court or any legal institution will not question the adequacy as long as consideration exists (Study.com, 2016).
The court will never interfere in any matter of dispute if one of the parties in the agreement thinks that he made a bad deal. The deciding consideration depends on the individual value and capacity of the parties. But the court can intervene if one of the parties accuses the other of influencing or forcing the former in the deal.
The parties or people who wish to enter into the legal contract must possess the legal capacity under the purview of law. As people who are mentally impaired, minors, bankrupt, prisoners and other people explicating stated cannot enter into a contract (Lawhandbook.org.au, 2016).
All the parties expressed their willingness to enter into a contract should enter it freely with a proper understanding of the contract details. They should not take their decision from external influence, intimidation, threat or false hope and misrepresentation (Contracts.uslegal.com, 2016).
To devise a strong contract law case study, the students must have a clear idea about these essential five elements. But there are many students who have several queries on different aspects of contract law. Consulting contract law case study sample or contract law case study example will help them in these circumstances.
Contract law : All Your Queries Answered
Not always a contract law case study sample is able to answer and suffice all the queries. The students have numerous questions in their mind with this vast discipline under law. Here are the most important aspects of contract law discussed in detail.
Breach of Contract
Breach of Contract refers to the legal action taken by any party when the other party does not honor the binding agreement or any of its clauses. If a person within an agreement breaks the contractual promise and does not perform the duty expected according to the contract, then it can be referred as breach of contract (Smallbusiness.findlaw.com, 2016). According to the severity and gravity of the breach, it can be classified into:
1. Minor Breaches
2. Material Breaches
3. Fundamental Breaches
While minor breaches refer to the slight violations, fundamental breaches are drastic violations ensuing legal action.
Consequences of contract breach
Firstly, both the parties can try to get into a solution through informal meetings when a dispute arises. But when they fail, the non-breaching party can seek legal remedy. This is performed through formal lawsuits and the established court system of the respective country.
The parties can also agree to hire a unanimous arbitrator who will review the contract dispute and breach and deliver a solution. But when the arbitrator too cannot provide a universally accepted remedy, it reaches the court of law.
In case of direct and proved breach of contract, the court can provide relief to the other party by awarding a remedy borne by the violator.
The violator needs to compensate the other party for the damages caused due to the breach of contract. According to the extent of the damage caused by the responsible party, the amount of compensation is decided.
2. Specific Performance
When the damages caused cannot be recovered through compensation then the court can ask the violator for a specific performance. Specific performance can be defined as any activity directed by the court that the breaching party must perform. But it is done when the compensation does not suffice the damages incurred. Generally, the court of law rules specific performance as a remedy when the product or service promised in the agreement is unique. Such as the real estate industry is referred to as unique where there cannot be a duplicate property with same facilities. But even the court will enforce this specific performance on the violator when the agreement made is fair and equitable without providing any undue advantage to any party.
3. Cancelation and Restitution
The non-breaching party can get authorization from the court of law the cancel the contract and sue for restitution when the violator get compelled to bring back the position it was before the contract was formulated.
These are the main consequences of contract breach (Contractsandagreements.co.uk, 2015). Breaching contract is a serious offence and a common reason of lawsuits.
Silence as Acceptance
Generally, silence or not responding to the offer does not get considered as a sign of acceptance. However, in some specific cases or situations, silence can be treated as acceptance. Then the question arises, when the silence of a party can be regarded as a sign of acceptance? Suppose a person X sends a packet of food to another person Y and also informs that the former expects payment for it. If person Y without agreeing eats the food then this activity can be regarded as acceptance. There are some specific requirements which when sufficed can be treated as acceptance (Legalmatch.com, 2016):
1. One party has made the offer while the other did not reject the offer
2. The offerer renders a particular service to the offeree
3. The offerer provides the service at his own free will without being influenced by any other person
4. The offerer informs the offeree as the former anticipates and expects a payment from the latter
5. The offeree has complete knowledge of all the above-mentioned events
6. The offeree should have used or accepts the service in some form which can be interpreted as acceptance under court of law.
This rule can cover other formal exchange of services other than the sale of goods. But unsolicited goods sent to people without formal acknowledgement cannot fall into this category. It would be treated as gifts.
Contract law : The basics
To make a contract viable under law it must accomplish certain requirements. It includes an offer and its acceptance, consideration, purpose, eligible parties and their consent. Other than these general rules, the associated parties, depending on the type of contract may need to fulfill additional requirements.
The term contract refers to the agreement in written form which includes the following elements. It must be verified under the court of law.
1. Introduction clauses (provisions)
2. Defining the parties and key terms
3. Statement (s) of purpose
4. Obligations of each party
5. Assurances and warranties
7. Signature block
The contract can also be seen as a process which can be typically divided into three separate stages (Nolo.com, 2016).
Both the parties (can be even more) contemplate about the prospective deal by examining the arrangement and the risks associated with it.
Phase 1: Evaluate the deal
Both the parties (can be even more) contemplate about the prospective deal by examining the arrangement and the risks associated with it.
Phase 2: Reaching the agreement
In this stage, the parties negotiate and agree on the final deal with stated agreements. Then with accordance to the consent, the written contract is finalized which will act as documentary evidence.
Phase 3: Implementation and performance
The agreement after signed by all gets implemented. All the parties must remain obligatory towards their agreement and perform accordingly. If any of the party fails to perform their task, the other party can draw them into a legal suite.
Contracts and the Law
The basic contract is formed when two separate parties enter into an agreement and obliges to perform their duties responsibly. With the term party, it can refer to any organization, person or a corporation which enters into an agreement. The agreement is legally enforceable. The main laws which govern the contract law are:
The Common Law : Common laws refer to the set of laws which are developed by judges, courts and legal tribunals which provides regard and importance to every individual case. It is based on consistent principles where similar cases are deal with a similar set of laws (Legal-dictionary.thefreedictionary.com, 2016). The most crucial aspects of contract law fall under the category of common law.
The Uniform Commercial Code: When the contracts are prepared for the exchange or sale of goods, the common law do not apply, rather it is governed by Uniform Commercial Code. It refers to the set of guidelines that which will regulate all these commercial transactions (Uniformcommercialcode.uslegal.com, 2016).
According to the nature of contract made between the parties, it can be classified into four categories.
1. Bilateral Contract: The most common form of contract involving two parties where they mutually oblige to certain promises to each other.
2. Unilateral Contract: Unilateral contract refers to those legal agreements where the only party promises a performance or a service to another while the other only accepts the offer.
3. Express Contract: An express contract refers to those mutually stated agreements where the conditions and promises are explicitly stated to each other without any documentation evidence.
4. Contracts under seal: It refers to the traditional contract which carries an authorized seal. In some countries or body of law, a contract is valid and enforceable only when it bears this seal from the court of law.
Implied Contract : Implied contract refers to the set of contract where the parties agree to the obligations and show their intent to enter into a valid contract. Implied contracts are implied in fact and also implied in law where it depends on the substance of existence.
Aleatory Contract: It refers to all those mutual agreements which get implemented for some unforeseen and uncertain event. In these contracts, both the parties take some risks. The most common example is insurance contract.
Adhesion Contract: In these contracts, one party always takes the advantage of their higher bargaining power. These are implemented by big businesses or influential people where the weaker party has very limited say in the formulation of contract. It is often referred as ‘take it or leave it’ contract.
Option Contract: An option contract is an agreement between the seller and the buyer which gives the latter an option to buy and also sell the particular product at a later date at an agreed price. Option contracts are used in the securities, commodities and real estate transactions. Though it may seem to be complicated, it is always advantageous of an option contract when the prices fluctuate.
These are the major types of contracts that apply under the state of law (Legal-dictionary.thefreedictionary.com, 2016). But it is not exhaustive; according to the conditions stated in the agreement or law applicable, contracts can also be classified as Executed Contracts, Unconscionable contracts, Void Contracts.
A construction contract refers to a legally binding agreement between two parties based on certain policies for construction, repair, alteration of buildings and different permanent structures (Definitions.uslegal.com, 2016). The construction contract can be differentiated into six types based on the promises made by the parties to each other.
1. Lump sum contract
2. Item rate contract
3. Lump sum and scheduled contract
4. Cost plus fixed fee contract
5. Cost plus percentage of cost contract
6. Special contract
Do All Construction Contracts Have to Be in Writing?
Generally, all the construction contracts are recorded in document form. Most of the countries prefer to have all the construction contracts to be in writing. Though it is not compulsory, still it is advised as it helps to prevent fraudulent claims.
Hence, in some systems, the constructions contracts come under the Stature of Frauds. It is a requirement that requires a contract to be in writing and signed by the respective concerned parties. Certain situations within the construction contracts may require a mandatory written agreement (En.wikipedia.org, 2016). Some of these situations are:
1. Construction loan financing
2. When the construction gets delayed at least by one year
3. Contract involving purchasing of expensive construction material
4. Sale of real estate and property
6. Contractors in which one party becomes a guarantor for another’s debt.
Even if the construction deed does not fall into the above-mentioned categories, a written agreement can be formulated to avoid future disputes. A written paper always helps to avoid any form of ambiguity and presents a clear picture about the obligations of the respective parties.
Construction Contracts Require Consideration - Is it true?
A construction contract always requires a consideration with it or it may not get enforceable. This consideration can be money or a promise of some service other than financial gain. But in case the contractor demands or forces the other party to pay more than the agreed amount then the consideration can be an issue in the lawsuit.
How can an International Contract Be Illegal?
Sometimes two parties belonging to two different countries enter into a contract and then find it impossible to implement and carry forward the agreement according to the present clauses. Hence, it is important for the court as well as for the concerned parties to know that the agreement they are going to enter is clearly enforceable. In a case of an international agreement, every contract needs to be filtered through various layers of legal provisions and requirements. As every country follows different legal provisions, it may happen that certain contracts which are legal in one country turns out to be invalid in another (Leritzlaw.com, 2016).
An international contract can be stated illegal if certain business operations stated is unenforceable in one nation, a change in law becomes effective in one country, the standard of the delivered service or goods do not match the expected standard.
Hence, to avoid all the complications, it is important to consider all aspects before drafting, enforcing and signing the contracts. If such a situation occurs then with the consent of all the parties involved the contract may be changed or modified to make its implementation possible.
Can an advertisement be considered as an offer?
In this age, advertisements have become a ubiquitous entity of common life where the companies try to entice their customers through published advertisements, internet, television and radio ads, billboards and many more. Every company claims to have the best products or services and try to allure people. But these advertisements are not offers (Smallbusiness.findlaw.com, 2016).
An advertisement does not suffice all the necessary requirements for a contract offer rather it can be distinguished as a preliminary negotiation or an invitation to bid. In a rational contract, both the parties must show intent, agree into certain terms, involve an exchange of consideration accompanied by a measure of acceptance by the prospective recipient. But in the case of an advertisement all these necessary elements are absent. Hence, an advertisement, a catalogue or a price quotation can be viewed as an invitation rather than an offer.
But is some extreme and exceptional cases, the advertisement can be treated as an offer when the product or service proffered is accompanied with specific details and contains some words of promise. It needs to be clear, definite and explicitly mentioned so that it keeps no opportunity for negotiation, then it can be treated as an offer.
Every business relationship involves some kind of contractual commitment within the concerned parties. Though contracts can be verbal, written or a combination of both, still mostly the business contracts are of documented agreements. A business contract is lengthy piece of document which includes:
1. Employment contracts
2. Lease agreements
3. Insurance agreements
4. Financial agreements
It is important that all the parties must make a careful consideration to every clause stated in the agreement. As due to negligence, any business contract may get terminated or result into losses for all the respective parties. A business contract may get terminated by agreement or convenience. But sometimes these contracts are ended when one party is found to breach the agreement or due to frustration of another owing to some unforeseen events (Definitions.uslegal.com, 2016). Accordingly, the concerned party can ask for compensation or book a lawsuit against the other.
Realization of accurate business contract importance
Suing the other party for breaching the contract or demanding compensation involves consumption of time, energy depletion as well as it can turn out to be expensive. So, it is important for the respective parties to make the intentions and expectations clear to each other and avoid future disputes. For example - a buyer orders 500 kg of watermelon from a seller expecting to receive fresh and nurturing watermelons with which it can prepare squash. But when he received, he found that the seller delivered older watermelons of the same amount with which he may not be able to prepare best quality squash. Disappointed buyer sued the seller founding it as a breach of contract. But the court may favor their opinion towards the seller as both the parties used a generic term while defining watermelons. If they specified the type, quality of the watermelons in the contract then this situation won’t arise!
Mortgage contracts deal with various parties where a financial institution or an enterprise lends money to another party for buying a property or real estate while putting a lien on the property being mortgaged. The whole process includes the mortgage offer, conveyance process and the deal completion (Contractsandagreements.co.uk, 2016).
As already mentioned, the Statute of Frauds carries some exceptions. The most important exception is stated as past performance doctrine through which an unwritten mortgage can be deemed enforceable even though it is unwritten. This mortgage will come up only when the money lent for the purchase of some land or other forms of real estate on which the mortgage needs to be granted. When the borrower does not follow as the mortgage deal is promised then an equivalent amount of mortgage from separate real estate can arise in favor of the lender according to the purview of law.
But even when the part performance doctrine requires an imposition of an equivalent mortgage, it is strictly advisable to get the mortgage in writing. As oral agreements can lead into complications where the parties may not recollect what has been promised to each other. But on the other hand, the written mortgage contract is a proof itself which also carries credibility under the court of law (Investopedia.com, 2016).
So, the written mortgage contracts are always in the best interests of the lender. Anyone who is considering to enter into a mortgage contract should take financial and legal advice from the experts.
8 reasons why should you avoid breaching a contract
Breaching a contract occurs when one of the party in the contract violates any clauses mentioned in the agreement and it causes harm (financial or in other form) to the other party. But as a dutiful party, no person or entity should violate the contract or breach its clauses in any form.
If any party violates the contract, it can affect the respective party in a variety of ways. They are as follows:
1. It damages the reputation of the party, their business and also as a person. For a small business owner, it can prevent it from growing any more
2. The other party will lose interest and concern to continue the business relationship with the defaulter
3. If the damages caused due to breach of contract, the other party can lead the business into a lawsuit
4. While the lawsuit continues in the court, the violator had to provide time and money there which affect the normal functioning and business
5. The court can order the defaulter to exhibit some specific performance or to honor the obligations mentioned in the contract
6. If the court finds that the violation towards the contract is momentous then the court can held the party contempt, fine and even imprison
7. The most common remedy of these cases, the violator would be asked to do pay for all the damages caused as compensation. The amount of money is determined according to the extent and equivalent to damages caused by the violator
8. In some exceptions, the violator can also be ordered by the court to pay for the punitive damages caused to the other party which can make the complete turnaround for the company impossible.
Contracts Which Need to Be in Writing
The English law of 1677 explaining the Statute of Frauds defines the scope of contract requirements. It clearly elucidates which contracts needs a proper documentation. Though revised several times, the core of this law remains the same. The following types of agreement contracts need to be documented to make it enforceable:
1. Contract sales in real estate
2. Agreement to pay someone else’s debt
3. Any contract which will take more than a year to get implemented
4. Contracts will carry a certain amount of money promised in the agreement
5. Contracts which will last longer than the parties involved
6. A contract paper to sell bonds or stock of a company
7. A transfer of contract in case of death of any person
Apart from the above-mentioned cases, depending on the country and purview of law, the parties may be required to document their agreement in certain situations as it demands (Avalaunchmedia.com, 2016).
Importance of Signature in Contract
The signature of all the concerned parties at the end of the agreement paper implies that the contract is agreed between them. But in an authorized contract paper, there are some guidelines that need to be followed with regard to signatures (Legalmatch.com, 2016).
Handwritten, photocopied, electronic pen, stamped, engraved all forms of signatures are allowed in contracts with the exception of certain circumstances. But the handwritten signatures must be done with pen and not pencil as the latter may get erased or smudged. In some countries, electronic and email signatures are also valid.
The party can also authorize another person who will sign the contract on his/ her behalf. It can happen through the power of attorney or some specific corporate management structure. Nearest family members of the concerned party can also sign the contract without authorization.
Some major contract papers require the presence of witnesses during the signing who, with their signatures in the same document would verify the contract as authentic. The number of witnesses can vary from country to country or with importance of the agreement.
Offer: Things to Remember
It is important to have a clear idea about the scope of an offer, one of the most essential parts of the contract law. There are four important segments that need to be remembered (Lawhandbook.org.au, 2016).
Every contract serves some specific purpose. It can be the sale of goods, promise of providing a service or a pledge of doing something (even refraining from doing something)
2. Terms of an Agreement
In the agreement, it should include enough details and clauses of the parties and the obligations that they are required to perform. It should include the material terms which generally includes prices, subject, services rendered, timeframe for delivery that are also considered as material terms. Terms of the agreement also include specific clauses with regard to any breach of contract.
3. Valuable Consideration
The consideration promised by the offeree to the offerer must be with accordance to the expectations and affordability of both the parties. Even after the implementation of the agreement, the consideration can change or alter as agreed by all the parties involved in it.
All the parties must have legal authority and capability to carry out the offer and hence the agreement. All the people involved must have attained 18 years of age and should be mentally sound.
Remedies in Law
For every contract breach, there are different types of monetary remedies. 1. Compensatory Breach: This is the most common breach of contract remedy. The party which breached the contract is ordered by the court of law to pay equivalent compensation to the affected party. 2. Restitution: It is a gain-based recovery ordered by the court as a remedy where the violator needs to pay back the affected party the amount value of the concerned product, service or property. 3. Punitive Damages: If something morally reprehensible happens in a particular case, then the violator needs to pay a heavy amount of money as a punishment.
The court also may ask the breaching party to pay for the nominal damages or liquidated damages, if caused (Smallbusiness.findlaw.com, 2016).
The aggrieved party can pursue a lawsuit in certain situations if it feels cheated or influenced in the contract (Law.freeadvice.com, 2016). The defenses of the affected party can be based on these three conditions:
1. Defense to duress; as the party need to show that the agreement of the contract was induced by threats and not by willingness. The threat compelled the person to assent to the contract leaving no other alternative. Blackmail is an example of duress.
2. Undue Influence; when the violator persuades the other party immorally and improperly to agree in an unfair contract. The violator may be known or stranger to the affected party as the latter blindly believes and sways their inclination.
3. Defense of misrepresentation; one of the party bargains with the other through the method of deception and false statements. It can conceal of facts, misrepresenting information or deliberate misguidance.
As all your queries have been sorted, you can have a look at the different contract law case studies sample examples. It will help you to gain knowledge and expertise in this discipline.
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