Describe an example of a contract that you or someone you know entered into (e.g., rental agreement, cell phone agreement, property purchase or lease [e.g., car, home, furniture, etc.], home or car repair, or student loan agreement). In your description, be sure to provide specific contractual details including parties and subject matter involved.
In general terms, a contract can be said to be an agreement between two or more parties where the parties are known as parties to the contract. The agreement creates rights and obligations under the common law and under the contractual statutes applicable in the USA and its states. The obligations created through the agreement require a party to the contract to perform something or refrain from performing something ("Uniform Commercial Code", 2016). In cases where the contractual obligations are not fulfilled, legislative and judicial remedies are available to the party aggrieved or suffering a loss. Contracts have become indispensable in the business fraternity throughout the world. However, the validity of a contract has always been questioned in matters of dispute. Validity of a contract depends on a few essential features that have to be fulfilled by the contracting parties in order to make such a contract enforceable under the eyes of the prevailing law. The purpose of this assignment is to bring out the essential elements of a valid contract and the consequences of a breach of contractual terms along with an explanation of the remedies available to the aggrieved party.
Essential Elements of Contract
The essential elements of a valid contract are as follows:
Offer and Acceptance
Offer is said to be a promise or a proposal that is made to a party to perform or refrain from performing something in exchange of something that has value. It is a definite promise to be bound by the terms of the contract that are proposed. The contractual obligations come into existence once the terms have been accepted by the other part to which the offer was made ("Principles of American Contract Law", 2016). Acceptance occurs when the offeree accepts the terms of the offer and such acceptance shall be unequivocal. Acceptance shall be communicated to the offeror by an act or a statement.
Consideration is the price that is paid by the offeror to the offeree against the performance of the stipulated promise. The consideration must be something of value to the offeree and not necessarily money.
Intention to Create Legal Relations
Formation of an agreement requires an intention of the parties to create a legal relationship between them ("Contract Law", 2016). Presence of consideration is a proof that a legal relationship exists. It is a consideration for the sacrifice made by the offeree.
A person shall be legally competent to enter into a contract. In other words, the person shall not be a minor, of unsound mind (declared by a competent court) or intoxicated. A person is said to be a minor if such a person is below the age of 18 or 21 (depends on the state regulations and jurisdictions) ("Contract Law", 2016).
Mutuality of Obligation
Mutuality of Obligation is a doctrine under which both the parties to a contract are required to perform their contractual obligations otherwise the court may hold such a contract to be without any contractual obligations for both the parties involved. Contractual obligations are closely related to consideration. Contracts not fulfilling this element are mostly invalidated by the courts.
Contracts may be written or oral and both are considered to be valid under the law. However, under the State of Frauds, certain types of contracts are required to be reduced to writing for them to be valid and enforceable under the law ("Writing Requirement - Elements of a Contract - Contracts", 2016).
Breach and Remedies
When a party is unable to perform their contractual obligation, there is said to be a breach of contractual terms. The aggrieved party suffering a loss due to such a breach may sue the other party and claim damages. A few reliefs can be claimed under the prevailing legislative structure as follows:
Monetary Damage: Monetary damages may be paid to the aggrieved against the losses faced.
Compensation: Compensation can be paid by the breaching party to compensate the promise. This puts the parties back to a position where it will be assumed that the breach did not take place ("Contracts - Contracts", 2016).
Specific Relied: After considering the circumstances of the case, the court may order the breaching party to perform a portion of the contract as deemed fit by the court.
Punitive Damages & Nominal Damages: Punitive damages are additional monetary penalties imposed by the court. Nominal damages are damages that are paid where it is not possible to determine the quantum of damage caused ("Contract Law", 2016).
The sample agreement is an agreement for sale and purchase of a real estate property. The buyer of the property is Mr. John Smith and the seller is Mr. Mike Cooper. The contract contains the details of the property. Payment is to be made through an escrow account and the contract stipulates the details of the consideration and the mode of payment. The contract stipulates a period of sixty days regarding contingencies of closing. The main subject matter of contract revolves around the manner in which the transaction is to be executed.
Chapter 18: Contract Law. (2016). Businesslawbasics.com. Retrieved 8 June 2016, from https://www.businesslawbasics.com/chapter-18-contract-law
Contract Law. (2016). Hg.org. Retrieved 8 June 2016, from https://www.hg.org/contract-law.html
Contracts - Contracts. (2016). Contracts.uslegal.com. Retrieved 8 June 2016, from https://contracts.uslegal.com/
Principles Of American Contract Law. (2016). www3.uninsubria.it. Retrieved 8 June 2016, from https://www3.uninsubria.it/uninsubria/allegati/pagine/1438/Prof_Mootz.pdf
Uniform Commercial Code. (2016). LII / Legal Information Institute. Retrieved 8 June 2016, from https://www.law.cornell.edu/ucc
Writing Requirement - Elements of a Contract - Contracts. (2016). Contracts.uslegal.com. Retrieved 8 June 2016, from https://contracts.uslegal.com/elements-of-a-contract/writing-requirement/