Contracts Law Overview

Contracts may appear to be lengthy and intimidating, but a contract is as simple as two or more people making a promise to each other that is enforceable by law. The obligations we create in contracts can relate to the performance of a service like landscaping, real estate, sale of goods, or doing something in the future.

Contracts are a part of everyday life, so it is essential to understand how contracts are governed, formed, and broken. If you find yourself in a contract that seems unfair or improper, you may have a legal defense to prevent its enforcement. If another party breaches your contract, you may be able to recover damages in a civil suit.

What Makes a Contract?

A valid and enforceable contract should have the following elements:

  • Meeting of the minds: Two or more parties come together to create a binding agreement or promises to each other
  • Offer: One party proposes definite terms that they intend to be bound to
  • Acceptance: The other party accepts those exact terms
  • Consideration: Both parties give and receive something of value in return

All parties must be competent or have the legal capacity to enter into the agreement, except for contracts for necessities like clothing, food, and shelter. Minors usually lack this capacity, though some states allow minors to enter contracts for bank accounts. The competence of adults with mental health issues depends on how the state tests capacity.

Which Law Governs Contracts?

Contract claims fall under civil law, which means you may file a lawsuit against the other party in the contract to correct a wrongdoing and possibly recover damages. Contract lawsuits require a “preponderance of evidence” in court, meaning the evidence needs to show a judge or jury that your claim is more likely true than not true.

Commonly, the state where the contract was created will serve as the jurisdiction where you can file any claims. However, some contracts may have a “choice of law” provision that specifies the jurisdiction or state where you can file a lawsuit if a dispute arises. Since contract law varies by state, it is important to remember your outcome may differ depending on where you can bring your claim.

Additionally, the type of obligation created in the contract dictates the kind of law that is applicable to a contract. When dealing with services or land, the governing law is state common law developed through prior court decisions. When dealing with the sale of goods, most states have adopted the Uniform Commercial Code as the governing law.

Different Types Of Contracts

There are a number of forms a contract may take.

Express contracts are communicated by written or oral terms. Most states require proof to demonstrate the creation of an oral contract.

Implied contracts are based on the situation and the conduct of the parties. Since no promise has been explicitly said in words, this typically occurs when two parties begin to act in a way that shows they intend to create an obligation to one another.

unilateral contract is created when one party accepts an offer by simply performing the requested task, like when you pay someone to wash your car and pay them after they finish.

bilateral contract is formed when one party promises to perform an action in response to another person’s action, like when you order a meal at a restaurant. When you sit at the table and place an order from the menu, the restaurant will cook your food expecting to be paid at the conclusion of your meal.

With an option contract, you don’t have to sign on the dotted line immediately. This type of contract allows you to enter into the contract at a later date, and may have a cut-off date by which you need to make your decision.

An adhesion contract, sometimes referred to as a boilerplate contract, typically appears when registering for a service, signing a lease, or making a purchase online through a pre-structured form. The contract is already drawn up, leaving you with the choice to either agree to the terms or walk away empty handed.

When Will A Contract Not Be Enforced?

Usually, a contract will be enforced as long as it is reasonable. There are some instances or legal defenses that may be available to you to prevent its enforcement.

  • Unconscionability: The contract is unfair and heavily favors the other party
  • Duress: You are forced to agree to a contract because of a serious threat and you have no reasonable alternative other than agreeing to the terms
  • Undue influence: You were persuaded or pressured into the contract because of the relationship you have with the other party
  • Misrepresentation: The other party made a false statement or concealed a fact
  • Mistake: Both parties made a mistake about the basis of the contract at the time the contract was formed
  • Lack of capacity: One party is a minor or an adult without the mental capacity
  • Illegality: The contract involves illegal or immoral conduct
  • Frustration of purpose: An unforeseen event occurs that undermines the primary reason for entering into a contract

What Happens When A Contract Is Breached?

breach of contract claim may arise if a party goes back on their promise, fails to perform their obligations, violates a material term, or interferes with the performance of the contract. If you and the other party are unable to fix the issue through arbitration, you may consider filing a lawsuit. There are three main remedies available are:

  • Specific performance: Forces the other party to fulfill their promise to you
  • Damages: Provides monetary compensation for your injury; however, the type and amount of damages you may receive varies by state
  • Cancellation and restitution: Cancels the contract and allows you to sue for restitution if you have upheld part or all of your contractual obligations

Speak to an Experienced Contracts Attorney Today

This article is intended to be helpful and informative. But even common legal matters can become complex and stressful. A qualified contracts lawyer can address your particular legal needs, explain the law, and represent you in court. Take the first step now and contact a local contracts attorney to discuss your specific legal situation.

Your Next Step:

Enter your location below to get connected with a qualified Contracts attorney today.

Related Topics In This Section