The basic aspects of contract law.
It’s probably not a surprise to read that disputes arise concerning contracts all the time. Sometimes there’s a question over whether a contract was formed. Commonly, there’s a dispute over whether one side satisfied their contractual obligations. Lawyers are also often questioned about contractual ambiguities, or are confused about their contractual obligations. All of this is covered by contract law.
Because of how many legal ramifications can manifest from two parties entering into a simple contract, contract law has evolved into a complex area. But at the end of the day, there are some basic rules of contract law that are generally always applicable. Those basic rules (at least the ones I’m often asked about) are summarized below.
A contract is just an agreement between two or more people, or businesses, or companies. However, whether an “agreement” constitutes a “contract” is another story.
A contract is generally legally binding if one party makes an offer to do something in exchange for consideration from the other party, and the other party actually accepted the offer. This analysis generally boils down to whether there was an (1) offer; (2) an acceptance of that offer; and (3) consideration.
Consideration generally means that both parties receive some sort of benefit from the agreement. If consideration does not exist, then a contract is not formed from the agreement. Instead, the “offer” will generally be construed as a non-enforceable gift.
No, an offer to form a contract does not have to be in writing. If I tell the neighbor that I’ll pay him 100 bucks if he rakes my leaves, we probably formed an enforceable contract, despite not writing it down.
If your child signs a contract, the contract is most likely unenforceable. This is because minors, or anyone under the age of 18, generally lack the capacity to contract. So if, for example, your high school kid signs an expensive contract to sign up at a gym, you can probably get out of it by hiring a contract lawyer.
If you have the ability and opportunity to read a document before signing it, you’re generally bound by the terms in the document, even if you don’t read it. So if you click “agree” on a website prompt asking if you’ve read the terms and conditions, you’ve probably formed a contract.
A breach of contract is a failure to perform the contract in the manner called for in the contract. So if you pay somebody to remodel your bathroom, and they don’t actually perform the remodel, they’re probably in breach of the contract (and in a bunch of other trouble).
An option contract gives the right to one party to enter into a second contract with the other party at a later date. Contract lawyers encounter option contracts all the time. For example, sometimes tenants and landlords enter into lease with option to purchase contracts where the tenant can pay the landlord rent each month or, at any time, exercise their “option” to purchase the space they are renting.
The law generally presumes that everyone has the capacity or competency to enter into a contract. But if a party does lack capacity, then the contract is often unenforceable. For example, if your grandma with dementia signs a contract, you can probably get out of it with the help of a contract lawyer.
Working with a Contract Lawyer
A lot of lawyers handle issues involving contracts. So if you just want to hire a contract lawyer to review a document before you sign it, you won’t have to pay an arm and a leg. After all, it’s a lot cheaper to pay a contract lawyer to review something before you sign it, than to pay a contract lawyer to litigate the terms of a contract later.
If you find yourself involved in a dispute with someone else about a contract, it’s probably worth it to hire a contract lawyer assuming the contract is worth enough money. For example, if you pay someone $20,000 to perform some work on your house and they don’t finish the job, you’ll probably want to hire a contract lawyer. But if hire a mechanic for $900 and they don’t fix your car, you’ll probably want to handle the issue yourself in small claims court.
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