Contract Law

CONTRACT LAW

Contract law

In a brief explanation, contract law can be defined as a binding agreement with specific terms between two or more persons or parties to do something in return for a valuable benefit known as consideration. In addition, contract law explains the business arrangement for the supply of goods and services at a fixed price. A contract also means that being willing to be legally bound to your side of that agreement, as long as the other party is bound to theirs.

Examples of contract

• Employment agreement
• Credit card agreement
• Agreement when you sign up an e-mail account or a Facebook account
• An agreement upon purchasing goods from someone
• Tenant agreement

Requirements for a contract

• Offer + Acceptance = Agreement
• Consideration
• Intention to create legal relations

Offer

An offer refers to an invitation to make a contract. In example putting a price tag on an item in a store. Moreover, offers can go back and forth.

Bilateral and Unilateral Contract

A bilateral contract requires two promises and two performances. Whereas, a unilateral contract a contains a promise by only one person to do promise by only one person to do something, if and when the other something, if and when the other party performs some act.party performs some act.

How Parties Reach Agreement

Acceptance

An express act or implication by conduct that manifests assent to the terms of an offer in a manner invited or required by the offer so that a binding contract is formed.The point at which one party agrees to the other parties offer. For example, when you are signing a tenancy agreement.

Consideration

In contract law consideration is concerned with the bargain of the contract. A contract is based on an exchange of promises. Each party to a contract must be both a promisor and a promisee. They must each receive a benefit and each suffer a detriment. This benefit or detriment is referred to as consideration.

Express terms

Express terms can be defined as the provision in a contract that is clearly, directly and conspicuously communicated in written spoken words. Express terms are terms that have been precisely mentioned and agreed by both parties at the time the contract is made. They can either be oral or in writing. 

Implied terms

In a brief explanation, implied terms can be contemplated as provision in a contract that is not directly stated in written or spoken words but is introduced into the contract by the courts as necessary to give effect to the obvious intentions of the contracting parties, or by a statute.

Exemption clause

An exemption clause is an agreement in a contract that imposes that a party is limited or excluded from liability. Exemption clauses can be used unfairly which may bring disadvantages to a party. Therefore, there have been changes to the law to create more fairness and to limit the use of clauses. In a simple definition, exemption clause is a provision in a contract under which one party (usually the one which drafted the agreement) is protected from being sued by the other party for damages, loss and negligence or its liabilities are severely restricted. For example, in banks they use exemption clauses in documents of foreign trade where they accept no liability for any injury to the customer unless it can be proven to have been the direct result of their negligence or mistake. The courts, however, look at this clause with disfavor and often interpret it narrowly to see if it is reasonable in the circumstances.

Discharge of Contract

What is Discharge of Contract ? 
Discharge of contract means the termination of a contractual relationship between parties. A contract is said to be discharged when it ceases to operate and when the rights & obligation created by it come to an end. In example, Two parties A and B make a contract to build a hospital. A is the municipal authority of the city and B is a construction company. Due to some reasons the contract get discharged. Then the both parties are free from the obligations of contract and the rights & obligations of the parties come to an end.

How a contract gets discharged?

• Performance

• Frustration

• Breach 

• Agreement.

Performance

A person who performs a contract in accordance with its terms is discharged from any further obligations. Performance of a contract must be exact and precise and should be in accordance with what the parties had promise. Section 38(1).


Frustration

A contract is frustrated when there is a change in the circumstances, which renders a contract legally or physically impossible of performance, section 57(2). Moreover, Frustration of a contract excuses non-performance and automatically discharges the contract except where the terms of contract override this implied legal provision. However, frustration is not acceptable as an excuse where the circumstance was foreseeable, and is not applicable to certain types of contracts such as insurance policies.

Breach

Breach of contract can be described as an unjustifiable failure to perform all or some part of a contractual duty constitutes a breach of contract. It eventuates when a party who has a duty of immediate performance fails to perform, or when one party hinders or prevents the performance of the other party. A total, major, material, or substantial breach of contract constitutes a failure to perform properly a material part of the contract. A partial or minor breach of contract is merely a slight deviation from the bargained-for performance. A breach may occur by Anticipatory Repudiation, whereby the promisor, without justification and before committing a breach, makes an affirmative statement to the promisee, indicating that he or she will not or cannot perform the contractual duties.The differences in the types of breach are significant in ascertaining the kinds of remedies and damages available to the aggrieved party.


Agreement

The general rule is that what has been created by agreement may be extinguished by agreement. An agreement by the parties to an existing contract to extinguish the rights and obligations that have been created is itself a binding contract, provided that it is made under seal or supported by consideration. Where the agreement for discharge is not under seal, the legal position varies according to whether the discharge is bilateral or unilateral. 

• Bilateral discharge

Bilateral discharge occurs whenever both parties to the contract have some right to surrender. In example, where there has been non-performance by either party, or is partly performed by one or both parties.

• Unilateral discharge

Unilateral discharge takes place where only one party has rights to surrender. Where one party has entirely performed his part of the agreement, he is no longer under obligations but has rights to compel the performance of the agreement by the other party. For unilateral discharge, unless the agreement is under seal, consideration must be furnished in order to make the agreement enforceable.

Remedies

There are several remedies for breach of contract, such as award of damages, specific performance, rescission, and restitution. In courts of limited jurisdiction, the main remedy is an award of damages. Because specific performance and rescission are equitable remedies that do not fall within the jurisdiction of the magistrate courts. In brief, a legal remedy is a court order that seeks to uphold a person's rights or to redress a breach of the law. When one party breaches a contract, the other party may ask a court to provide a remedy for the breach. The court may order the breaching party to pay money to the non-breaching party.