Contract Law: Essential Elements and Key Concepts

Posted on Jan 6, 2025 in Law & Jurisprudence

Contract Law: Key Elements and Concepts

Essential Elements of a Contract

  • Offer: A person proposes a deal.
  • Acceptance: Once a party receives an offer, they must respond to it.
  • Consideration: Both sides must receive some measurable benefit.
  • Legality: The contract must be for a lawful purpose.
  • Capacity: The parties must be of sound mind.
  • Consent: Certain kinds of trickery and force can prevent the formation of a contract.
  • Writing: Some contracts must be in writing to be enforceable.

Types of Contracts

  • Bilateral Contract: A promise made in exchange for another promise.
  • Unilateral Contract: A binding agreement in which one party has made an offer that the other party can accept only by action, not words.
  • Executory Contract: An agreement in which one or more parties have not yet fulfilled their obligations.
  • Executed Contract: An agreement in which all parties have fulfilled their obligations.
  • Valid Contract: A contract that satisfies all of the law’s requirements.
  • Voidable Contract: An agreement that may be terminated by one of the parties.
  • Void Agreement: A contract that neither party can enforce because the bargain is illegal or one of the parties had no legal authority to make it.

Remedies for Breach of Contract

  • Promissory Estoppel: A possible remedy for an injured plaintiff in a case with no valid contract, where the plaintiff can show a promise, reasonable reliance, and injustice. (The defendant made a promise knowing that the plaintiff would likely rely on it, the plaintiff did rely on the promise, and the only way to avoid injustice is to enforce the promise.)
  • Express Contract: An agreement with all the important terms explicitly stated.
  • Implied Contract: The words and conduct of the parties indicate that they intended an agreement.
  • Quasi-Contract: A possible remedy for an injured plaintiff in a case with no valid contract, where the plaintiff can show the benefit to the defendant, reasonable expectation of payment, and unjust enrichment. (The plaintiff gave some benefit to the defendant, the plaintiff reasonably expected to be paid for the benefits and the defendant knew this, and the defendant would be unjustly enriched if he did not pay.)
  • Quantum Meruit: “As much as he deserves” – the damages awarded in a quasi-contract case.

Other Important Contract Terms

  • Goods: Anything movable, except for money, securities, and certain legal rights (includes pencils, commercial aircraft, books, and Christmas trees). Goods do not include land, a house, or a stock certificate.
  • Offer: An act or statement that proposes definite terms and permits the other party to create a contract by accepting those terms.
  • Offeror: The person who makes an offer.
  • Offeree: The person to whom an offer is made.
  • Letter of Intent: A letter that summarizes the main points of a negotiation or proposed contract.
  • Revoked: When the offeror “takes it back” before the offeree accepts.
  • Termination by Operation of Law: If an offeror dies or becomes mentally incapacitated, the offer terminates automatically and immediately.
  • Mirror Image Rule: Requires that acceptance be on precisely the same terms as the offer.
  • Non-Compete Agreement: An agreement in which an employee agrees not to work for a competitor. Non-compete agreements related to the sale of a business are also enforceable if reasonable in time, activity, and territory.
  • Exculpatory Clauses: A contract provision that attempts to release one party from liability in the event the other is injured.
  • Unconscionable Contracts: A contract that a court refuses to enforce because of fundamental unfairness.
  • Oppression: One party uses its superior power to force a contract on the weaker party.
  • Capacity: The legal ability to enter into a contract.
  • Disaffirm: To give notice of refusal to be bound by an agreement.
  • Rescind: To cancel a contract.
  • Restitution: Restoring an injured party to its original position. A minor who disaffirms a contract must return the consideration he has received to the extent he is able.
  • Status Quo Rule: If a minor cannot return the consideration, the adult or store is only required to return its profit margin to the minor.
  • Fraud: When a party to a contract says something that is factually wrong. The defendant knew that his statement was false, the false statement was material, and the injured party justifiably relied on the statement. In the case of fraud, the injured party generally has a choice of rescinding the contract or suing for damages or, in some cases, doing both.
  • Unilateral Mistake: Occurs when only one party enters a contract under a mistaken assumption.