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Traditionally, a contract was an enforceable legal document only if it was stamped with a
seal. The seal represented that the parties intended the agreement to entail legal
consequences. No consideration was required since the seal was a symbol of the solemn
acceptance of the legal effect and consequences of the agreement. In the past, all
contracts were required to be under seal to be valid, but the seal has lost some or all of its
effect by statute in manyjurisdictions. Recognition by the courts of informal contracts,
such as implied contracts, has also diminished the importance and employment of formal
contracts under seal.
Express Contracts
In an express contract the parties state the terms, either orally or in writing, at the time of
its formation. There is a definite written or oral offer which is accepted by the offeree
(the person to whom the offer is made) in a manner that explicitly demonstrates consent
to its terms.
Implied Contracts
Although contracts implied in fact and contracts implied in law are both called implied
contracts, a true implied contract consists of obligations arising from a mutual agreement
and intent to promise that have not been expressed in words. It is misleading to label as
an implied contract a contract implied in law because a contract implied in law lacks the
requisites of a true contract. The term quasi-contract is a more accurate designation of
contracts implied in law. Implied contracts are as binding as express contracts. An
implied contract depends on substance for its existence; therefore, for an implied contract
to arise there must be some act or conduct of a party to be bound.
A contract implied in fact is not expressed by the parties but, rather, suggested from facts
and circumstances indicating a mutual intention to contract. Circumstances exist that,
according to the ordinary course of dealing and common understanding, demonstrate
such an intent sufficient to support a finding of an implied contract. An implied in fact
contract does not arise contrary to law or the express declaration of the parties. Contracts
implied in law (quasi-contracts) are distinguishable in that they are not predicated on the
assent of the parties but exist regardless of assent.
The implication of a mutual agreement must be a reasonable deduction from all the
circumstances and relations contemplated by the parties when they enter into the contract
or which are necessary to effectuate their intention. No implied promise can exist where
the relations between the parties prevent the inference of a contract.
A contract will not be implied where it would result in inequity or harm. Where doubt
and divergence exist in the minds of the parties, the court cannot infer a contractual
relationship. If, after an agreement expires, the parties continue to perform according to
its terms, an implication arises that they have mutually assented to a new contract
containing the same provisions as the old agreement.
A contract implied in fact, which is inferred from the circumstances, is a true contract,
whereas a contract implied in law is actually an obligation imposed by law and treated as
a contract only for the purposes of a remedy. With respect to contracts implied in fact, the
contract defines the duty; in the case of quasi-contracts, the duty defines and imposes the
agreement upon the parties.
An executed contract is one in which nothing remains to be done by either party. The
phrase is, to a certain extent, a misnomer because the completion of performances by the
parties signifies that a contract no longer exists. An executory contract is one in which
some future act or obligation remains to be performed under its terms.
The exchange of mutual, reciprocal promises between persons that entails the
performance of an act, or refraining from the performance of an act, with respect to each
party, is a bilateral contract. A bilateral contract is sometimes called a two-sided contract
because of the two promises that constitute it. The promise that one person makes
constitutes sufficient consideration for the promise made by the other.
A unilateral contract involves a promise made by only one party. The offeror, a person
who makes a proposal, promises to do a certain thing if the offeree performs a requested
act that he or she knows is the basis of a legally enforceable contract. The performance
constitutes an acceptance of the offer, and the contract then becomes executed.
Acceptance of the offer can be revoked, however, until the performance has been
completed. This is a one-sided type of contract because only the offeror, who makes the
promise, will be legally bound. The offeree may act as requested or refrain from acting
but cannot be sued for failing to perform, or even for abandoning performance once
begun, because he or she did not make any promises. This is in contrast to a bilateral
contract.
Unconscionable Contracts
Adhesion Contracts
Adhesion contracts are those that are drafted by the party who has the greater bargaining
advantage, providing the weaker party with only the opportunity to adhere to (accept) the
contract or reject it. They are frequently employed because most businesses could not
transact business if it were necessary to negotiate all the terms of every contract. Not all
adhesion contracts are unconscionable since the terms of such contracts do not
necessarily exploit the party who signs the contract. Courts, however, often refuse to
enforce contracts of adhesion on the grounds that a true meeting of the minds never
existed, or that there was no acceptance of the offer because the purchaser actually had no
choice in the bargain.
Contracts can be either void or voidable. A void contract imposes no legal rights or
obligations upon either party and is not enforceable by a court. It is, in effect, no contract
at all.
Although a general body of contract law exists, some aspects of it, such as construction
(the process of ascertaining the proper explanation of equivocal terms), vary among the
different jurisdictions. When courts must select the law to be applied with respect to a
contract, they consider what the parties intended as to which law should govern, the place
where the contract was entered into, and the place of performance of the contract. Many
courts apply the modern doctrine of the "grouping of contracts" or the "center of gravity,"
in which the law of the jurisdiction that has the closest or most significant relationship
with the matter in issue applies.
Courts generally apply the law that the parties expressly or impliedly intend to govern the
contract, provided it bears a reasonable relation to the transaction and the parties acted in
good faith. Some jurisdictions follow the law of the place where the contract was
performed, unless the intent of the parties is to the contrary. Where foreign law governs,
contracts may be recognized and enforced under the doctrine of comity (acknowledgment
that one nation gives within its territory to the legislative, executive, or judicial acts of
another nation
A contract is a legally enforceable promise. Contracts are vital to society because they
facilitate cooperation and trust. Rather than relying on fear of reprisal or the hope of
reciprocity to get others to meet their obligations, people can enlist other people to pursue
common purposes by submitting to contracts that are backed by impartial authority.
Without contracts and their supporting institutions, promises would be much more
vulnerable to ill will, misunderstanding, forgetfulness, and other human flaws. Indeed,
contracts allow people that have never even met to reach agreements, such as
lending/borrowing money to buy a house, which they would never consider making
outside of a legal framework.
Discussed below are characteristics and types of contracts and the Uniform Commercial
Code (UCC), which governs most commercial contracts in the United States.
BACKGROUND
Contracts have been used since ancient times to ensure the performance of different
parties in all types of promises. Contract law had reached a relatively sophisticated state
by the 15th century in England. Then, during the Industrial Revolution in the 19th
century, the increasing complexity of contracts, combined with new ideas about free
market economies, forced a new type of contract law. It was based on the "freedom of
contract" concept, which basically held that individuals should be free to create their own
agreements independent of outside intervention. The role of the courts was only to
enforce the promises and not to determine the rightness or wrongfulness of the
agreement.
Contract law during the 19th and early 20th century was characterized by strict
interpretation. If two parties entered an agreement voluntarily, the courts were not
concerned with complaints of perceived unfairness, such as illegal bargaining power.
However, as business dealings became more geographically diverse and larger in volume,
many types of contracts became standardized. Companies and individuals often used the
same forms, or contracts, to handle numerous similar transactions. As a result, many
contracts were not specifically tailored to the agreements that they represented, and the
party to which the terms were dictated usually did not have a complete understanding of
the promise. A corollary of that development was that contracts were often used to take
advantage of less powerful, or less informed, parties.
The move toward more ambiguous criteria and greater intervention in the contract
process by the courts has resulted in greater protection of weaker parties and a more
realistic interpretation of agreements. The drawback, however, has been a dilution of the
strength of contracts. Because the rules governing contracts have become more vague,
agreements no longer supply the same predictability and social stability that they once
afforded. Furthermore, individuals and companies are less able to craft agreements that
will ensure the performance of both parties. Contract law and theory continues to evolve,
though, in response to societal pressures and needs.
CONTRACT ELEMENTS
By its most basic definition, a contract is a legally enforceable promise. It differs from a
simple verbal promise in that either party may ask the state to force the other party to
honor its promise. To distinguish contracts from other types of promises and agreements,
courts have established basic elements that are necessary for a contract to exist. A
contract may be legally defined as a voluntary, legal, written agreement made by persons
with the proper capacity. It should include: (1) an offer; (2) an acceptance; and (3)
consideration, or an exchange of value. There are legal exceptions to most of these
conditions, and all of them are subject to interpretation in the courts. Furthermore, some
contracts do not meet these requirements, such as implied contracts and those created
under promissory estoppel, both of which are discussed later.
MUST BE VOLUNTARY.
Contracts not entered into voluntarily are voidable. If a banker threatens to kill a client if
he does not refinance his mortgage at a higher interest rate, the client would not be
required to submit to the contract. Although that case is extreme, agreements made under
any duress are generally not enforceable. For example, a company might tell a supplier
that it was considering ending their business relationship if, within the next ten minutes,
the supplier didn't sign a contract to provide materials at a certain cost. If the supplier
signed the agreement, it might be able to convince the courts that it did so under duress or
undue influence, and therefore was not bound by the contract's terms. In general,
contracts created under duress, undue influences, fraud, and misrepresentation are
voidable by the injured party.
MUST BE LEGAL.
Contracts are also void if they involve a promise that is illegal or violates public policy.
For instance, a contract regarding the sale of illegal drugs is unenforceable. Likewise,
contracts that are legal but are not in the public interest may be null. For example, a
contract in which a company requires a customer to pay an extremely high rate of interest
on borrowed funds could be deemed invalid by the courts. Or, suppose a company
contracts with a customer to sell supplies to him that he uses to grow marijuana. If the
company also tells him how to grow the illegal substance, the contract would become
unenforceable because the agreement promoted the violation of a statute. As another
illustration, a retail company that required an employee to sign an agreement that he
would never work for another retailer probably would be unable to enforce the contract
because it contained unreasonable restrictions or imposed undue hardship on the worker.
ORAL CONTRACTS.
Contracts do not have to be written to be enforceable in court. In fact, most oral contracts
are legally enforceable. However, they are obviously much more difficult to prove.
Furthermore, most states have adopted "statutes of frauds," which specify certain types of
contracts that must be in writing. Examples of contracts that typically fall under the
statues of frauds include agreements related to the sale of real estate, contracts for the sale
of goods above $500, and contracts in which one person agrees to perform the obligation
of another person. Yet even those contracts do not have to exist in conventional fashion.
In fact, a simple memo or receipt may suffice. There are several exceptions to the statutes
of frauds. For instance, when one party would suffer serious losses as a result of reliance
on an oral agreement, the statute of frauds may be waived (see promissory estoppel
below).
Even if a contract is voluntary, legal, and written, it is void if the person that makes the
agreement does not have the mental and legal capacity to do so; hence, a mentally
retarded individual or a child could not be bound by a contract. But a person without the
authority to make an agreement may also void a contract. For instance, suppose that an
overly zealous salesman representing a ball bearing company signed an agreement with a
buyer to supply one billion ball bearings to be delivered in 24 hours. The contract could
be worthless if the salesman was acting outside of his authority to commit the company
to that agreement. Or, suppose that a person signed a contract between her former
employer and one of its customers. The agreement would likely be null because she did
not have the capacity to act on the company's behalf.
OFFER.
In addition to being voluntary, legal, written, and made by persons with proper capacity,
contracts usually must possess three basic components: an offer, an acceptance, and
consideration. An offer is a promise to perform an act conditioned on a return promise of
performance by another party. It is recognized by a specific proposal communicated to
another party. Once a legal offer has been made, the offeror is bound to its terms if the
other party accepts. Therefore, the offeror must clearly indicate whether the proposal is
an offer or some other communique, such as an invitation to negotiate. The offeror may
stipulate certain terms of acceptance, such as time limits, and even withdraw the offer
before the other party accepts.
ACCEPTANCE.
Acceptance, the second basic requirement, is legally defined as "a manifestation of assent
to the terms [of the offer] made by the offeree in the manner invited or required by the
offer." As with offers and offerors, the courts look for an intent to contract on the part of
the acceptor. The difference is that the offeror may stipulate terms of acceptance with
which the other party must comply. If the offeree attempts to change the terms of the
offer in any way, a rejection is implied and the response is considered a counteroffer,
which the original offeror may reject or counter. As with most rules regarding contracts,
exceptions exist. For example, the Uniform Commercial Code includes a "Battle of the
Forms" provision whereby an offeree may imply acceptance under certain circumstances
even if it changes or alters the offer.
CONSIDERATION.
The two primary categories of contracts are "unilateral" and "bilateral." In a unilateral
contract only one party promises something. For instance, if a car dealer tells a customer,
"I will give you that car if you give me $15,000," he has made an offer for a unilateral
contract—the contract will only be created if the customer accepts the offer by paying the
$15,000. If the dealer says "I will promise to give you the car if you promise to pay me
$15,000," a bilateral contract has been proposed because both parties must make a
promise. The concept of unilateral contracts is important because it has been used by
courts to hold a party liable for a promise even when consideration was not given by the
other party. For instance, an employer may be liable for providing pension benefits that it
promised to an employee, even if the worker gave no promise and did nothing in return.
Contracts may also be classified as "express" or "implied." Express contracts are those in
which both parties have explicitly stated the terms of their bargain, either orally or in
writing, at the time that the contract was created. In contrast, implied contracts result
from surrounding facts and circumstances that suggest an agreement. For instance, when
a person takes a car to a repair shop he expects the shop to exercise reasonable care and
good faith in fixing the car and charging for repairs. Likewise, the shop expects the
customer to pay for its services. Although no formal agreement is created, an implied
contract exists.
QUASI-CONTRACTS.
In addition to express and implied contracts are "quasi-contracts," which arise from
unique circumstances. Quasi-contracts are obligations imposed by law to avoid injustice.
For instance, suppose that a man hires a woman to paint his house. By accident, she
paints the wrong house. The owner of the house knows that she is painting it by mistake
but, happy to have a free paint job, says nothing. The painter would likely be able to
collect something from the homeowner because he knowingly was "unjustly enriched" at
her expense. Had she painted his house while he was on vacation, he would be under no
obligation to her.
VALIDITY STATUS.
Contracts may also be categorized as valid, unenforceable, voidable, and void. Valid
contracts are simply those that meet all legal requirements. Unenforceable contracts are
those that meet the basic requirements but fail to fulfill some other law. For instance, if a
state has special requirements for contracts related to lending money, failure to comply
could make the contract unenforceable. Voidable contracts occur when one or both
parties have a legal right to cancel their obligation(s). A contract entered into under
duress, for example, would be voidable at the request of the injured party. Void contracts
are those that fail to meet basic criteria, and are therefore not contracts at all. An illegal
contract, for example, is void.
PROMISSORY ESTOPPEL.
A separate type of contract, and one that overtly exemplifies the trend away from strict
interpretation and toward fairness, is created by promissory estoppels. Under the theory
of promissory estoppel, a party can rely on a promise made by another party despite the
nonexistence of a formal, or even implied, contract. Promissory estoppels can be evoked
if allowing a promisor to claim freedom from liability because of a lack of consideration
(or some other contractual element) would result in injustice. Suppose that a business
owner promised an employee that he would eventually give him the business if he
worked there until he (the owner) retired. Then, after 20 years of faithful service by the
employee, the owner decides to give the business to his son-in-law. The owner could be
"estopped" from claiming in court that a true contract did not exist, because the worker
relied on the owner's promise.
Three basic assumptions on which Article Two is founded are (I) duty of good faith; (2)
recognition of unconscionable contracts; (3) and merchant duties. The duty of good faith
assumption implies that all parties in a contract are expected to observe "reasonable
commercial standards of fair dealing" as defined by the UCC. The concept of
unconscionable contract implies that a grossly unfair or one-sided contract can be
corrected by the courts. Finally, the UCC recognizes that merchants are held to a higher
standard in contracts than are nonmerchants because merchants are naturally more
knowledgeable and better able to protect themselves.
The UCC only covers what it classifies as "goods," which includes most movable,
tangible property. It does not cover contracts and transactions related to services, real
estate, stocks and bonds, or other intangibles. The UCC is generally used by courts for
cases in which "goods" are predominant in the contract. Where no specific UCC rules
exist, the courts usually revert to common law.
Classification of Contracts
A contract can be classified in a number of ways. Some of the more significant
classifications are as follows.
Simple and Formal Contracts
The classification of a contract as either formal or informal reflects its form or means
of creation.
A simple or informal contract - can be entered into orally and/or in writing.
A formal contract - is one in which the agreement between the parties is entered into
in a particular form of writing known as a deed.
Bilateral and Unilateral Contracts
* A bilateral - contract is one in which both parties to it have obligations to perform
at the time it comes into existence. It is constituted by an exchange of promises
between the parties. E.g. A agrees to sell his car to B for $1,000, at the time of its
formation it consists a promise by A to transfer title in the car to B, in return for B’s
promise to pay A the sum of $1,000. At the time of formation, neither party has yet
carried out their promises. At this stage, their promises are said to be executory.
In Union Dominions Trust (Commercial) Ltd v Eagle Aircraft Services Ltd [1968],
Lord Diplock observed that in a bilateral contract each party undertakes to the other
party to do or to refrain from doing something, and in the event of his failure to
perform his undertaking, the law provides the other party wit h a remedy’. The great
majority of contracts are bilateral contracts.
* A unilateral contract - is one in which only one party has obligations to perform at
the time of its formation.
e.g. A promises that he or she will pay B if B performs some act, a contract arises
when B performs the act. At the time of formation only A has to perform his or her
promise as B has already performed, or executed, his or her obligation.
‘A unilateral contract is one which the act of acceptance of the offer is also executed
consideration for the promise offered. The act of acceptance called by the offeree,
leaves the contract executory only on the part of the offeror.’
* Void contract is an agreement that is void is not a contract and the main effect of
such a contract is that neither party is able to sue each other pursuant to it.
* Voidable contract is one whose validity is called into question because of a defect
in the quality of the consent given by one of the parties upon entering into it.
* Unenforceable contract is one, which is in all respcts valid, but cannot be enforced
by one or either of its parties. The principal basis for unenforceability is the absence
of writing evidencing the contract where such writing is required by statute. An
example is contracts involving the sale of land.
intr.v.
con·sent·ed, con·sent·ing, con·sents
NOUN:
ETYMOLOGY:
They must also not face any inducements to donate organs - it is seen as an entirely
voluntary, altruistic gesture that benefits others.
Only people aged 16 and over can consent to organ donation. For children, parents or
legal guardians make decisions.
Some difficulty surrounds the ability of people with forms of mental impairment to
make informed medical decisions. Generally, family members or legally specified
individuals decide based on the presumed wishes of the donor.
Informed consent contrasts with presumed consent (the assumption that an individual is
happy to donate organs after death unless he or she has explicitly said that they do not
wish to).
Others argue that medicine has a moral responsibility to patients in need of organs, and
that the rights accorded a living person do not apply to a dead body.
In practice, presumed consent can be either 'hard' or 'soft': in a soft approach, relatives
are approached and have the opportunity to request that organs are not used even if the
deceased has not specifically opted out. This is the position recommended by the British
Medical Association.
Spain is often held up as a country where opt-out systems have led to an increase in
transplantation - it carries out around 34 transplants per million of population while the
UK manages just 13 per million. A study carried out in 2006 suggested opt-out systems
typically increase the numbers of transplants by around 25-30 per cent.
To support its system, Spain has established a sophisticated transplant network, which
includes specially trained staff who liaise with families after a death. In particular, 'organ
procurement officers' have the sensitive task of dealing with grieving relatives, to
persuade them not to block the harvesting of organs. An insight into this key role can be
seen in Pedro Almodovar's film 'All About My Mother' - the main character, Manuela, is
a procurement officer.
In general, consent is not a defense against criminal liability. A defendant can argue that
because of consent, there was no crime (for example arguing that the use of an
automobile was not theft). However, once a crime has been established consent is
generally not a defense. For example, if a person intentionally puts someone's eye out, the
fact that the victim has consented to the activity is generally irrelevant. The major
exception to this is the crime of rape or sexual assault.