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What Is Contract Law?

Contract formation and termination is governed by contract law.
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  • Written By: Renee Booker
  • Edited By: E. E. Hubbard
  • Last Modified Date: 21 August 2014
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Although the requirements for formation and termination of a contract, as well as the remedies for breaching a contract, may vary by jurisdictions, contract law is the area of the law in all jurisdictions that governs formation, termination and breach of contracts. A contract is generally defined as a legal agreement between two or more parties. It usually requires an offer, an acceptance of the offer, and consideration in order to be legally binding.

Who may legally enter into a contract is one question answered by contract law. As a rule, minors may not legally enter into a contract. A person who lacks the appropriate mental state of mind is also prohibited from entering into a contract. In many jurisdictions, this area of law makes a contract voidable if a person who lacks the legal capacity to enter into the contract is a party to the contract. A voidable contract may be voided by the person who lacks capacity; however, the other party to the contract is legally obligated under the contract unless and until the other party chooses to void the contract.

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The elements required to form and terminate a contract are also addressed under contract law. What constitutes an offer, an acceptance, and consideration are determined by the laws in the jurisdiction where the contract was formed. What may be the subject will also be governed by this type of law. For example, in many jurisdictions, a contract that calls for something illegal to be be done, or something that is impossible, may be considered void, and, therefore, not a legal contract at all. Termination of a contract must also be accomplished pursuant to the rules of contract law in the jurisdiction where the contract was executed as a rule.

In many jurisdictions, by far the largest portion of the jurisprudence on contract law is devoted to issues surrounding breach of contract. When one party does not perform according to the terms of a contract, he or she is said to be in breach of contract. Under what circumstances a party may breach the terms of a contract are governed by contract law. Also within the area of breach of contract, contract law will determine what damages are available to a person who has suffered injuries as the result of another party's breach. In most cases, damages will be in the form of monetary compensation; however, in some cases, a court may order specific performance which requires the party who breached the contract to actually fulfill his or her part of the contract.

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tommyray
Post 7

I have a question. My girlfriend was hired the other day by a semi well-known company. This company in the past has a reputation for scams, but are claiming to be cleaning up their act. She went into the interview under the impression that it was going to be an office based job assignment, but after the initial orientation class, has found that they are, in fact, going door to door in neighborhoods selling. There was also a signed contract stating that she was to get paid $500 weekly, regardless of sales. However, she never has received a copy of this contract.

I am now and always have been under the impression that any reputable company (especially one that has been around as long and has done as much business as the one described here) would automatically hand over a copy of the agreement. What are the legal obligations of an employer to hand over the copy of the written contract?

titans62
Post 5

@Izzy78 - As far as I know, verbal contracts aren't worth a whole lot in court. I guess the only instance where it might hold up is if you had them recorded somehow. Even then, I'm not sure. Like you said, part of the job of a judge is deciding what person is telling the truth and who isn't. Even in the cases where someone has clearly tricked someone into signing a bad contract, the court can't really do anything, because the bad contract is in writing.

I don't know why, but a ton of people just sign any contract that is put in front of them without reading it in detail. I think a lot of places even make the contract signing stage awkward, so people won't feel comfortable taking the time to read everything. This is always a bad move. Sometimes it won't matter, because most places value their reputation, but a lot of places will put little holes in the contract that can hurt you in the end.

Izzy78
Post 4

Is anyone here familiar with verbal contract law? Does it even really exist? I have seen a lot of cases on TV shows and witness real-life instances where people claim that someone said one thing. Then it is up to the judge to decide which person is actually lying. Are verbal contracts ever legally binding, though?

The one time I know verbal contracts don't mean anything is when you are buying a car. I have purchased a couple, and the salesmen are very good at being creative with their wording. At one place I went to, a guy flat out told me that there was an extended warranty on a vehicle, even though it was never mentioned anywhere. Once I started asking questions about it, I soon found out he was just making it up to try to get me to buy the car. Unless it was written in the actually contract, his word would have meant nothing. Those are the kinds of places that should be avoided.

Some of the other people are a little more subtle, though. They will imply that there is some benefit when there actually isn't. I guess that is just part of the car buying process.

kentuckycat
Post 3

@stl156 - Those are good questions, because it is always important to understand how contracts work. As you get older, knowing some contract law basics will help you out immensely.

I wouldn't say that there is any specific wording or terminology that has to go into contracts. Basically, all it has to say is that Party A is transferring something or selling something to Party B, and then the contract should outline what the details of the transfer are. Places like real estate agencies or car dealerships will have contracts that have been checked by lawyers, but that is only to help themselves in the long run.

If you were to sell me a car, we could easily have a contract handwritten on a piece of paper that said I was buying the car for X dollars. Of course, that contract could present some problems if I soon found out there was a problem with the car. That is why contracts should be as detailed as possible. That way all the parties have to do is look to the contract to see who is right and who is wrong.

stl156
Post 2

From watching court shows on TV, it seems like the vast majority of small claims court cases stem from contract law. I suppose because contracts are the main thing involved in trials outside of actual criminal offenses. The only other cases really that seem to end up in small claims court are damage claims.

I have not really signed a lot of contracts before. Are there any certain rules that have to be followed when someone is drawing up the contract? The article mentions things like there not being illegal parts, but I am talking more about things like specific wording and terminology. Also, is it possible to make a contract without it being looked over by a lawyer or someone? How do you know it is legal, otherwise?

Are there any other tips you should know before you go out and sign a contract for something?

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