A contract is a "promise" or an "agreement" made of a set of
promises. Breach of this contract is recognized by the law and legal
remedies can be provided. In civil law, contracts are considered to be part of the general law of obligations. The law generally sees performance of a contract as a duty. This article describes the law relating to contracts in common law jurisdictions.
Comparison of contract and tort law
The law of obligations has traditionally been divided into contractual obligations, which are voluntarily undertaken and owed to a specific person or persons, and obligations in tort, which are based on the wrongful infliction of harm to certain protected interests,
primarily imposed by the law, and typically owed to a wider class of
persons. Recently, it has been accepted that there is a third category,
restitutionary obligations, based on the unjust enrichment
of the defendant at the plaintiff’s expense. Contractual liability,
reflecting the constitutive function of contract, is generally for
failing to make things better (by not rendering the expected
performance); liability in tort is generally for action (as opposed to
omission) making things worse; and liability in restitution is for
unjustly taking or retaining the benefit of the plaintiff’s money or
work [Beatson (1998) Anson’s Law of Contract, 27th ed. (Oxford: OUP), pg. 21].
Compare with the U.S. context, the Uniform Commercial Code defining contract as "the total legal obligation which results from the
parties agreement" and does not attempt to state what act is essential
to create a legal duty to perform a promise. The law may recognize the
existence of rights, privilege, or power created by a promise.
Scope of common law contract law
Basic common law contract law addresses four sets of issues:
- When and how is a contract formed?
- When may a party escape obligations of a contract (such as a contract formed under duress or because of a misrepresentation)?
- What is the meaning and effect to be given to the terms of a contract?
- What is the remedy to be given for breach of a contract?
Contract formation: There must be an agreement which consists of an offer and acceptance, consideration (see also consideration under English law), and contractual intention for a simple contract to exist: i.e. it is not a deed—otherwise, no consideration is needed.
Subject to the sine qua non of contract formation, other ingredients that make up a contract include:
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- Form—In some cases, certain formalities (that is, writing) must be observed.
- Capacity—The parties must be legally capable of entering into a contract.
- Consent—The agreement must have been entered into freely. Consent may be vitiated by duress or undue influence.
- Legality—The purpose of the agreement must not be illegal or contrary to public policy.
A contract which possesses all of the above ingredients is said to
be valid. The absence of an essential element will render the contract
either void, voidable, or unenforceable.
In some situations, a collateral contract may exist.
Meaning and effect of contract terms: Many contract disputes
involve a disagreement between the parties about what terms in the
contract require each party to do or refrain from doing. Hence, many
rules of contract law pertain to interpretation of terms of a contract
that are vague or ambiguous. The parol evidence rule limits what things can be taken into account when trying to interpret a contract.
Privity:
In general, only parties to a contract may sue for the breach of a
contract, although in recent years the rule of privity has eroded
somewhat and third-party beneficiaries have been allowed to recover
damages for breaches of contracts they were not party to.
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