Contracts

Contracts

Introduction

Contract refers to an agreement existing between two entities or individuals developing an enforceable obligation to execute or to refrain from doing a specific or particular thing[1]. The purpose of the contract is to enhance or develop the agreement made by the parties while fixing their rights and duties in relation to the treaty or contract. The law courts must ensure the validity of the contract in order to prevent grounds limiting its implementation or enforcement towards the achievement of the goals and objectives by the entities involved. The terms of a contract and its prescription are the role of the statutes in case of effects on the public. The proponents of an insurance contract in relation to the protection of the common carrier exist under the guidance of the statute with the aim of safeguarding the interest of the public. This ensures the availability of financial resources in the occurrence of accidents. It is note the role of the courts to create all contracts for parties or different entities. Contract only exists when the entities have express or implied agreement in relation to the essential terms of an agreement. The role of the courts is to empower the implementation of the contracts thus no participation in writing or development of the agreement between the entities.

In order to enforce the components of a contract, it has to be valid in accordance with the prescription of the entities under the authority of the law courts. The policy of the law contributes towards the encouragement of the formation or development of the contracts to guide relationship between competent parties or entities with the aim of achieving legal objectives. Parties or entities of the contract or agreement must adhere to the terms and conditions while executing duties or interacting in order to enhance the validity of the agreement. The binding force behind the development and implementation of an agreement or contract between two entities is the act of good faith[2]. The formation of a contract eliminates the contemplation of the right of the entity or party in its rejection. This research paper will focus on the illustration of the concept of contracts through the elaboration of the types of contracts, components of contracts, and valuable impacts of the law or contracts in the social, economic, and political lives within the society.

Types of Contracts

Several contracts exist under the legal aspect with the aim of guiding relationship and achievement of certain objectives by competent parties or entities.

Contracts under Seal

In the traditional concept, the validity of an agreement as a legal document was determined by the act of seal stamping. The symbolism of the seal was the intention of agreement by the entities towards accomplishing legal consequences. In this concept of contracts, there is no legal benefit or detriment to the parties’ obligation[3]. This is because of the symbolism of the seal as the solemn acceptance in relation to the legal impact and consequences of the agreement. It was the obligation of the legal department to ensure that all contracts were under seal stamping in order to enhance validity. Due to numerous jurisdictions within the modern society, the sealing concept lost its meaning and influence in the development and enforcement of the components of the legal agreement or contracts. The recognition of the law courts on the context of informal contracts has also played a critical role in the diminishing of the influence of the contacts under seal.

Express Contracts

The concept of express contracts demands that the parties or entities must state the terms (formally or informally) through writing or verbal means within the time of the development of the contracts. In this context, there is an offer that is accepted by the other party wishing to enter into this agreement thus the consent for the formation of the agreement. The parties must abide to the requirements of the consent form in order to enhance the validity of the contracts towards meeting the needs and legal objectives of the entities participating in the legal agreement.

Implied Contracts

Implied contracts develop under the obligation in relation to mutual agreement and intention of promise expressed in writing. This type of contract is binding like in the case of the express contracts. The existence of an implied contract depends on the extent of a substance such as a conduct or an act of a party or entity with the aim of making the contract binding. The expression of the implied contracts is through the facts and circumstances indicating or illustrating the intention to the development of the contract or legal agreement[4].

Executed & Executory Contracts

An executed contract is an expression of the contract illustrating that nothing remains to be applied or done to either entity. This indicates that the completion of the performance by the parties is an illustration of the end of the agreement. An executory legal agreement illustrates on the concept of future act or performance by the parties following the completion of the first aspect of the agreement.

Bilateral & Unilateral Contracts

Bilateral contracts refers to the tow-sided legal agreement focusing on the adherence to the terms and promise developed by the two entities or parties in relation to doing certain acts or refraining from particular activities. Unilateral legal agreement focuses on the aspect of the promise or intention of terms by one entity. One entity promises to perform certain actions under the influence or participation of the other party or entity towards promotion of the validity of the contract.

Unconscionable Contracts

This reflects unjust or unbalanced legal agreement leaning towards the entity or party with massive bargaining power. The development of these contracts depends on the concepts of fairness and decency. No mental, competent, fair, or honest individual would enter into such contracts because of the terms and conditions in relation to the bargaining power. It is developed on exploitation motives thus a hindrance to the realization of the goals and objectives in the context of societal welfare.

Adhesion Contracts

This refers to the development of mutual agreement between the individual with massive bargaining power and the entity with minimal bargaining aspect. This indicates that the stronger party in this legal agreement will draft terms of the contract thus offering minimal authority to the weaker entity towards adoption or rejection of the legal document. The other party has to take or leave the contract and its relevant terms in accordance with the proposals by the stronger party.

Aleatory Contracts

This refers to the legal agreements that come into action following the occurrence of certain events. In the concept of this contract, one or both entities assume the risk as the terms and conditions of the legal agreement. An example of this legal agreement is the fire insurance policy[5].

Voidable and Void Contracts

A void legal agreement or contract exists when there is lack of imposition of the legal rights upon the entities thus not enforceable by the court of law. A voidable legal agreement enjoys legal enforcement despite the fact that it can be treated as not binding to the entities suffering inabilities during its execution.

Elements of a Contract

There are six crucial elements of a contract in the maximization of its validity and effectiveness, in the achievement of goals and objectives by the involved parties or entities. These elements include offer & acceptance, intention to legal relations, consideration, legal capacity, consent, and illegal or void contracts[6].

Offer & Acceptance

A legal agreement or contract comes into existence when one party makes an offer and the other party accepts or agrees to the terms of the offer. The offers must incorporate elements differentiating its willingness to deal or negotiate with the relevant body. The offer must be specific in order to obtain precise acceptance from the other party or entities with the intention of forming the legal relationship. The concept of the offer is a promise of bound depending on the acceptance by the other party or entities willing to enter the legal agreement. The concept of acceptance of the offer must be unequivocal and transmitted to the person making the offer through relevant communication systems. This is to enhance the recognition of the contract by the law thus the opportunity to focus on the validity of the legal agreement or contract[7].

Intention to develop legal relations

The development of a contract or legal agreement does not depend simply on the agreement of the two parties. There must be elements of the intention to enter into a legal relationship by the entities. This is usually evidence or communicable in relation to the circumstances defining the adoption and integration of the contracts. Domestic and social agreements do not have the intention to legal relations while the commercial agreements must abide by this element of a legal agreement in order to be valid in the context of the court of law[8].

Consideration

This refers to the price viable to the promise made by the other party. The cost or price of the promise must be valuable but not necessarily money. Considerations include aspects such as interests and benefits to the entity within the legal agreement during the valid period of the contract. The existence of the consideration element enables the courts not to question the adequacy if it portrays elements of value[9].

Legal Capacity

Not all entities or individuals have the ability to enter into valid legal agreement. This indicates the existence of significant consideration for the handling of the legal agreements between different individuals within the society. These include mentally impaired individuals, minors, bankrupts, corporations, and prisoners.

Consent

The act of a legal agreement must portray elements of good faith indicating that the entities must understand the concept of the contract. This indicates that the consent towards entering into the legal agreement by the entities must be genuine in order to enhance valid and transparency by the participants[10].

Illegal or void contracts

This element illustrates on the concept of the law to recognize certain legal agreements. This proclaims that an illegal contract is not enforceable by the court of law thus deemed void. Contracts prohibited by the statute are also illegal thus do not apply towards the achievement of the goals and objectives of the parties involved.

Impacts on individuals, business and institutions

Contracts have recognizable impacts on the individuals, business and institution in the society depending on the terms reached by the parties. The following are some of the impacts related to the contracts

Reduces risks

The contracts always serve in reducing the most usual risks when used in minimizing liabilities. Some of the risks, which a business or an individual in a contract may avoid, include the suing of the party issuing the contract. This occurs since the contract makes all the parties to agree on the laid down terms contained in an agreement besides making them sign. The signing from both the parties helps in attesting the contracts while making it legal thereby reducing any chance of one party leveling action against the other[11]. This illustrates on the main reason for written agreement and a lawyer, for both parties, whom the latter will refer to whenever there is any disputes. The written agreement serves in as an evidence for the future referral.

Creates positive relationship

Contracts also ensure that there is a cultivated positive relationship among the members making the agreement. Whenever businesses, institutions or individuals are constructing a contract, there is need for both of the parties involved to cooperate with each other. The parties would need to be honest with each other, especially when laying the terms. A positive relationship always serves as the foundation of being honest with each other hence the establishment of a contract will foster a strong relationship. Further, establishment of the contract makes the parties to remain loyal to each other since it serves as an attaching element. For instance, an employee having an employment contract will always feel a sense of stability because of the attachment they have to the business. In most times, individuals or business, making the contract will arrive at an agreement period thereby creating a sense of security. The individuals or institution will need to cooperate with each other in order to arrive to a viable terms for the contracts; otherwise, the contract will fail.

Promotes clarity

Apart from reducing the risks to the involve individuals, the contracts may also serves as a clarity to the parties involved. This arises because the contract always contains the entire requirement that the individuals or the business should meet within the duration of the agreement. This ensures that each party carries out its mandate without missing since it is accountable to the contract. This implies that reaching a contract ensures that the parties work towards achieving the aims of the contract, because of the well laid down missions to each. Consequently, the contracts serve a great deal in ensuring that there is no confusion occurring between the parties besides increasing their focus on their operations. Further, both of the parties involved will have the time of table the terms that they are comfortable to work with consequently increasing the production of the contract. Since the parties have agreed on the terms, it will be difficult to deviate since each of them has a work scope that they fit. For instance, in an employment contract, the employee gets to know the specificity that he or she will be working on during the duration. Further, the contracts serve significantly in limiting the obligation of the involved individuals or businesses. The limiting of obligation always occur in the instances involving the servicing contracts including maintenance. There is always an established prices at which the prices for the services will occur and the rate at which the involved company will offer the services. Many institutions and individuals have involved themselves in these contracts since they ensure that there is payment for any activity carried out. The specificity allowed in the contracts is always important in the cases involving the need to protect any copyrighted material.

Fixed resource cost

In the business environment, the contracts will foster the fixed resource cost between the parties. The agreement involving the fix resource costs allows the business to obtain from or sell product to another company at a fixed cost. This impact positively on the planning inside the business since there is prior knowledge about the cost at which the involved transactions will occur. The contract allows the business to obtain a certain good at a particular price within a given period[12]. Further, the clarity of a contract also allows the business to remove the chances of being affected by the intended increase in the cost any resource since there is an established agreement. However, the fixed cost agreement may fail if there is unintended decrease in the involved economic resource.

Enforces non-compete agreements

Most businesses and institution always involve themselves in building a contract in order to foster the non-compete agreements. These agreements prevent the other individuals or businesses from bringing their goods or services to the market thereby promoting the production of only those businesses in contracts. The non-compete agreement ensure that there is a strategic relationship between two businesses permitting them to provide unique goods or services to the consumers[13]. Further, the non-compete agreements may also serves the companies who would like to regulate the services availed by their employees to other companies. This ensures that the company prohibits the employee from offering specific knowledge regarding the company to the other companies. The non-compete agreements ensure that the employee always remain loyal to the company that hired him or her.

Time and money

The process of reaching to a contract between any two individuals or business will always consume resource in terms of money and time. The businesses or individuals involved will have to dedicate enough time and money towards the contract. This poses a disadvantage to the businesses and individuals, whenever they would like to reduce associated risks through making a contract. When establishing an airtight contract the involved business must hire a lawyer’s services in drafting the contract, as it (contract) remains subject to law. For instance, a company may need every individual in the organization to sign the contract thereby increasing on the value. In most occasions, the lawyers are always expensive because of the type of services they offer is a necessity to the parties. The involve business will also have to find a good lawyer, always expensive, to draft the contract since it (contract) is valuable to their operation. Further, the process of drafting a contract always involves many activities thereby consuming a lot of time that the business could utilize in growing other elements of its operation.

Price fixing problems

Whenever an individual, business or institution enters into a contract allowing only a specific price, the members would need to adhere to this until the end of the contract. This may prove to be disadvantageous to the individuals involved especially in economies where there are prices swings. A product or service under the contract may go out of stock while the supply may also depreciate, with the immediate remedy being to raise the prices. This will pose a threat of failure of the businesses since the contract only allows them to avail the products at a certain price. Without the termination of the contract, the individuals involved in the contract will fail in the market. Occasionally, the individuals involved in fixed price cost have always terminated their contacts because of the prices swings.

Biasness

A standard contract should always favor both the parties involved especially when considering the terms availed to both. However, this may not be the case in some instances, whereby bigger companies may direct the standardization toward their part. This always occurs when the other party is ignorant or not aware of the on goings leading to the former commanding the whole contract. This makes the contract be one sided with the terms involved favoring the bigger company while being disadvantageous to the latter. Consequently, this brings the need for the individuals involved in contracts to ensure that they have hired a good lawyer who can help in mutually drafting the terms of the contract.

Conclusion

A contract refers to an agreement existing between two entities or individuals developing an enforceable obligation to execute or to refrain from doing a specific or particular thing. Contracts are an important element of law that business, individuals and institution would need to have knowledge about them. In order to enforce the components of a contract, it has to be valid in accordance with the prescription of the entities under the authority of the law courts. A business or individuals involving in establish since every party knows their expectation within the contract. This provides room for the achievement of the established missions since the parties would be doing their parts in order to achieve the drafted terms and agreements. Types of existing types of contracts include contract under seal, express contracts, implied contracts, executed contracts and bilateral contracts. Apart from the types, there are six elements of contract including offer & acceptance, intention to legal relations, consideration, legal capacity, consent, and illegal or void contracts[14].An individual or business will enter into a specific type of contract depending on the terms attached to it (contract). Further, the parties involved in the contract will need to seek for the lawyers who ensure that there the terms are in favor of the involved parties otherwise it might end up being bias.

 

 

 

 

 

 

 

 

Bibliographies

1. BLUM, BRIAN A. Contracts: Examples & Explanations (Austin: Wolters Kluwer Law & Business, 2007).
2. KOFFMAN, LAURENCE, AND ELIZABETH MACDONALD. The Law of Contract (Oxford: Oxford University Press, 2007).
3. BHANA, DEEKSHA, E BONTHUYS, AND MINETTE NORTJE. Student’s Guide to the Law of Contract (Cape Town: Juta, 2009).
4. TORRES, JUSTO P. Obligations and Contracts: (with Introduction to Law); [extra-Contractual Obligations, Law on Merchants, Introductory to Business Law, Law on Damages; Glossary of Legal Terms], (Manila: Rex Book Store, 2003).
5. WALSTON-DUNHAM, BETH. Introduction to Law (Clifton Park, NY: Delmar Cengage Learning, 2009).

6. FURMSTON, M. P., CHESHIRE, G. C., & FIFOOT, C. H. S. (2006). Cheshire, Fifoot and Furmston’s law of contract. Oxford, N.Y: Oxford University Press.
7. CIBINIC, J., NASH, R. C., & NAGLE, J. F. (2006). Administration of government contracts. Washington, D C: George Washington University, National Law Center, Government Contracts Program.
8. BRENNAN, D. S., & AMERICAN BAR ASSOCIATION. (2008). The construction contracts book: How to find common ground in negotiating the 2007 industry form contract documents. Chicago: American Bar Association.
9. FURMSTON, M. P., CHESHIRE, G. C., & FIFOOT, C. H. S. (2006). Cheshire, Fifoot and Furmston’s law of contract. Oxford, N.Y: Oxford University Press.
10. KOFFMAN, L., & MACDONALD, E. (2007). The law of contract. Oxford: Oxford University Press.

1. [1] Brian A. Blum. Contracts: Examples & Explanations (Austin: Wolters Kluwer Law & Business, 2007).

 

[2] Macdonald Elizabeth and Laurence Koffman. The Law of Contract (Oxford: Oxford University Press, 2007).

[3] Nortje Minette, Bhana, Deeksha, and Bonthuys E. Student’s Guide to the Law of Contract (Cape Town: Juta, 2009).

 

[4] Nortje Minette, Bhana, Deeksha, and Bonthuys E. Student’s Guide to the Law of Contract (Cape Town: Juta, 2009).

 

[5] Macdonald Elizabeth and Laurence Koffman. The Law of Contract (Oxford: Oxford University Press, 2007).

[6] Beth Walston-Dunham, Introduction to Law (Clifton Park, NY: Delmar Cengage Learning, 2009).

[7] P Justo Torres, Obligations and Contracts: (with Introduction to Law); [extra-Contractual Obligations, Law on Merchants, Introductory to Business Law, Law on Damages; Glossary of Legal Terms], (Manila: Rex Book Store, 2003).

[8] Beth Walston-Dunham, Introduction to Law (Clifton Park, NY: Delmar Cengage Learning, 2009).

[9] Beth Walston-Dunham, Introduction to Law (Clifton Park, NY: Delmar Cengage Learning, 2009).

[10] Beth Walston-Dunham, Introduction to Law (Clifton Park, NY: Delmar Cengage Learning, 2009).

[11] Furmston, M. P., Cheshire, G. C., & Fifoot, C. H. S. (2006). Cheshire, Fifoot and Furmston’s      law of contract. Oxford, N.Y: Oxford University Press.

 

[12] Brennan, D. S., & American Bar Association. (2008). The construction contracts book: How to     find common ground in negotiating the 2007 industry form contract documents. Chicago:           American Bar Association.

[13] Furmston, M. P., Cheshire, G. C., & Fifoot, C. H. S. (2006). Cheshire, Fifoot and Furmston’s      law of contract. Oxford, N.Y: Oxford University Press.

[14] Beth Walston-Dunham, Introduction to Law (Clifton Park, NY: Delmar Cengage Learning, 2009).