Elements of a Contract Essay

“A contract is an agreement that can be enforced in court. It is formed by two or more parties who agree to perform or to refrain from performing some act now or in the future. ” (pg 208) Recently I was faced with a situation regarding a contract that was not in writing and I had to explain that as long as a verbal contract contains the four essential elements of a contract it is binding. We are so accustomed to seeing contracts in writing that many people assume that a contract must be a long and drawn out document before it is enforceable.

For a contract to be enforceable, whether is verbal or in writing, one page or ten pages long, there are four elements that need to be present, and they are: (1) Agreement: which consists of an offer and an acceptance of that offer (for the offer made in the initial stages of the contract must itself be considered a valid offer. For an offer to be ‘valid’, it must be communicated, there must a commitment made and there must be definite terms agreed on. ), (2) Consideration which is what each party gives to the other as the agreed price for the other’s promises.

Usually the consideration is the payment of money but it need not be; it can be anything of value including the promise not to do something, (3) Contractual Capacity which simply means that the parties entering into the contract must be legally able to do so; they must be considered legally competent. Generally meaning being of legal age and having a sound mind, and (4) Legality which means that whatever the parties have contracted to do is legal and considered to be against public policy.

However in the event that all of the elements for a valid contract are present and it is determined that (1) the consent of the parties involved in the contract was given under duress or under fraudulent circumstances or (2) the contract is not written in its proper form (the law stipulates that certain contracts must be in writing) a contract can be considered unenforceable. A breach of contract occurs when a party who has signed a contract fails to live up to his responsibilities as specified in the contract.

A breach of contract occurs when a party who has signed a contract fails to live up to his responsibilities as specified in the contract. There are a range of legal remedies for breach of contract, and they are: (1) Damages: The remedy that is most often used for a breach of contract is the remedy of damages — payment in one form or another, made by the breaching party to the non-breaching party. There are many kinds of damages, and generally speaking damages may be very specific to the kind of breach that has occurred.

Following are some guidelines on damages: Compensatory damages aim to put the non-breaching party in the position that they had been if the breach had not occurred. Punitive damages are payments that the breaching party must make, above and beyond the point that would fully compensate the non-breaching party. Punitive damages are meant to punish a wrongful party for particularly wrongful acts, and are rarely awarded in the business contracts setting.

Nominal damages are token damages awarded when a breach occurred, but no actual money loss to the non-breaching party was proven. Liquidated damages are specific damages that were previously identified by the parties in the contract itself, in the event that the contract is breached. Liquidated damages should be a reasonable estimate of actual damages that might result from a breach. (2) Specific Performance. If damages are inadequate as a legal remedy, the non-breaching party may seek an alternative remedy called specific performance.

Specific performance is best described as the breaching party’s court-ordered performance of duty under the contract. Specific performance may be used as a remedy for breach of contract if the subject matter of the agreement is rare or unique, and damages would not suffice to place the non-breaching party in as good a position as they would have been had the breach not occurred. (3) Cancellation and Restitution. A non-breaching party may cancel the contract and sue for restitution if the non-breaching party has given a benefit to the breaching party.

“Restitution” as a contract remedy means that the non-breaching party is put back in the position it was in prior to the breach, while “cancellation” of the contract voids the contract and relieves all parties of any obligation under the agreement. ? References Business Law Today, TEXT & CASES: E-Commerce, Legal, Ethical, and Global Environment, Comprehensive Edition NINTH EDITION (2012), Roger LeRoy Miller, Gaylord A. Jentz, Herbert D. Kelleher.