Contracts are an important part of everyday life. They are an essential part of business. As a student of a business law class, I will discuss in this paper several aspects of contracts. This paper will give a definition of a contract and the essential elements necessary to form a valid contract. It will briefly discuss breach of contract and the difference between a material breach and a nonmaterial breach of contract.
Examples of legal and equitable remedies available for breach of contracts will be highlighted. Also, legal excuses for nonperformance or other grounds for discharge of contracts will be addressed. Finally, three types of common contracts personally and professionally encountered will be mentioned. A contract is an agreement between parties that is enforceable by law (Melvin, 2012).
Transactions conducted within the business world and by individuals that involve commitments to provide goods, services, or real property are usually in contract form. When one party makes an offer to another and they reach an agreement, a contract is formed. An agreement reached between the cooperating parties contains a promise, for example, one party agrees to sell a vehicle for $500 and the other party accepts and pays the money then receives the merchandise.
This constitutes an acceptance of assent between parties showing that the parties agree with the terms offered. To ensure fairness of trade for goods and services, contracts are enacted between individuals in the event one party breaks their promise or breaches the contract. A breach of contract is when a party to an agreement owes a duty to perform and fails to fulfill her obligation (Melvin, 2011). A material breach of contract is when the non-breaching party did not receive the main benefit of the bargain or contract. An example of a material breach is when a homeowner contracts an electrician to install high grade wires for safety reasons and instead the electrician installs low-quality wires that does not work as well and causes damage to the walls.
Since the intent of the contract (safety) was ignored or disregarded this was a material breach of contract (legalmatch, 2012). A non material breach usually occurs when there is a failure to perform a duty that involves minor details that does not affect the entirety of the outcome of the contract. An example, a homeowner asks for black wires and the contractor puts in the same grade of red wires that are hidden by the wall and performs the same.
This is considered a non material breach because the overall outcome of the contract is the same (legalmatch, 2012). The law also provides means for parties to be compensated for breach of contract by legal remedies. Legal remedies for many contracts are characterized by remedy at law which is money damages that are awarded. These monetary damages are awarded to the non breaching party by the court.
In contract claims, money damages are limited primarily to compensatory/direct damages, consequential damages, restitution, and liquidated damages. When the monetary damages are not sufficient, equitable relief may be granted (Melvin, 2012). Equitable damages are awarded when money damages are not enough to compensate the non breaching party or when one party was unjustly enriched at the other party’s expense. For example, supplies were paid for and not delivered. In such instances, equitable relief may be granted by the court.
This type of relief is primarily in the form of specific performance, injunctive relief, or reformation (Melvin, 2012). There are also procedures to follow when non performance or discharge of contracts is warranted. Legal excuses for non performance or grounds for discharge of contracts are when the parties agree to a change in the terms of the contract or the actions of the party who changes from the terms of the contract are implicitly accepted by the action or non-action of the other party. If the change is not acceptable and serious enough to alter the intended results of the contract, the deviated party has breached the contract (lectriclaw, 2012).
Contracts can be discharged by complete performance or material non performance of the contractual duty. For example: A contractor does not do any work promised on a bathroom, or almost none, then the homeowner does not owe him anything. Therefore, the homeowner - the non breaching party is discharged and the contractor is liable for the breach of contract (lectriclaw, 2012).
A cancellation can be effected if one party breaches the contract, or a termination can occur when either party lawfully ends the contract for anything other than a breach. In this case, all executor duties are discharged on both sides but in the event of a partial breach, there is still a right to seek a remedy (lectriclaw, 2012). Procedures dealing with all aspects of contracts are a part of everyday transactions and can affect every individual on one level or another. In everyday living, contracts can be a basic part of individual life.
On a personal level, there are several types of contracts that have been encountered. These contracts are life, health, and automobile insurance that is a benefit for the person insured in case something happens such as a death, a hospital stay or a car accident.
Also, there are employment contracts that are signed when one accepts a job such as an employment application, and service contracts such as contractors performing work on my home. These are basic examples of how contracts affect everyday life on a personal level. As one can see, it is evidenced that various aspects of contracts are an important part of business and individual life.
This paper discussed the essential elements necessary to form a valid contract, breach of contract, material and non material breach of contact, examples of legal and equitable remedies available, legal excuses for nonperformance or other grounds for discharge of contracts. Also, it was briefly mentioned about contracts involved in personal and professional life.
Legal match. Material breach of contract. Retrieved 12/26/12 from: http://www.legalmatch.com/law-library/article/material-breach-of-contract.html
Mayer, D, Warner, D. Foundations of business law and the legal environment. Retrieved 12/26/12 from: http://catalog.flatworldknowledge.com
Melvin, S.P. (2011). The legal environment of business: A managerial approach: Theory to practice. New York, NY: McGraw-Hill/Irwin.
The lectric law library. Retrieved 12/26/12 from: http://www.lectlaw.com/files/bul08.htm