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What is a contract ?
contract, in the simplest definition, a promise enforceable by law. The promise may be to do something or to refrain from doing something. The making of a contract requires the mutual assent of two or more persons, one of them ordinarily making an offer and another accepting. If one of the parties fails to keep the promise, the other is entitled to legal redress. The law of contracts considers such questions as whether a contract exists, what the meaning of it is, whether a contract has been broken, and what compensation is due the injured party.
Historical development of contracts(what does it mean on a contract?)
Contract law is the product of a business civilization. It will not be found, in any significant degree, in noncommercial societies. Most primitive societies have other ways of enforcing the commitments of individuals; for example, through ties of kinship or by the authority of religion. In an economy based on barter, most transactions are self-enforcing because the transaction is complete on both sides at the same moment. Problems may arise if the goods exchanged are later found to be defective, but these problems will be handled through property law—with its penalties for taking or spoiling the property of another—rather than through contract law.
Even when transactions do not take the form of barter, noncommercial societies continue to work with notions of property rather than of promise. In early forms of credit transactions, kinship ties secured the debt,
as when a tribe or a community gave hostages until the debt was paid. Other forms of security took the form of pledging land or pawning an individual into “debt slavery.”
Some credit arrangements were essentially self-enforcing: livestock, for example, might be entrusted to caretakers who received for their services a fixed percentage of the offspring. In other cases—constructing a hut, clearing a field, or building a boat—enforcement of the promise to pay was more difficult but still was based on concepts of property.
In other words, the claim for payment was based not on the existence of a bargain or promise but on the unjust detention of another’s money or goods.
When workers sought to obtain their wages, the tendency was to argue in terms of their right to the product of their labour.
A true law of contracts—that is, of enforceable promises—implies the development of a market economy.
Where a commitment’s value is not seen to vary with time, ideas of property and injury are adequate and there will be no enforcement of an agreement if neither party has performed, since in property terms no wrong has been done.
In a market economy, on the other hand, a person may seek a commitment today to guard against a change in value tomorrow; the person obtaining such a commitment feels harmed by a failure to honour it to the extent that the market value differs from the agreed price
Contracts are made up of three basic parts – an offer, an acceptance and consideration
The offer and acceptance are what the purpose of the agreement is between the parties. A public relations firm offers to provide its services to a potential client. An electrician offers to wire a new home. A photographer agrees to photograph a wedding.
But offers are never really that simple, are they? What exactly will the public relations do for the client? Press releases? Media contacts? Editorial services? Event planning? Will it be exclusive?
Can the public relations firm offer its services to businesses in the same industry?
How long is the engagement for? Just an event? Or for a longer period of time? How much will be paid? How often?
Naturally, you’d expect that the owner of the public relations firm and the potential client discussed these items. But if the outcome of those discussions aren’t memorialized, aren’t written down in the contract, no one else will ever know.
And if later the client isn’t happy with how services are going, how does the firm show it fulfilled its bargain?
This scenario happens more frequently than anyone cares to admit. The only winner in those instances are the attorneys who are hired to sort it all out. That sorting – through a series of nasty letters back and forth, arbitration, mediation, litigation – costs an extraordinary amount of time and money, not to mention stress. Most of those consequences could have been avoided simply by writing a clear contract.
If you expect someone to do something – put it in writing. Don’t worry about offending the other side. If they promised something, write it down.
If you expect a certain level of services, spell it out.
Some people don’t want to do that because they are afraid the other side will walk away from the deal due to the specificity. My reply has always been the same: if they won’t put it in writing, they didn’t intend to do it at all. Better to find out before things go south in those instances.
Consideration is a legal way of saying “something of value.”
For a contract to be enforceable each party has to bring something of value to the table. In most commercial transactions the consideration is the service and/or product (on one side) and cash (on the other). You pay a certain amount of monthly retainer for the services of a public relations firm,
you write a check to the electrician for wiring your home,
you provide your credit card information to the photographer who takes event photographs.
When it’s time to write a contract, the first thing you should do is be sure you can clearly lay out what the bargain is – who will do what, when, where, how often and for how much. If there are any special promises or guarantees,
what are they? If something goes wrong, what do you intend to do about it? Make sure that you and the other side are both clear on each other’s rights and responsibilities.
In addition, business owners should have solid form agreements in their possession that address these main issues for routine transactions (drafted by an attorney for their use and not just downloaded from an Internet site*). And certainly for large transactions, an attorney should be consulted prior to signing any agreement.
Review of contracts is typically not expensive,
especially by an attorney that has experience in commercial transactions. The small amount spent upfront can potentially save thousands of dollars, not to mention avoidance of a large amount of unnecessary stress later.
What are the elements of a contract?
A legal contract is an agreement between two parties that creates mutual, legally enforceable obligations.
Certain essential elements must be present before a written contract is binding, including: identification (names) of the parties,
the purpose of the agreement, a detailed statement of the rights and obligations of each party, what each party is giving (e.g., money, products, or services) in exchange for what they’re getting, the term of the agreement (when it starts and when it ends), termination rights (when and under what circumstances one or both parties can end the contract before the normal end date), liabilities of the parties if something goes wrong or they have a dispute, signatures, and many other provisions.
For example :
let’s use a contract where a homeowner hires a contractor to remodel their kitchen (these are just examples, and are not intended to be used or relied on for your contract):
Identification of the parties
“This agreement is between John D. Homeowner (“Homeowner”) and Acme Construction, Inc. (“Acme”) for remodeling work to be done at 123 Maple St., Anytown USA.”
Rights and obligations of the parties
These would be too numerous to list here, but they might include statements like “Acme will remodel Homeowner’s kitchen, including replacing and installing the cabinets, countertops, sink, oven/stove, and faucet (collectively, the “Materials”) chosen by Homeowner. Acme will use commercially best efforts to complete the work by [insert date] (the “Completion Date”). Homeowner will make the home available during weekday hours from 9am-5pm.”
What each party is giving
“Acme will complete the remodel, by the agreed upon completion date, and will perform the work and Materials installation according to industry standards and best practices. Homeowner will pay Acme ten thousand dollars ($10,000) for the labor, consisting of an upfront payment of $5,000 to be paid at the start of the work and the remaining $5,000 to be paid when the work is complete. Homeowner may pay Acme by check.
Homeowner will also order and pay for Materials, and Acme will pick up the Materials from each provider.”
“This Agreement shall begin on the date the second of the two parties hereto signs it, and shall end when the work is complete.”
“Acme may terminate this Agreement on thirty days written notice if Homeowner’s check for the initial payment is returned by the bank for insufficient funds, or if Homeowner fails to obtain and pay for the Materials. Homeowner may terminate this Agreement at any time before Acme begins work, but not thereafter unless Acme commits a material breach of this Agreement.”
Obligations and rights if something goes wrong
In this case, it would only likely be on Acme’s side, since Homeowner’s obligations are limited to paying for the labor and materials.
“Acme shall correct any mistakes in the labor within thirty days if,
in Homeowner’s commercially reasonable opinion it negatively affects the cosmetic, functioning, stability, use, or safety of the kitchen. Homeowner shall pay Acme in cash within three days if either check bounces.”
“In the event of a dispute between the parties that cannot be resolved within thirty days, the parties shall mediate the dispute using an American Arbitration Association (AAA) arbitrator,
with each party paying their own expenses.
If the mediation does not resolve the matter, the parties shall submit the dispute to AAA for binding arbitration.”
Of course, there are many other parts of a contract,
but this gives you an idea of what some key provisions could look like.
Lawyers spend years in law school and then in practice to learn how to properly draft a contract so it’s enforceable,
but you can use Jotform form contracts with just a few clicks.
We recommend that you check with your own lawyer before using any form contract to make sure it covers all the necessary bases for what you’re trying to achieve.
There are a huge number of types of contracts (too many to list here) that people use,
but check out our website to see the form contracts available through JotForm.
We’re adding forms all the time!
Mutual Assent Defined
When two parties agree to form a contract, this is known as mutual assent.
Mutual assent is generally proven by showing that an offer has been made and accepted. When two parties set to agree to terms that fulfill certain requirements, mutual assent has occurred. Agreeing to these initial terms is the first step in forming a contract.
Contract types include:
full-time and part-time contracts.
freelancers, consultants, contractors.