Contract Law – Its Importance in the World Today

Our society depends upon free exchange in the marketplace at every stage. The interactions in the market all the times depend upon voluntary agreements between individuals or other “legal persons”. Such voluntary agreements can never become binding without a legal contract.

The origin of the contract law can be traced from the development of common law and it is also alleged to be an offspring of tort law, as both contracts and torts give rise to obligations. The difference between them lies in the fact that the tort obligations are imposed by law; on the other hand contracts are a medium through which people willingly create commitment between themselves.

Contract law is based on a number of Latin legal principles, out of which consensus ad idem is the most important, which means a meeting of the minds between the parties i.e. an agreement among them. It is said to be a part of “private law” because it does not bind the state or persons that are not parties to the contract. Thus, contracts are voluntary and require an “exercise of the will of the parties”. But not all agreements are contracts e.g. Non-business agreements, religious agreement, or charitable agreements etc.

A contract an agreement between two or more persons, creating an obligation upon them to fulfill or not to fulfill some duties laid down specifically in the agreement. This agreement creates a legal relationship of rights and duties on the parties and if these obligations in the agreement are not fulfilled then stringent action could be taken by the courts on the party. There are three key elements for the conception of a contract. These are offer, acceptance, consideration and an intention to create legal relations. Contracts can be written, oral, or implied also. Generally the parties to a written contract comprehend that they have entered into a binding agreement, but they do not always grasp this point when making an oral or implied contract. It is always difficult to prove the terms of an oral or implied contract than those of a written one.

There are many important points that have to be kept in mind while forming a valid contract; after making the offer to the promisee, the contract will be formed when the promisee communicates his acceptance to the contract. The person making the offer is free to withdraw the same before the acceptance of the offer. Once the agreement is made, the following clauses should be present in the same.

1. There should be some consideration offered for the agreement.
2. The parties should be competent to contract.
3. The consent to the agreement should be free.
4. The object of the agreement should be lawful.

Consideration

This is one of the important aspects which is necessary for a party to enter into a contract. This is the return which a person gets for performing the obligations of the contract. This needs to be of some value but it is not necessary that it should be specified in the contract. An agreement made without consideration is void.
Persons competent to contract.

All persons are legally authorized to enter into a contract except for the following:
• Minors, who are above 18 years of age and when a guardian is appointed for them the age is increased to 21 years.
• Mentally incompetent persons.
• Person who is ineligible from entering into the contract by law.

Companies have a separate legal entity to enter into contracts through the acts of their agents, officers and workers.

Consent to the contract

Unless the consent of the contract is obtained through, coercion, undue influence, fraud, misrepresentation or mistake, it is presumed that the consent is free.

Relief given to the aggrieved party
Generally the party who has suffered due to the breach of contract of the other can claim money damages that will put the non-breaching party in the position it would be in, if the contract had been performed. In some cases the court may order the breaching party to perform its obligations.

The aim of the law of damages is to place the plaintiff in the same position that he would have been, had the breach not occurred. The parties to a contract may determine the damages beforehand which are called liquidated damages and can be recovered. In this case the sum of money should not exceed the amount already specified. But in the case when there are no predetermined damages then the person can claim the whole amount.

Essentials of a contract agreement

The contract should contain certain clauses without which the agreement will be incomplete.
• A detailed description of the duties and obligations of the parties should be stated to avoid ambiguity at a later stage.
• Representations concerning warranties should be present in the contract
• Confidentiality clauses should be present to ensure that the parties keep any information which comes into the possession, due to the contract, confidential.
• The force majeure clause which generally provides that no party will be liable for non-performance arising out of an event of force majeure i.e. war, aggression, epidemic should also be present.
• The term should also be specified in the agreement.
• The events on the occurrence of which the contract will be terminated should also be specified. This clause also describes the methods of giving notice, and whether the breaching party must be given a chance to cure the breach.
• The relief available to the other party on the breach by one party should also be stated. This would also include liquidated damages.
• An arbitration clause should also be inserted to settle the disputes through arbitration rather than court litigation.
• In international contracts, it is important to state the jurisdiction and the applicable law governing the contract.

Once these conditions are incorporated in a contract it will be easier for the parties to enforce them and claim their rights.

Legal Research Counsel
Mindsprings Solutions (India) Pvt. Ltd.
visit Site: http://www.mindsprings.net
Visit Blog: http://lpo-legalprocessoutsourcing.blogspot.com

About these ads

15 Responses

  1. I want to know…..How Contract is the brain child of corporate world???????

  2. What is the relevance of the law of contract in modern business interactions?

  3. please help me to know the relevance of law of contract in business

  4. discuss for me the roles of the law of contracts to an economy.both positively and negatively.

  5. The usefulness of the law of contract in the practice of estate surveying and valuation

  6. The usefulness of the law of contract in the practice of estate surveying and valuation.

  7. Im also keen to to discover how the law of contract is applicable in modern day business entities!

  8. Thank you for this, now I am more even enlighten on the relevance of law to our society…

  9. thanks a lot, but am still having a problem on what are the importances of free consent in contract?

  10. Free consent is necessary for the valid contract and is not enforceable by law and will be voidable contract.

  11. So if consent is caused by coercion then it will be voidable contract.

  12. I like it when people come together and share ideas.
    Great website, continue the good work!

  13. Discuss for me the roles of laws of contracts in the modern economy. Both positively and negatively.

  14. As a general rule any contract with no free consent is void. But there is exception to the general rule that the contract can be voidable at the option of the injured party where the contract was entered under undue influence,misrepresentation, or mistake. Where the injured party has the option either to rescind the contract or to order the other party to change some terms in the contract and continue with the contract.

  15. discuss the history of the contract law?/

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

Join 31 other followers

%d bloggers like this: