Contract

Introduction

The definition of a contract Contract v. agreement Requirements for a valid contract Void and voidable contracts Unenforceable contracts Breach of contract

Contract

A legally binding agreement between two or more parties which the court will enforce

Agreement – an exchange of promises; not every agreement is a contract

Contract – a legally enforceable agreement – the agreement that generates rights and obligations that may be enforced in the courts

Contract and agreement

The law does two things in transforming an agreement into an enforceable contract:

1. It determines whether the contract meets all the requirements of the law

2. The law, and not the contracting parties, has the final say on whether there is a contractual obligation and what the scope of the obligation is

Express and implied terms

Express terms: what the parties said or wrote Implied terms: terms that have not been

agreed by the parties, but the law makes them part of the contract anyway

Requirements for a valid contract

1. The parties must possess legal capacity to enter contract2. One party must have made a binding offer, and the other one

has to accept it3. The contract must be supported by consideration4. The resulting agreement must have been a genuine one5. Some contracts must be made in a particular form6. The object of the contract must not be disapproved of by the

law

Legal capacity

Parties must be competent Natural persons: age of majority (consent),

mental capacity Legal persons: properly registered

companies

Offer and acceptance

One party must have made a binding offer to the other, and the offer must have been accepted

Such an offer must be binding; parties must accept legal consequences.

In legal terminology, an offer is a statement of willingness by the offeror to enter into a contract if the other party accepts all the terms of the offer

Consideration

Every contract must be supported by consideration (the court only enforces a bargain, not a one-sided promise).

The doctrine of consideration: any promise not supported by consideration is unenforceable.

If the party that makes a promise gets nothing in return, the contract is unenforceable: each party must benefit.

Genuine agreement

The resulting agreement must have been a genuine one

The contract must reflect the actual exchange of promises, not a false one

Contracts in particular form

In certain exceptional cases, the contract must have been made in a particular form

- Marriage- Contracts which must be in writing: a transfer of

shares, an assignment of copyright, a contract to pay someone else’s debt...

- To enforce one of these contracts, a claimant must produce a writing signed by the other party that contains evidence of the contract

The object of the contract

The object of a contract must be approved of by the law

- f.e. “to take a contract on the rival” is not a contract in law

Such an agreement is not legally enforceable

Void contracts

Any contract that lacks one of essential requirements

It does not give rise to any legal rights or duties

It does not exist as far as the law is concerned

Voidable contracts

Valid to start with, but may be avoided at the option of one of the parties

A contract affected by a flaw (fraud, duress, misrepresentation, undue influence)

F.e. The doctrine of duress allows a party to get out of a contract when he was forced to enter into contract by threats from the other party

Unenforceable contracts

Contract that is valid in all respects, but cannot be enforced by an action in law because the party wishing to enforce it lacks some kind of evidence (evidence in writing)

Breach of contract

Contract typically creates an obligation to do or avoid doing something, or to pay a sum of money

Breach of contract is the refusal or failure by a party to a contract to perform an obligation imposed on them under the contract

If one party does not do what they have promised to do, they are in breach of contract

The injured party is entitled to a legal remedy

Remedies for breach of contract

Equitable remedies: quantum meruit, ‘as much as he deserves’ –

for partial performance; Specific performance – an order to make a

party perform his obligatons under the contract

Injunction – a court order to stop someone breaching a term of the contract

Damages

The aim of damages in contract law is to put the claimant in the position he would have been in if the contract had been performed properly

Damages are designed to compensate for the loss one has suffered

Expectation damages Unliquidated damages – the court decides how much

will be awarded in damages Liquidated damages – parties decide in advance

Vocabulary

Binding agreement – obvezujući sporazumContracting parties – ugovorne straneNatural person – fizička osobaLegal person – pravna osobaValid contract – valjani ugovorVoid contract – ništav (ništetan) ugovorVoidable contract – pobojan (poništiv) ugovorCopyright – autorsko pravoBreach of contract – raskid ugovora

Vocabulary revision

Fill in the blanks with the most appropriate words from the list below:

consideration, sue, obligation, illegal, breach, fraud, mutual, capacity

A contract is an agreement that creates a binding _________________ upon the parties. The essentials of a contract are as follows: _________________ agreement, a legal ________________, which need not be financial; parties who have legal ________________ to make a contract; absence of __________ or duress; and a subject matter that is not __________________ or against public policy.

In case of a _____________ of contract, the injured party may go to court to __________ for damages, for injunction, or for specific performance if financial compensation would not compensate for the breach.

Answer key

A contract is an agreement that creates a binding obligation upon the parties. The essentials of a contract are as follows: mutual agreement, a legal consideration, which need not be financial; parties who have legal capacity to make a contract; absence of fraud or duress; and a subject matter that is not illegal or against public policy.

In case of a breach of contract, the injured party may go to court to sue for damages, for injunction, or for specific performance if financial compensation would not compensate for the breach.