Contract Law
A contract is an agreement (promise) between persons (businesses, individuals, organizations, or government agencies) to do, or not do, something in exchange for 'consideration' (compensation). The agreement is enforcable by law. The law provides remedies if an agreement is broken (breached) or recognizes the performance of an agreement as a duty. Contracts arise when a duty does or may come into existence, because of a promise made by one of the parties. To be legally binding as a contract, a promise must be exchanged for adequate consideration. Adequate consideration is a benefit or detriment which a party receives which reasonably and fairly induces them to make the promise/contract. For example, promises that are purely gifts are not considered enforceable because the personal satisfaction the grantor of the promise may receive from the act of giving is normally not considered adequate consideration. Certain promises that are not considered contracts may, in limited circumstances, be enforced if one party has relied to his detriment on the assurances of the other party.
Contracts are mainly governed by state statutory and common (judge-made) law and private law. Private law principally includes the terms of the agreement between the parties who are exchanging promises. This private law may override many of the rules otherwise established by state law. Statutory law may require some contracts be put in writing and executed with particular formalities. Otherwise, the parties may enter into a binding agreement without signing a formal written document. Most of the principles of the common law of contracts are outlined in the Restatement Second of The Law of Contracts published by the American Law Institute. The Uniform Commercial Code, whose original Articles have been adopted in nearly every state, represents a body of statutory law that governs important categories of contracts. The main Articles that deal with the law of contracts are:
- Article 1 (General Provisions)
- Article 2 (Sales).
- Article 9 (Secured Transactions) governs contracts assigning the rights to payment in security interest agreements.
Contracts related to particular activities or business sectors may be highly regulated by state and/or federal law.
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Types of Remedies
There are many different types of remedies that can be sought when there is a breach of contract.
- Compensatory Damages
Money to reimburse you for costs to compensate for your loss.
- Consequential and Incidental Damages
Money for losses caused by the breach that were foreseeable. Foreseeable damages means that each side reasonably knew that, at the time of the contract, there would be potential losses if there was a breach.
- Attorney fees and Costs
Only recoverable if expressly provided for in the contract.
- Liquidated Damages
These are damages specified in the contract that would be payable if there is a fraud
- Specific Performance
A court order requiring performance exactly as specified in the contract. This remedy is rare, except in real estate transactions and other unique property, as the courts do not want to get involved with monitoring performance.
- Punitive Damages
This is money given to punish a person who acted in an offensive and egregious manner in an effort to deter the person and others from repeated occurrences of the wrongdoing. You generally cannot collect punitive damages in contract cases.
- Rescission
The contract is canceled and both sides are excused from further performance and any money advanced is returned.
- Reformation
The terms of the contract are changed to reflect what the parties actually
intended.
Bear in mind that it often makes sense for both parties to directly negotiate a settlement. However, if the matter involves a significant amount of money, a wise option would be to retain an attorney to help you propose settlement terms and to review any proposed settlement in advance.
Other alternatives for dispute resolution include mediation and arbitration . These avenues for obtaining a remedy may be more cost effective than simply filing a lawsuit and letting the court settle the dispute.
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