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LEGAL DICTIONARY

Contract Law

What Is Contract Law?

Contract law is an area of law pertaining to legal agreements between individuals, businesses, and groups. A written and signed contract creates an obligation between two or more parties to do or not do particular things, such as an exchange of money for goods or services provided.

Contracts protect us in many ways and in many aspects of our lives, from employment contracts that spell out a job description and its salary to non-disclosure agreements that protect real and intellectual property.

What Are the Basics of Contract Law?

Contracts typically involve two or more parties (participants) who are considered competent to enter into a legal agreement. In this case, "competent" means that all parties are mentally able legal adults and that the contract is mutual and voluntary.

Any legal contract must contain the following elements.

  • Offer: The offer is what one party will do, such as paint your house or provide your cellular service
  • Acceptance: Acceptance is the agreement to accept what is offered without any changes
  • Intent: Both parties must acknowledge that the agreement is enforceable by law
  • Consideration: Consideration is something of value that will be exchanged for the offer, such as a flat fee or a series of monthly payments

Although oral agreements can be valid, written contracts are easier to enforce in a court of law.

Examples of Contracts

We encounter contracts in many aspects of our daily lives, including everything from warranties on appliances to agreements with landscaping services. Here are some examples of essential written contracts:

  • Employment contract - An employment contract protects both the employee and the employer by detailing job duties, hours, and compensation.
  • Non-disclosure agreement - A non-disclosure agreement (NDA) prohibits one party from discussing the information detailed in the contract with a non-authorized party or parties.
  • Non-compete agreement - This agreement prevents a current or former employee from working with a competitor for a specified time after their employment ends.
  • At-will employment - Under the terms of at-will employment, an employer can terminate an employee at any time for any reason (with some legal exceptions). Also, an employee can leave the job at any time without legal consequences.
  • Trust - A trust agreement is a legal contract that allows the trustor to transfer the ownership of assets to the trustee to be held for the trustor's beneficiaries.

What Is Breach of Contract?

A contract is breached when someone does not follow the terms of the contract. The breach may be a violation of one or more contract clauses or contract provisions. In many cases, the law allows the harmed party to take the other party to court to enforce the agreement.

For example, a forum selection clause, typically included in written commercial contractual agreements, stipulates the courts of a specific jurisdiction that will hear any contract dispute.

How is a breach of contract resolved?

A successful breach of contract case can involve the following forms of resolution:

  • Compensatory damages – money awarded to a plaintiff to compensate for damages, injuries, or other losses caused by the breach of contract
  • Punitive damages – additional damages awarded at the court's discretion when the breach has caused great harm
  • Nominal damages – trivial compensation awarded when the harm of the breach has been minimal
  • Liquidated damages – an estimate of hard-to-define losses from a breach
  • Restitution – the non-breaching party is put back in the position it was in before the breach occurred
  • Cancellation – the contract is voided, and all parties are relieved of any contractual obligation

Conclusion

The many exchanges we count on in a free marketplace depend upon contract law. Contract law makes many of these voluntary agreements we make in our business and personal lives enforceable.

Helpful Resources:
Cornell Law - Contract
Judicial Education Center - Elements of a Contract
KPPB Law - What Is A Forum Selection Clause?
Britannica - Contract definition

What Is Contract Law?

Contract law is an area of law pertaining to legal agreements between individuals, businesses, and groups. A written and signed contract creates an obligation between two or more parties to do or not do particular things, such as an exchange of money for goods or services provided.

Contracts protect us in many ways and in many aspects of our lives, from employment contracts that spell out a job description and its salary to non-disclosure agreements that protect real and intellectual property.

What Are the Basics of Contract Law?

Contracts typically involve two or more parties (participants) who are considered competent to enter into a legal agreement. In this case, "competent" means that all parties are mentally able legal adults and that the contract is mutual and voluntary.

Any legal contract must contain the following elements.

  • Offer: The offer is what one party will do, such as paint your house or provide your cellular service
  • Acceptance: Acceptance is the agreement to accept what is offered without any changes
  • Intent: Both parties must acknowledge that the agreement is enforceable by law
  • Consideration: Consideration is something of value that will be exchanged for the offer, such as a flat fee or a series of monthly payments

Although oral agreements can be valid, written contracts are easier to enforce in a court of law.

Examples of Contracts

We encounter contracts in many aspects of our daily lives, including everything from warranties on appliances to agreements with landscaping services. Here are some examples of essential written contracts:

  • Employment contract - An employment contract protects both the employee and the employer by detailing job duties, hours, and compensation.
  • Non-disclosure agreement - A non-disclosure agreement (NDA) prohibits one party from discussing the information detailed in the contract with a non-authorized party or parties.
  • Non-compete agreement - This agreement prevents a current or former employee from working with a competitor for a specified time after their employment ends.
  • At-will employment - Under the terms of at-will employment, an employer can terminate an employee at any time for any reason (with some legal exceptions). Also, an employee can leave the job at any time without legal consequences.
  • Trust - A trust agreement is a legal contract that allows the trustor to transfer the ownership of assets to the trustee to be held for the trustor's beneficiaries.

What Is Breach of Contract?

A contract is breached when someone does not follow the terms of the contract. The breach may be a violation of one or more contract clauses or contract provisions. In many cases, the law allows the harmed party to take the other party to court to enforce the agreement.

For example, a forum selection clause, typically included in written commercial contractual agreements, stipulates the courts of a specific jurisdiction that will hear any contract dispute.

How is a breach of contract resolved?

A successful breach of contract case can involve the following forms of resolution:

  • Compensatory damages – money awarded to a plaintiff to compensate for damages, injuries, or other losses caused by the breach of contract
  • Punitive damages – additional damages awarded at the court's discretion when the breach has caused great harm
  • Nominal damages – trivial compensation awarded when the harm of the breach has been minimal
  • Liquidated damages – an estimate of hard-to-define losses from a breach
  • Restitution – the non-breaching party is put back in the position it was in before the breach occurred
  • Cancellation – the contract is voided, and all parties are relieved of any contractual obligation

Conclusion

The many exchanges we count on in a free marketplace depend upon contract law. Contract law makes many of these voluntary agreements we make in our business and personal lives enforceable.

Helpful Resources:
Cornell Law - Contract
Judicial Education Center - Elements of a Contract
KPPB Law - What Is A Forum Selection Clause?
Britannica - Contract definition