Contracts

              The law recognizes the freedom of individuals to enter into agreements with one another and enforces certain types of agreements as a matter of social policy. Contract law is of vital importance to business. By providing sanctions against violators and rules to cover all possible contingencies, the law protects individuals, discourages careless bargain-making, and reduces the cost of transactions.

     Contracts involve binding promises. Either or both of the parties concerned may promise to perform at some future date rather than immediately. Contracts are also bargains. They govern an exchange between two or more parties who have (1) negotiated to set the terms of the deal and (2) freely assented to the agreement.

     Most contracts are bilateral, that is, they involve promises by both parties. Some contracts are unilateral, though. In unilateral contracts, a promise is exchanged for some actual performance. Contracts of either type may be express agreements set out in words or implied agreements established by behavior alone. (Unless the Statute of Frauds requires the contract to be in writing. ) When justice demands, the courts may even use the concept of quasi-contract to impose contracts on people who have not agreed to them.

     Four prerequisites must be met to create an enforceable contract:

           1. All parties to the contract must be competent (over age 18 and not mentally impaired). The law protects incompetents and infants by allowing them to back out of a contract at will. 

           2. All parties must agree to the same terms at the same time through the process of offer and acceptance. Assent is determined objectively, that is, by interpreting the parties deeds.

           3. Legally binding promises require that something of value, that is some consideration, be given in return for a promise. Consideration may consist of a return promise, an action, some forbearance from action, or a change in a legal relationship.

            4. The contract's substance must be legal. The courts will not enforce agreements that violate legal statutes, public policy, or public morals.    

     Contracts that meet these four prerequisites may still be flawed. Mistakes, misrepresentation, duress, undue influence, and lack of written evidence of the terms of the contract may all make contracts fully or partially unenforceable.

     Over the past 30 years, the Uniform Commercial Code has made the laws governing the sale of goods consistent among the states and has had a major impact on contract law, While the UCC did not repudiate the common law, it did make changes in order to better deal with business realities and minimize technicalities. Thus, the UCC relaxed the rules regarding offer and 'acceptance; dealt with the problems arising from the use of form documents for offer and acceptance; simplified contract modification; and, with the doctrine of unconscionability, created a new and flexible tool for policing the contract process.