Text 19 Contract

A contract is an agreement between parties that the law will enforce. Almost everyone makes contracts every day. For a contract to arise the offerer (who makes the offer) must make a definite offer, and the offeree (one to whom the offer is made) must accept the offer. Of course, the parties may negotiate additional details to reach mutually acceptable terms. The offeree could reject the offer by demanding, for example a lower price or earlier delivery. The offerer in turn, could accept or reject such a counteroffer. Without both offer and acceptance there is no agreement. The contract's object and purpose must be legal. The form of the contract must meet the legal requirements.

Contracts are usually written but may be spoken or implied. Some contracts are made and carried out in a single face-to-face conversation.

Even when a written contract is not required by law, it is wise to put the agreement in the writing and have a signed copy for each party. This is particularly true if the contract is complex and contains many details which could lead to later misunderstandings. It also is important when large sums of money or long periods of time are involved. For example, contracts to transfer an interest in real property (land or objects permanently attached to the land) must be in writing.

According to enforceability contracts can be classified as valid, voidable, and void or unenforceable.

A contract is valid if it meets the requirements to be legally enforceable. A contract is void if it has no legal force or involves fraud in the execution.  If a contract can be rejected by one of the parties on legal grounds, it is called a voidable contract, for example, when one party persuade the other to contract by means of fraud, if the contract is signed by a person with limited mental capacity, under the influence of illegal drugs, alcohol or medicines. A voidable contract can be enforced or avoided by the injured party or by a legally incompetent party. A void agreement on the other hand, cannot be enforced by either party. A contract is unenforceable, if there is no legal remedy. A valid contract sometimes becomes unenforceable because the time limit for filling suit to enforce it has passed or because the defendant has gone bankrupt and a judgment against the person cannot be collected.

Contracts can be classified as either executed or executory, according to whether or not they have been completed. Many contracts are performed almost immediately; others require days, months, or years to complete. Many life insurance contracts are not completed for decades. An executed contract is one that has been fully performed. Both parties have done all they promised to do. An executory contract is one that has not been fully performed. Something as agreed upon remains to be done by one or both of the parties.

Questions:

1. What does the term “contract” mean?

2. What is necessary for a contract to arise?

3. Why do the parties negotiate before signing a contract?

4. How are contracts classified according to enforceability?

5. What does unenforceability implies?

6. When is a contract void?

7. When is a contract voidable?

8. When does a valid contract become unenforceable?

9. How could you define executory contract?

10. How could you define an executed contract?