Law of Contract for Business Law CPA / CS / CCP Section 1

A contract is a legally enforceable agreement between two or more parties where each assumes a legal obligation that must be completed. Many aspects of daily life involve contracts, including buying property, applying for a car loan, signing employment-related paperwork, and agreeing to terms and conditions when buying products and services or using computer software.

Legal issues involving contracts arise most often when one party fails to perform the legal obligation it has agreed to do. When a party breaches a contract by failing to perform, the other party can often sue for money damages, or, in some limited cases, can ask the court to force the other party to perform as promised.

Contracts can also be the source of legal disputes when they are not written clearly. Parties who misunderstand the terms of their agreement may sue each other and have a court settle the argument. Additionally, when a company signs a contract and later goes out of business or is unable to fulfill its promises, the other party may have to pursue legal action in civil or bankruptcy court to obtain relief.

Terms to Know

• Contract – An agreement between two or more parties that creates in each party a duty to do or not do something, and the right to performance of the other party’s duty or a remedy for a breach
• Breach – Failure to perform an obligation created by a promise or contract, without justification or excuse
• Performance – The action or omission required to fulfill a promise or obligation
• Specific Performance – An equitable remedy that requires a breaching party to fulfill the exact terms of the contract; used when monetary damages are insufficient or inadequate, such as for the breach of a sale of real estate
• Offer – A proposal for an agreement that another party may accept upon receipt to form a legally binding contract
• Acceptance – An approval, often required to be in writing, of an offer that forms a legally binding contract
• Statute of Frauds – A state law that does not allow certain contracts to be enforced unless they are in writing

Other Considerations When Hiring a Contracts Lawyer

Many people believe that all contracts have to be in writing. Every state has a statute of frauds, which does indeed require certain types of contracts, such as contracts for the sale of real property, to be in writing. However, all states still allow some legally binding contracts to be oral. These contracts usually involve the sales of goods under a certain dollar amount, usually $500, or the purchase of services that can be completed in less than a year. When disputes arise regarding oral contracts, the parties should seek legal advice right away to ensure that their contract is valid under state law.

In some instances of breach of contract, the court may award specific performance, which requires the breaching party to do what it promised. However, this option is available only in limited circumstances. Specific performance is usually reserved for real estate transactions and agreements to purchase a one-of-a-kind products, such as works of art. With most contracts, a non-breaching party can only sue for money damages. The court will determine an amount of money to compensate the non-breaching party for the failed performance of the contract. An attorney can help you determine an acceptable dollar amount for a breach and ensure that your financial interests are protected.

If you are facing a legal issue related to a contract, consult a contracts lawyer immediately to explore your legal rights.