Contract
From Wikipedia, the free encyclopedia
A contract is a legally binding exchange of promises or agreement between parties that the law will enforce. Contract law is based on the Latin phrase pacta sunt servanda (literally, promises must be kept).[1] Breach of a contract is recognised by the law and remedies can be provided. Almost everyone makes contracts everyday. Sometimes written contracts are required, e.g., when buying a house.[2] However the vast majority of contracts can be and are made orally, like buying a law text book, or a coffee at a shop. Contract law can be classified, as is habitual in civil law systems, as part of a general law of obligations (along with tort, unjust enrichment or restitution).
Contents |
[edit] Contractual formation
In common law jurisdictions there are three key elements to the creation of a contract. These are offer and acceptance, consideration and an intention to create legal relations. In civil law systems the concept of consideration is not central. In addition, for some contracts formalities must be complied with under what is sometimes called a statute of frauds.
One of the most famous cases on forming a contract is Carlill v. Carbolic Smoke Ball Company,[3] decided in nineteenth century England. A medical firm advertised that its new wonder drug, the smokeball, would cure people's flu, and if it did not, buyers would get £100. Lots of people sued for their £100 when it did not work. Fearing bankruptcy, Carbolic argued the advert was not to be taken as a serious, legally binding offer. It was merely an invitation to treat, or mere puff, a gimmick. But the court of appeal held that to a reasonable man Carbolic had made a serious offer. People had given good "consideration" for it by going to the "distinct inconvenience" of using a faulty product. "Read the advertisement how you will, and twist it about as you will," said Lord Justice Lindley, "here is a distinct promise expressed in language which is perfectly unmistakable".
[edit] Offer and acceptance
Perhaps the most important feature of a contract is that one party makes an offer for a bargain that another accepts. This can be called a 'concurrence of wills' or a 'meeting of the minds' of two or more parties. There must be evidence that the parties had each from an objective perspective engaged in conduct manifesting their assent, and a contract will be formed when the parties have met such a requirement.[4] An objective perspective means that it is only necessary that somebody gives the impression of offering or accepting contractual terms in the eyes of a reasonable person, not that they actually did want to contract.
The case of Carlill v. Carbolic Smoke Ball Co. (above) is an example of a 'unilateral contract', where acceptance is the performance of an act or the fulfillment of the condition precedent. In the U.S., the general rule is that in "case of doubt, an offer is interpreted as inviting the offeree to accept either by promising to perform what the offer requests or by rendering the performance, as the offeree chooses."[5]
Offer and acceptance does not always need to be expressed orally or in writing. An implied contract is one in which some of the terms are not expressed in words. This can take two forms. A contract which is implied in fact is one in which the circumstances imply that parties have reached an agreement even though they have not done so expressly. For example, by going to a doctor for a checkup, a patient agrees that he will pay a fair price for the service. If he refuses to pay after being examined, he has breached a contract implied in fact. A contract which is implied in law is also called a quasi-contract, because it is not in fact a contract; rather, it is a means for the courts to remedy situations in which one party would be unjustly enriched were he or she not required to compensate the other. For example, say a plumber who accidentally installs a sprinkler system in the lawn of the wrong house. The owner of the house had learned the previous day that his neighbor was getting new sprinklers. That morning, he sees the plumber installing them in his own lawn. Pleased at the mistake, he says nothing, and then refuses to pay when the plumber hands him the bill. Will the man be held liable for payment? Yes, if it could be proven that the man knew that the sprinklers were being installed mistakenly, the court would make him pay because of a quasi-contract. If that knowledge could not be proven, he would not be liable. Such a claim is also referred to as "quantum meruit." [6]
- See also: Invitation to treat
[edit] Consideration and estoppel
Consideration is a controversial requirement for contracts under common law. It is not necessary in civil law systems,[7] and for that reason has come under increasing criticism. The idea is that both parties to a contract must bring something to the bargain. This can be either conferring an advantage on the other party, or incurring some kind of detriment or inconvenience. Three rules govern consideration.
- consideration must be sufficient, but need not be adequate. For instance, agreeing to buy a car for a penny may constitute a binding contract.[8] While consideration need not be adequate, contracts in which the consideration of one party greatly exceeds that of another may nevertheless be held invalid for lack of sufficient consideration. In such cases, the fact that the consideration is exceedingly unequal can be evidence that there was no consideration at all. Such contracts may also be held invalid for other reasons such as fraud, duress, unequal bargaining power, or contrary to public policy. In some situations, a collateral contract may exist, whereby the existence of one contract provides consideration for another. Critics say consideration can be so small as to make the requirement of any consideration meaningless.
- consideration must not be from the past. For instance, in Eastwood v. Kenyon,[9] the guardian of a young girl raised a loan to educate the girl and to improve her marriage prospects. After her marriage, her husband promised to pay off the loan. It was held that the guardian could not enforce the promise as taking out the loan to raise and educate the girl was past consideration, because it was completed before the husband promised to repay it.
- consideration must move from the promisee. For instance, it is good consideration for person A to pay person C in return for services rendered by person B. If there are joint promisees, then consideration need only to move from one of the promisees.
Civil law systems take the approach that an exchange of promises, or a concurrence of wills alone, rather than an exchange in valuable rights is the correct basis. So if you promised to give me a book, and I accepted your offer without giving anything in return, I would have a legal right to the book and you could not change your mind about giving me it as a gift. However, in common law systems the concept of culpa in contrahendo, a form of 'estoppel', is increasingly used to create obligations during pre-contractual negotiations.[10] Estoppel is an equitable doctrine that provides for the creation of legal obligations if a party has given another an assurance and the other has relied on the assurance to his detriment. A number of commentators have suggested that consideration be abandoned, and estoppel be used to replace it as a basis for contracts.[11] However, legislation, rather than judicial development, has been touted as the only way to remove this entrenched common law doctrine. Lord Justice Denning famously stated "The doctrine of consideration is too firmly fixed to be overthrown by a side-wind."[12]
- See also: Consideration under English law
[edit] Intention to be legally bound
There is a presumption for commercial agreements that parties intend to be legally bound. On the other hand, many kinds of domestic and social agreements are unenforceable on the basis of public policy, for instance between children and parents. One early example is found in Balfour v. Balfour.[13] Using contract-like terms, Mr Balfour had agreed to give his wife £30 a month as maintenance while he was living in Ceylon (Sri Lanka). Once he left, they separated and Mr Balfour stopped payments. Mrs Balfour brought an action to enforce the payments. At the Court of Appeal, the Court held that there was no enforceable agreement as there was not enough evidence to suggest that they were intending to be legally bound by the promise.
The case is often cited in conjunction with Merritt v. Merritt.[14] Here the court distinguished the case from Balfour v. Balfour because Mr and Mrs Merritt, although married again, were estranged at the time the agreement was made. Therefore any agreement between them was made with the intention to create legal relations.
[edit] The abstraction principle
Germany has a special approach to contracts, which ties into property law. Their 'abstraction principle' (Abstraktionsprinzip) means that the personal obligation of contract forms separately to the title of property being conferred. When contracts are invalidated for some reason, e.g. a car buyer was so drunk that he lacked legal capacity to contract,[15] the contractual obligation to pay can be invalidated separate from proprietary title of the car. Unjust enrichment law, rather than the law of contract, is then used to restore title to the rightful owner.
[edit] Formalities and writing
Contrary to common wisdom, an informal exchange of promises can still be binding and legally as valid as a written contract. A spoken contract should be called an "oral contract", which might considered a subset of "verbal contracts." Any contract that uses words, spoken or written, is a verbal contract. Thus, all oral contracts and written contracts are verbal contracts. This is in contrast to a "non-verbal, non-oral contract," also known as "a contract implied by the acts of the parties", which can be either implied in fact or implied in law.
Most jurisdictions have rules of law or statutes which may render otherwise valid oral contracts unenforceable. This is especially true regarding oral contracts involving large amounts of money or real estate. For example, in the U.S., generally speaking, a contract is unenforceable if it violates the common law statute of frauds or equivalent state statutes, which require certain contracts to be in writing. An example of the above is an oral contract for the sale of a motorcycle for US$5,000 in a jurisidiction which requires all any contract for the sale of goods over US$500 to be in writing to be enforceable. The point of the Statute of Frauds is to prevent false allegations of the existence of contracts that were never made, by requiring formal (i.e. written) evidence of the contract, however, a common remark is that more frauds have been committed through the application of the Statute of Frauds than have ever been prevented. Contracts that do not meet the requirements of common law or statutory Statutes of Frauds are unenforceable, but are not necessarily thereby void. However, a party unjustly enriched by an unenforceable contract may be subject to restitution for unjust enrichment. Statutes of Frauds are typically codified in state statutes covering specific types of contracts, such as contracts for the sale of real estate.
In Australia and many, if not all, jurisdictions which have adopted the common law of England, for contracts subject to legislation equivalent to the Statute of Frauds, there is no requirement for the entire contract to be in writing, although there must be a note or memorandum evidencing the contract, which may come into existence after the contract has been formed. The note or memorandum must be signed in some way, and a series of documents may be used in place of a single note or memorandum. It must contain all material terms of the contract, the subject matter and the parties to the contract. In England and Wales, the common law Statute of Frauds is still in force, but only for guarantees, which must be evidenced in writing, although the agreement may be made orally. Certain other kinds of contract must be in writing or they are void, for instance, for sale of land under s. 52, Law of Property Act 1925.
If a contract is in a written form, and somebody signs the contract, then the person is bound by its terms regardless of whether they have read it or not,[16] provided the document is contractual in nature.[17] Furthermore, if a party wishes to use a document as the basis of a contract, reasonable notice of its terms must be given to the other party prior to their entry into the contract.[18] This includes such things as tickets issued at parking stations.
- See also: Non est factum
[edit] Uncertainty, incompleteness and severance
If the terms of the contract are uncertain or incomplete, the parties cannot have reached an agreement in the eyes of the law.[19] An agreement to agree does not constitute a contract, and an inability to agree on key issues, which may include such things as price or safety, may cause the entire contract to fail. However, a court will attempt to give effect to commercial contracts where possible, by construing a reasonable construction of the contract.[20]
Courts may also look to external standards, which are either mentioned explicitly in the contract[21] or implied by common practice in a certain field.[22] In addition, the court may also imply a term; if price is excluded, the court may imply a reasonable price, with the exception of land, and second-hand goods, which are unique.
If there are uncertain or incomplete clauses in the contract, and all options in resolving its true meaning have failed, it may be possible to sever and void just those affected clauses if the contract includes a severability clause. The test of whether a clause is severable is an objective test - whether a reasonable person would see the contract standing even without the clauses.
- See also: Contra proferentem
[edit] Contractual terms
The terms and conditions of a contract are its content. Once the so called essentialia negotii of a contract's formation are established, the question of what the parties of a contract have agreed to.
[edit] Different types of statements
Whether a statement is a term of a contract is important because only if a promise is a term of the contract can a party sue for the breach of the contract. Statements can be split into the following types:
- Puff (sales talk): If no reasonable person hearing this statement would take it seriously, it is a puff, and no action in contract is available if the statement proves to be wrong. It may also be referred to as "puffery".
- Representation: A representation is a statement of fact made to induce another person to enter into a contract and which does induce them to enter into a contract, but it is one that the maker of the statement does not guarantee its truth. If the statement proves to be incorrect, it cannot be enforced, as it is not a term of the contract, but it may prove to be a misrepresentation, whereupon other remedies are available.
- Term: A term is similar to a representation, but the truth of the statement is guaranteed by the person who made the statement. The test is an objective test.
Factors that a court may take into account in determining the nature of a statement include:
- Timing: If the contract was concluded soon after the statement was made, this is a strong indication that the statement induced the person to enter into the contract.
- Content of statement: It is necessary to consider what was said in the given context, which has nothing to do with the importance of a statement.
- Knowledge and expertise: In Oscar Chess Ltd v. Williams,[23] a person selling a car to a second-hand car dealer stated that it was a 1948 Morris, when in fact it was a 1939 model car. It was held that the statement did not become a term because a reasonable person in the position of the car dealer would not have thought that an inexperienced person would have guaranteed the truth of the statement.
The parol evidence rule limits what things can be taken into account when trying to interpret a contract.
[edit] Terms implied in fact
The Privy Council proposed a five stage test in BP Refinery Western Port v. Shire of Hastings:
- Reasonableness and equitableness: The implied term must be reasonable and equitable.
- Business efficacy: The implied term must be necessary for the business efficacy of the contract. For instance, if the term simply causes the contract to operate better, that does not fit this criterion.
- Obviousness: The term is so obvious that it goes without saying. Furthermore, there must be one and only one thing that would be implied by the parties. For example, in Codelfa Construction Pty Ltd v. State Rail Authority of New South Wales,[24] a term regarding the inability of construction company to work three shifts a day could not be implied because it was unclear what form it would have taken.
- Clear expression: The term must be capable of clear expression. No specific technical knowledge should be required.
- Consistency: The implied term may not contradict an express term.
In Australia, the High Court has ruled that the test in BP Refinery applies only to formal contracts, while the test in Byrne and Frew v. Australian Airlines Ltd[25] shall apply to informal contracts:
- Necessity: The term must be necessary to ensure reasonable or effective operation of a contract of the nature before the court.
- Consistency: The implied term may not contradict an express term (same as for formal contracts).
- Clear expression: The term must be capable of clear expression (same as for formal contracts).
- Obvious: McHugh and Gummow JJ have stated that it must also be obvious.
[edit] Terms implied in law
These are terms that have been implied into standardised relationships. The other difference between this and terms implied in fact is that the test is one of necessity;[26] a necessary term is one where the contract is rendered worthless or nugatory if it is without it.
[edit] Terms implied by custom or trade
You are generally bound by the custom of the industry that you are in. To imply a term due to custom or trade, you must prove the existence of the custom, which must be notorious, certain, legal and reasonable[27][28]
[edit] Course of dealing
If two parties have regularly conducted business on certain terms, it may be reasonable to presume that in future dealings where there is no contract, the parties wish to incorporate the terms of the previous contracts. However, if a party wishes to incorporate terms by course of dealing, the original document must have been contractual in nature, and delivery receipts may not fit this description. In Australia, there is a further requirement that the document was procured after formation.
[edit] Good faith
It is common for lengthy negotiations to be written into a heads of agreement document that includes a clause to the effect that the rest of the agreement is to be negotiated. Although these cases may appear to fall into the category of agreement to agree, courts nowadays (at least in Australia) will imply an obligation to negotiate in good faith provided that certain conditions are satisfied[29]
- Negotiations were well-advanced and the large proportion of terms have been worked out; and
- There exists some mechanism to resolve disputes if the negotiations broke down.
The test of whether one has acted in good faith is a subjective one; the cases suggest honesty, and possibly also reasonably.
[edit] "Subject to" contracts
If a contract specifies "subject to contract", it may fall into one of three categories:[30]
- The parties are immediately bound to the bargain, but they intend to restate the deal in a formalised contract that will not have a different effect; or
- The parties have completely agreed to the terms, but have made the execution of some terms in the contract conditional on the creation of a formalised contract; or
- It is merely an agreement to agree, and the deal will not be concluded until the formalised contract has been drawn up.
If a contract specifies "subject to finance", it imposes obligations on the purchaser:[31]
- The purchaser must seek finance; and
- When offers of finance arrive, the purchaser must make a decision as to whether the offers of finance are suitable.
Once again, there is an element of good faith involved.
This may also refer to contingent conditions, which come under two categories: condition precedent and condition subsequent. Conditions precedent are conditions that have to be complied with before performance of a contract. With conditions subsequent, parties have to perform until the condition is not met. Failure of a condition does not void the contract, it is just regarded as voidable.
[edit] Statutory implied terms
The rules by which many contracts are governed are provided in specialized statutes that deal with particular subjects. Most countries, for example, have statutes which deal directly with sale of goods, lease transactions, and trade practices. For example, most American states have adopted Article 2 of the Uniform Commercial Code, which regulates contracts for the sale of goods.
There are also many acts around the world which deal with specific types of transactions and businesses. For example, the states of California and New York in the U.S. have statutes that govern the provision of services to customers by health studios, and the UK has the Sale of Goods Act 1979 which governs the contracts between sellers and buyers.
[edit] Setting aside the contract
There can be three different ways in which contracts can be set aside. A contract may be deemed 'void', 'voidable' or 'unenforceable'. Voidness implies that a contract never came into existence. Voidability implies that one or both parties may declare a contract ineffective at their wish. Unenforceability implies that neither party may have recourse to a court for a remedy. Recission is a term which means to take a contract back.
[edit] Misrepresentation
Misrepresentation means a false statement of fact made by one party to another party and has the effect of inducing that party into the contract. For example, under certain circumstances, false statements or promises made by a seller of goods regarding the quality or nature of the product that the seller has may constitute misrepresentation. A finding of misrepresentation allows for a remedy of rescission and sometimes damages depending on the type of misrepresentation.
According to Gordon v. Selico[32] it is possible to make a misrepresentation either by words or by conduct, although not everything said or done is capable of constituting a misrepresentation. Generally, statements of opinion or intention are not statements of fact in the context of misrepresentation.[33] If one party claims specialist knowledge on the topic discussed, then it is more likely for the courts to hold a statement of opinion by that party as a statement of fact.[34]
[edit] Mistake
A mistake is an incorrect understanding by one or more parties to a contract and may be used as grounds to invalidate the agreement. Common law has identified three different types of mistake in contract: unilateral mistake, mutual mistake, and common mistake.
- A unilateral mistake is where only one party to a contract is mistaken as to the terms or subject-matter. The courts will uphold such a contract unless it was determined that the non-mistaken party was aware of the mistake and tried to take advantage of the mistake.[35] It is also possible for a contract to be void if there was a mistake in the identity of the contracting party. An example is in Lewis v Avery[36] where Lord Denning MR held that the contract can only be avoided if the plaintiff can show, that at the time of agreement, the plaintiff believed the other party's identity was of vital importance. A mere mistaken belief as to the credibility of the other party is not sufficient.
- A mutual mistake is when both parties of a contract are mistaken as to the terms. Each believes they are contracting to something different. The court usually tries to uphold such a mistake if a reasonable interpretation of the terms can be found. Although a contract based on a mutual mistake in judgement does not cause the contract to be voidable by the party that is adversely affected. See Raffles v. Wichelhaus.[37]
- A common mistake is where both parties hold the same mistaken belief of the facts. This is demonstrated in the case of Bell v. Lever Brothers Ltd.,[38] which established that common mistake can only void a contract if the mistake of the subject-matter was sufficiently fundamental to render its identity different from what was contracted, making the performance of the contract impossible.
[edit] Duress and undue influence
Duress has been defined as a "threat of harm made to compel a person to do something against his or her will or judgment; esp., a wrongful threat made by one person to compel a manifestation of seeming assent by another person to a transaction without real volition."[39] An example is in Barton v. Armstrong,[40] a decision of the Privy Council. Armstrong threatened to kill Barton if he did not sign a contract, so the court set the contract aside. An innocent party wishing to set aside a contract for duress to the person need only to prove that the threat was made and that it was a reason for entry into the contract; the onus of proof then shifts to the other party to prove that the threat had no effect in causing the party to enter into the contract. There can also be duress to goods and sometimes, the concept of 'economic duress' is used to vitiate contracts.
Undue influence is an equitable doctrine that involves one person taking advantage of a position of power over another person. The law presumes that in certain classes of special relationship, such as between parent and child, or solicitor and client, there will be a special risk of one party unduly influencing their conduct and motives for contracting. As an equitable doctrine, the court has the discretion to vitiate such a contract. When no special relationship exists, the general rule is whether there was a relationship of such trust and confidence that it should give rise to such a presumption.[41] See Odorizzi v. Bloomfeild School District.
[edit] Incapacity
Sometimes the capacity of either natural or artificial persons to either enforce contracts, or have contracts enforced against them is restricted. For instance, very small children may not be held to bargains they have made, or errant directors may be prevented from contracting for their company, because they have acted ultra vires (beyond their power). Another example might be people who are mentally incapacitated, either by disability or drunkenness.[42] When the law limits or bars a person from engaging in specified activities, any agreements or contracts to do so are either voidable or void for incapacity. The law on capacity can serve either a protective function or can be a way of restraining people who act as agents for others.
[edit] Illegal contracts
A contract is void if it is based on an illegal purpose or contrary to public policy. One example, from Canada, is Royal Bank of Canada v. Newell.[43] A woman forged her husband's signature on 40 checks, totalling over $58,000. To protect her from prosecution, her husband signed a letter of intent prepared by the bank in which he agreed to assume "all liability and responsibility" for the forged cheques. However, the agreement was unenforceable, and struck down by the courts, because of its essential goal, which was to "stifle a criminal prosecution." Because of the contract's illegality, and as a result voided status, the bank was forced to return the payments made by the husband.
In the U.S., one unusual type of unenforceable contract is a personal employment contract to work as a spy or secret agent. This is because the very secrecy of the contract is a condition of the contract (in order to maintain plausible deniability). If the spy subsequently sues the government on the contract over issues like salary or benefits, then the spy has breached the contract by revealing its existence. It is thus unenforceable on that ground, as well as the public policy of maintaining national security (since a disgruntled agent might try to reveal all the government's secrets during his/her lawsuit).
[edit] Remedies for breach of contract
A breach of contract is failure to perform as stated in the contract. There are many ways to remedy a breached contract assuming it has not been waived. Typically, the remedy for breach of contract is an award of money damages. When dealing with unique subject matter, specific performance may be ordered.
As for many governments, it was not possible to sue the Crown in the U.K. for breach of contract before 1948. However, it was appreciated that contractors might be reluctant to deal on such a basis and claims were entertained under a petition of right that needed to be endorsed by the Home Secretary and Attorney-General. S.1 Crown Proceedings Act 1947 opened the Crown to ordinary contractual claims through the courts as for any other person.
[edit] Damages
There are three different types of damages.
- Compensatory damages which are given to the party which was detrimented by the breach of contract. With compensatory damages, there are two kinds of branches, consequential damages and direct damages.
- Nominal damages which include minimal dollar amounts (often sought to obtain a legal record of who was at fault).
- Punitive damages which are used to punish the party at fault. These are not usually given regarding contracts but possible in a fraudulent situation.
- Exemplary damages which are used to make an example of the party at fault to discourage similar crimes. Fines can be multiplied by factors of up to 50 for such damages.
Whenever you have a contract that requires completing something, and a person informs you that it will not be completed before they begin your project, this is referred to anticipatory breach. When it is either not possible or desirable to award damages measured in that way, a court may award money damages designed to restore the injured party to the economic position that he or she had occupied at the time the contract was entered (known as the "reliance measure"), or designed to prevent the breaching party from being unjustly enriched ("restitution").
[edit] Specific performance
There may be circumstances in which it would be unjust to permit the defaulting party simply to buy out the injured party with damages. For example where an art collector purchases a rare painting and the vendor refuses to deliver, the collector's damages would be equal to the sum paid.
The court may make an order of what is called "specific performance", requiring that the contract be performed. In some circumstances a court will order a party to perform his or her promise (an order of "specific performance") or issue an order, known as an "injunction," that a party refrain from doing something that would breach the contract. A specific performance is obtainable for the breach of a contract to sell land or real estate on such grounds that the property has a unique value.
Both an order for specific performance and an injunction are discretionary remedies, originating for the most part in equity. Neither is available as of right and in most jurisdictions and most circumstances a court will not normally order specific performance. A contract for the sale of real property is a notable exception. In most jurisdictions it is enforceable by specific performance. However, even in this case the defenses to an action in equity (such as laches, the bona fide purchaser rule, or unclean hands) may act as a bar to specific performance.
Related to orders for specific performance, an injunction may be requested when the contract prohibits a certain action. Action for injunction would prohibit the person from performing the act specified in the contract.
[edit] Procedure
In the United States, in order to obtain damages for breach of contract or to obtain specific performance or other equitable relief, the aggrieved injured party may file a civil (non-criminal) lawsuit in state court (unless there is diversity of citizenship giving rise to federal jurisdiction). If the contract contains an arbitration clause, however, the aggrieved party must submit an arbitration claim in accordance with the procedures set forth in the agreement.
Many contracts provide that all disputes arising thereunder will be resolved by arbitration, rather than litigated in courts. Customer claims against securities brokers and dealers are almost always resolved by arbitration because securities dealers are required, under the terms of their membership in self-regulatory organizations such as the NASD or NYSE, require use of brokerage agreements that contain arbitration clauses. [44] On the other hand, certain claims have been held to be non-arbitrable if they implicate a public interest that goes beyond the narrow interests of the parties to the agreement (i.e., claims that a party violated a contract by engaging in illegal anticompetitive conduct or civil rights violations). Arbitration judgments may generally be enforced in the same manner as ordinary court judgements. However, arbitral decisions are generally immune from appeal in the United States unless there is a showing that the arbitrator's decision was irrational or tainted by fraud. Virtually all states have adopted the Uniform Arbitration Act to facilitate the enforcement of arbitrated judgements. Notably, New York State, where a sizable portion of major commercial agreements are executed and performed, has not adopted the Uniform Arbitration Act. [45]
In England and Wales, a contract may be enforced by use of a claim, or in urgent cases by applying for an interim injunction to prevent a breach. Likewise, in the United States, an aggrieved party may apply for injunctive relief to prevent a threatened breach of contract, where such breach would result in irreparable harm that could not be adequately remedied by money damages.
[edit] Third Parties
The doctrine of privity of contract means that only those involved in striking a bargain would have standing to enforce it. In general this is still the case, only parties to a contract may sue for the breach of a contract, although in recent years the rule of privity has eroded somewhat and third party beneficiaries have been allowed to recover damages for breaches of contracts they were not party to.[46] A recent example is in England, where the Contract (Rights of Third Parties) Act 1999 was introduced.
[edit] Contractual theory
Contract theory is the body of legal theory that addresses normative and conceptual questions in contract law. One of the most important questions asked in contract theory is why contracts are enforced. One prominent answer to this question focuses on the economic benefits of enforcing bargains. Another approach, associated with Charles Fried, maintains that the purpose of contract law is to enforce promises. This theory is developed in Fried's book, Contract as Promise. Other approaches to contract theory are found in the writings of legal realists and critical legal studies theorists.
Another dimension of the theoretical debate in contract is its place within, and relationship to a the wider law of obligations. Obligations have traditionally been divided into contracts, which are voluntarily undertaken and owed to a specific person or persons, and obligations in tort which are based on the wrongful infliction of harm to certain protected interests, primarily imposed by the law, and typically owed to a wider class of persons.
Recently it has been accepted that there is a third category, restitutionary obligations, based on the unjust enrichment of the defendant at the plaintiff’s expense. Contractual liability, reflecting the constitutive function of contract, is generally for failing to make things better (by not rendering the expected performance), liability in tort is generally for action (as opposed to omission) making things worse, and liability in restitution is for unjustly taking or retaining the benefit of the plaintiff’s money or work.[47]
Compare with the US context, the Uniform Commercial Code defining "Contract" as "the total legal obligation which results from the parties agreement"[citation needed] and does not attempt to state what act is essential to create a legal duty to perform a promise. The common law describes the circumstances under which the law will recognise the existence of rights, privilege or power arising out of a promise.
[edit] References
- ^ Hans Wehberg, Pacta Sunt Servanda, The American Journal of International Law, Vol. 53, No. 4 (Oct., 1959), p.775.]
- ^ e.g. In England, s. 52, Law of Property Act 1900
- ^ Carlill v. Carbolic Smoke Ball Company [1893] 2 QB 256
- ^ e.g. Lord Steyn, Contract Law: Fulfilling the Reasonable Expectations of Honest Men (1997) 113 LQR 433; c.f. § 133 BGB in Germany, where "the actual will of the contracting party, not the literal sense of words, is to be determined"
- ^ Restatement (Second) of Contracts § 32 (1981) (emphasis added)
- ^ http://12.170.132.252/default2.asp?selected=1692&bold=%7C%7C%7C%7C
- ^ e.g. In Germany, § 313 BGB
- ^ Chappell & Co Ltd v Nestle Co Ltd [1959] 2 All ER 701.
- ^ Eastwood v. Kenyon (1840) 11 Ad&E 438
- ^ Austotel v. Franklins (1989) 16 NSWLR 582
- ^ e.g. P.S. Atiyah, 'Consideration: A Restatement' in Essays on Contract (1986) p.195, Oxford University Press
- ^ Central London Property Trust Ltd. v. High Trees House Ltd. [1947] KB 130
- ^ Balfour v. Balfour [1919] 2 KB 571
- ^ Merritt v. Merritt [1970] 2 All ER 760; [1970] 1 WLR 1211; CA
- ^ § 105, II BGB
- ^ L'Estrange v. F Graucob Ltd [1934] 2 KB 394
- ^ Curtis v. Chemical Cleaning and Dyeing Co [1951] 1 KB 805
- ^ Balmain New Ferry Company Ltd v. Robertson (1906) 4 CLR 379
- ^ Fry v. Barnes (1953) 2 D.L.R. 817 (B.C.S.C)
- ^ Hillas and Co. Ltd. v. Arcos Ltd. (1932) 147 LT 503
- ^ Whitlock v. Brew (1968) 118 CLR 445
- ^ Three Rivers Trading Co., Ltd. v. Gwinear & District Farmers, Ltd. (1967) 111 Sol. J. 831
- ^ Oscar Chess Ltd v. Williams [1957] 1 WLR 370
- ^ Codelfa Construction Pty Ltd v. State Rail Authority of New South Wales (1982) 149 CLR 337
- ^ Byrne and Frew v. Australian Airlines Ltd (1995) 185 CLR 410
- ^ Liverpool City Council v. Irwin [1976] 2 WLR 562)
- ^ Con-stan Industries of Australia Pty Ltd v. Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226
- ^ Frigaliment Importing Co., Ltd., v. B.N.S. International Sales Corp., 190 F. Supp. 116 (S.D.N.Y. 1960) (plaintiff failed to prove what he meant by "chicken") and U.C.C. § 1-205.
- ^ Coal Cliff Collieries Pty Ltd v. Sijehama Pty Ltd (1991) 24 NSWLR 1
- ^ Masters v. Cameron (1954) 91 CLR 353
- ^ Meehan v. Jones (1982) 149 CLR 571
- ^ Gordon v. Selico (1986) 18 HLR 219
- ^ Bisset v Wilkinson and others [1927] AC 177
- ^ Esso Petroleum Co Ltd v Mardon [1976] 2 Lloyd's Rep. 305
- ^ Smith v. Hughes [1871]
- ^ Lewis v Avery [1971] 3 All ER 907
- ^ Raffles v. Wichelhaus (1864) 2 Hurl. & C. 906.
- ^ Bell v Lever Brothers Ltd. [1931] ALL E.R. Rep. 1, [1932] A.C. 161
- ^ Black's Law Dictionary (8th ed. 2004)
- ^ Barton v. Armstrong [1976] AC 104
- ^ Johnson v. Buttress (1936) 56 CLR 113
- ^ see in the U.K. e.g. s.3(2) Sale of Goods Act 1979
- ^ Royal Bank of Canada v. Newell 147 D.L.R (4th) 268 (N.C.S.A.)
- ^ http://www.seclaw.com/arbover.htm
- ^ New York Civil Procedure Law and Rules § 7501, et seq.
- ^ Beatson (1998)" Anson's Law of Contract", 27th ed. (Oxford: OUP), p.246
- ^ Beatson, Anson’s Law of Contract (1998) 27th ed. OUP, p.21
[edit] Further reading
- Ewan McKendrick, Contract Law - Text, Cases and Materials (2005) Oxford University Press ISBN 0-19-927480-0
- P.S. Atiyah, The Rise and Fall of Freedom of Contract (1979) Clarendon Press ISBN 0198253427
- Randy E. Barnett, Contracts (2003) Aspen Publishers ISBN 0-7355-6535-2
[edit] See also
[edit] External links
- Contract Law Lessons by Max Young
- Contracts Case Summaries
- UK Contract Law Caselist
- Cornell Law School contracts: an overview
- Principles of European Contract Law
- Behavioral Contracting in the Classroom
- Basics of contract law (England and Wales) at lawteacher.net
- Israeli Contract Laws
- United Nations Convention on Contracts for the International Sale of Goods, Vienna, 11 April 1980
- Online Sign Off - Manage Contracts Online
Attractive nuisance · Calculus of negligence · Caveat emptor · Caveat venditor · Contra proferentem · Duty of care · Eggshell skull · Fair use · First-sale doctrine · Good-faith exception · Living tree doctrine · Ignorantia juris non excusat · Implied powers · Implied terms of a contract · Odious debt · Plain view doctrine · Proximate cause · Res ipsa loquitur · Sovereign immunity · Stare decisis or Precedence rule · Standard of care · Unclean hands · Vicarious liability ·
