Contract Law

Overview:
Contract law forms the basis of nearly all commercial interactions in modern
society. Although many people do not realize it they enter into several
contracts each day. Contracts include the obvious examples, such as leases
rental agreements, employment contracts, and real estate sales, but also
include the purchase of a soda from the neighborhood convenience store. It
would be very difficult to imagine a modern society that was not dominated
by contracts in the way that much of the world is currently.
Contract Law, is the rules and customs created or enforced by governments
relating to the formation, interpretation, and enforcement of contracts.
Or
A contract is an agreement that is enforced on the relevant parties by
the law. In civil law, contracts are considered as the general law of
obligations. In a contract, there must be mutual agreement in terms of
offer and acceptance. Certain formalities are required to finalize a
contract. The concerned parties must be legally capable of entering into
a contract. If the agreement is not achieved through fair means and has
any undue influence or favor, it will be considered as illegal. Mutual
consent is the main aspect of a contract. Many contract disputes occur
due to the disagreement between the parties on the terms and conditions.
They interpret the rules differently as these are often found to be
vague or ambiguous.
Function:
Contract law permeates our day-to-day lives, and often we are not aware of
its presence. While legally qualified individuals may be aware every time a
contract comes into existence and note phrases such as the customer uses
this at their own risk with a wry smile, the majority of society lives in blissful
ignorance of how deeply indebted to contract law they are.
In the first instance it would be a useful exercise to list a few of the various
instances of contract law coming into play when we may not expect it.

Public Transport every ticket bought on a bus train or on the

underground forms a contract. This is a contract of services and the
majority of terms will be implied rather than express. If one was to
state the whole list of terms on the back of a ticket as to the
obligations of the provider of the transport to the customer, it would

result in a piece of paper resembling an instruction sheet rather than a

ticket.
It should be mentioned here that such express terms that form part of the
contract must be present at the moment it was entered into. The terms of
importance will usually be on display either around the point where a ticket
is bought, or it will direct the customer to a full list of the conditions
elsewhere.

Employment every employee must have a contract of employment

with their employer. While it is a fact that some employers have not
bothered with the formality of drafting a document setting out the
rights and expectations of both parties.

Any purchase of goods or services while this is dealt with in more

detail below, the sale of goods or services is the most basic form of
contract. While we may not appreciate the scope of the law and its
impact upon a basic purchase of e.g. a new car, the terms and
conditions of sale, the various pieces of legislation importing terms and
the case law stretching back more than 100 years on similar issues all
have a bearing upon a customers (and suppliers) rights and
obligations. It is of course rare for anyone to be made aware of all the
terms in existence and the small print usually covers most things of
relevance.

Buying a house most people who have become involved in the

convincing process will recall the stress of waiting for the solicitor to
confirm that they have exchanged contracts. The contract will set
out the terms of sale, including the price, items of furniture and
fixtures that are being left behind and the date of completion. Once the
purchase is completed and the monies paid, any issue that may be
taken between the parties will have to be raised as a breach of
contract. While in the majority of cases the axiom Caveat Emptor
(buyer beware) will apply, the specific terms of the contract must still
be fulfilled and depending upon the severity of extent of the breach,
this will dictate the appropriate remedy available.

Contract Law is everywhere. From the purchase of a newspaper in the

morning to the service of gas and other utilities, there exists a contract to
govern most relationships outside the domestic scenario. It is
understandable therefore that this area of law may be the most diverse in its
impact upon everyday life, yet its principles remain comparatively
straightforward. There are of course complex issues and certain types of

contract (acquisitions and mergers, share holders agreements etc) require

specific rules to govern their application, most contracts have a quality that
allows them to operate without the knowledge of their existence.
The most influential and commonly used contracts are those relating to the
purchase of goods and services. We have contracts for the sale of goods
when we do our weekly shopping, buy a new appliance or finally get that pair
of shoes. Similarly contract for the supply of services exist over the cables
service for the TV, the mobile phone company or the plumber who comes
into fix the leak upstairs. However they are created, the contracts that we
are party to are numerous and often we are not specifically aware of our
obligations under them, save to pay what we have agreed to.
While we have focused on consumers and individual contracts that is not to
say that there are any fewer contracts that exist between companies,
corporations, charities or even governments. Most companies will have
several contracts for the services it obtains from other companies i.e.
cleaning, catering, accountancy etc. There will be contracts of employment
with every member of staff, as well as contracts with each shareholder as to
the money they have invested and the dividends received each period. They
will in turn have contracts with the customers who retain their services, or
even other companies by way of merger or shared services within a larger
agreement. This is a non-exhaustive list but a good example of how contract
law not only creates the basis for the relationship between individuals,
companies etc, but also regulates their rights and obligations and ultimately
provides a solution in the event of a dispute. The scope of this area of law
clearly has no limit.
Contract is always subjected to the law. The law provides a remedy if a
contract is breached by either party. A contract is legally valid when a
promise is exchanged between both the parties. Promises in term of gifts
are not considered enforceable because the personal satisfaction of the
grantor is not viewed as adequate consideration. ``Certain promises that
are not considered as contracts under the normal circumstances may be
enforced if one party relies on the assurance of the other party
Contracts are generally governed by state law and private law. Private
law includes the terms of the agreement between the parties, whereas
State law requires the contracts to be out into writing.

General Principles

General principles of contract also serve as a source of law. It occurs

when the concerned parties agree upon these principles, which govern
their contract. Such clauses hardly occur between the private parties.
However, they occur in major agreements between a state and a foreign
enterprise. ``The general principles of the contract law are not laid
down by any legislative action. Rather they are elaborated. The process
of elaborating general principles of contract law is similar to the
elaboration of any other general principles of law

Freedom of Contract

The first and foremost principle of contract law is the freedom of

contract. ``The freedom of contract has three aspects.
They are:
1. Each party is free to decide whether it wishes to go for a contract or not .
2. It is the prerogative of the party to decide with whom it will have a
contract.
3. Each party has the freedom to decide the terms on which the contract
will be based.

Freedom of contract expresses the legal level of the basic economic

system that is known as the market economy. ``The economic system of the
market economy rests on the assumption that the citizens are able to
determine what will best serve their purpose (Bonell, 1997) . All the
decisions are to be made by the individuals themselves. They must be
granted freedom of contract to decide their partners and terms.
Conclusion:
We have seen how contract law permeates every section of our lives. From
employment, to convincing or even to social and recreational activities such
as buying a drink in the pub, contracts are created all around us. While the
majorities are short lived and the terms fairly simple and unobtrusive,

breaches of such agreements may still be enforced with all the force of the
law as with the more serious forms of contract.
The public perception of contracts is often misleading as many have not
found it necessary to enforce such terms. As we live in a capitalist society
with freedom of choice, the need to ensure quality often negates the need
for a consumer to enforce their rights as to quality and fitness under a
contract of sale. Standards are maintained by Government bodies and
independent organizations i.e. BSI. The consumer rarely has the need to
enforce breaches of contract, and even if they do, retailers are so aware of
the rights of consumers that they will allow an exchange of goods without
question. It is more often that not (certainly in the current financial climate)
that the terms as to payment are enforced by suppliers and sellers in default
of the agreement more frequently. Issues of credit are widespread at the
moment and the contracts that regulate the borrowing of money against
property (hire purchase) or simply under a general agreement (credit card)
are being breached every day. This is the other side of the coin for contract
law. There are terms and conditions for both parties. This is the essence of a
legal contract, the exchange of consideration without which there is nothing
more than an unenforceable promise.
The law of contract needs to change with the developments in economics,
technology and social attitudes. It is usually a matter for Parliament to
intervene and legislate for new situations and introduce law that will govern
particular relationships and the contract that arise between them. It is
impossible however to legislate for all potential eventualities as a situation
may arise that was not foreseen, or the technology, issue or relationship that
it was intended to regulate may have moved on. It is then for the Courts to
interpret the law so as to find the solution to any dispute. While the variety
and scope of contracts continue to evolve and increase, the general
principles that we have examined above remain applicable. It may be that in
years to come there will be introduced a system that will create a standard
form of agreement based upon the nature and relationship of the parties to it
e.g. companies or businesses in the same market dealing between
themselves but there will always be the isolated agreement, or informal
shake of hands that ultimately creates a contract and the enforceable terms
it grants to those party to it.
We Conclude that functions of contract law are:

Provide compensation to the claimant when a breach of contract has

been committed

To deter someone from breaking a contract knowing that compensation

will be available

To provide a framework in which businesses can operate

References:
http://contract-law.laws.com/contracts/contract-law-overview
http://www.ukessays.com/essays/law/contract-law.php
http://www.mightystudents.com/essay/List.functions.contract.3729