Question 1

What are defenses to enforcement of a contract?

Accepted Answer

There are several defenses that can conceivably be asserted to a claim to enforce a contract. For instance, if one of the parties was a minor or suffering from mental incompetency at the time the contract was entered into, then those facts may be defenses to the validity of the contract. This defense is called lack of capacity to contract . Likewise, if there was a mutual mistake by the parties, then that could void a contract on the theory that there has been no meeting of the minds and therefore no agreement. It is not unheard of that in the course of defending a contract claim, the defendant may claim that he or she was induced to enter into contract due to fraud on the part of the other party. Fraud can be loosely defined as a misrepresentation of a material fact. Other conceivable defenses to a contract claim could come in the form of duress, undue influence, impossibility, and frustration. Duress is simply a threat or perceived threat to induce a party to enter into a contract. If someone puts a gun to your head and makes you sign a contract, that contract is not enforceable because you were operating under duress. Duress may also come in a num­ber of other forms that may be considerably more subtle. Undue influence arises when certain persons may have a great deal of control over a party and utilize that control in order to unduly influence a person to enter into a contract. Impossibility arises where it truly becomes impossible to perform a contract due to something that is unforeseen by the parties. For instance, the destruction of the World Trade Center made the performance of the leases for that building impossible. A related concept is that of frustration of purpose . For instance, during the inauguration of a new president, there may be certain contracts entered into. If the inauguration, however, is canceled, then the purpose of those con­tracts has been frustrated. If you were one of the suppliers who agreed to provide the grandstands for the inauguration the U.S. Government may be able to void the con­tract with you since the inauguration is not going forward.

Question 2

What are important components to look out for in a contract?

Accepted Answer

In reviewing a written contract, there are several things that the parties need to be on the lookout for: The identity of the parties. Each of the parties needs to be expressly identified. If you are dealing with a corporate entity, you need to make sure the complete name of that corporation is stated in the contract. The only way to con­firm that you have the complete name of that corporation is to call the state agency that supervises corporations to get the complete name. In addition, the contract should expressly identify the position of the person signing on behalf of the corporation, so that it is clear that he or she is a corporate officer and therefore has the authority to sign. Consideration. The consideration must be expressly stated in the document. Governing law. It is a good idea to state in the contract what state's law is going to control this contract in the event there is a dispute that arises. This is important if you are entering into a contract with a person or entity that is not based in the same state where you are. Time of the essence. A time of the essence clause is significant if you are interested in prompt performance by the other party. If prompt performance is not a big deal to you, then you may not want a time of the essence clause. If there is a time of the essence clause in the contract and either party does not comply with the time requirements set forth in the contract, then that is considered to be a material breach of the contract. Survival. The term survival means that if one party to the contract were to pass away before there has been complete performance, then the obligation set forth in the contract would apply to the estate and heirs of that person. Modification. It is a good idea to expressly state in the con­tract that any modification of the contract must be in writ­ing and must be signed by both parties. That eliminates any possibility of there being any oral modification which may be the subject of a later dispute. Waiver. A waiver is an intentional relinquishment of a known right. It is generally a good idea to have a waiver clause in the contract that says that the failure of either party to insist upon strict performance of any of the provi­sions of this agreement shall not be interpreted as a Waiver of any other default or breach of the same or similar nature. This will help prevent a situation in which a waiver of strict performance of a contract provision on one occasion will constitute a waiver of future breaches by that other party. Severability. This term means that if any provision within the agreement is found to be invalid or unenforceable, It will not effect the enforceability or validity of the other provisions in the agreement. Suppose for instance that a particular paragraph in your contract was determined to be either unenforceable or illegal by a court, that conceivably could invalidate your entire contract unless you have this clause within the contract. Assignability. The general rule is that any contract may be assigned unless the contract expressly says otherwise. Assignment of a contract essentially means that you are selling your rights under the contract to another part. For instance, if the contract that you are entering into is a contract for the purchase of an automobile, then you may sign a written contract agreeing to buy that automo­bile for a certain price. You may then assign it (sell it) to another party unless the contract says that assignment is not allowed. What you ore selling in this instance is the contract, not the car. You need to decide whether want a non-assignment clause within your contract. Integration. An integration clause in a contract says that this contract contains the entire understanding of the parties and that the parties expressly agree that there are no oral or written warranties, or relied upon other than what is expressly said within the written agreement including any post-contract discussions (discussions or com­munications that took place after the contract was signed) are not to be relied on by the parties. The word integration in context means that the entire understanding of the parties is integrated into the one document. Attorney's Fees. Attorney's fees are typically only recoverable if expressly provided for in the contract or if provided by statute. You should consider whether you want to be able to recover your fees if a dispute arises and if you do make sure to include an attor­ney's fee provision within the contract.

Question 3

What does it take to make a contract?

Accepted Answer

A contract is an agreement between two persons to either do something or not to do something in exchange for some form of consideration. An agreement may come in several different forms. The agreement may be implied as a result of the conduct of the parties. On the other hand, the agreement may be expressed, meaning that the parties have expressly stated what their intentions are and what they wish to obtain as a result of the agreement. An expressed contract may be in writing or it may be oral. Either type of contract is equally enforceable in most instances, although a written contract is always preferable because it clearly sets forth the terms of the agreement. An oral contract is always subject to dispute, because the parties may have different recollections of exactly what they agreed to. The way that an agreement comes about is generally through an offer being made by one party and then that offer being accepted by the other party. The offer may come in two different forms-written or oral form. The more precise the terms of the offer, the better off the parties will be in establishing the certainty of their agreement. A counteroffer is, by its very terms, a rejection of the original offer. The dealership would be free to reject your counteroffer. There are several different ways that an offer may be framed. The person making the offer may state certain terms and condi­tions that have to be met in order for the offer to be accepted. If those terms and conditions are not met, then there cannot be a valid acceptance of the offer. Consideration is a very elusive but important concept. An easy way to think of it is as the tit for tat, the quid pro quo, or, to put it another way, it is simply the meat of the agreement. If there is no consideration, then there is no contract. Typically the performance of a preexisting legal duty can­not serve us consideration for a contract. For instance, If you are already under a duty to perform a certain act and you then promise to do it as the consideration for a contract, that consid­eration is insufficient. Forbearance to do a certain act may serve as consideration.

Question 4

How do you modify a contract?

Accepted Answer

Sometimes, after you have entered into a contract, you may need to modify it. Either time has passed and circumstances have changed, or you recognize that the first version is not exactly what you intended. How do you change it? The best way is to enter into a contract amendment. To amend is to alter, modify or change something. If your contract is in writing, the preferred way to modify it is also in writing. In fact, even if you have an oral contract--one you have not put in writing--you may wish to amend it in writing. Doing so will also memorialize the fact that you have a contract and what the current terms of it are. That will make it easier to prove what the original terms were, as well as those you have changed. Just as you can enter into an oral contract, though, you can also amend a contract without writing down the changes. That can only occur with a written contract if that document does not provide that all amendments must be in writing, and most written contracts prepared by lawyers will have such a provision. An amendment to a written contract generally is labeled at the top of the first page with something like “Amendment to [insert the name of the underlying agreement]”. To be effective, it will need to be entered into by the same parties as the first agreement--although the parties can be modified by the amendment. A description of the existence of the underlying contract, and what the parties intend by the amendment, is often included within paragraphs called Recitals. Then, the body of the amendment provides something like, “The parties hereby agree that Paragraph 1 of the Underlying Agreement is modified to read as follows.” The desired changes are then included--as many, in following sections, as are needed to memorialize everything the parties want to have changed. Amending an oral agreement should be similar, although less formal if the terms are not written down. A caution: it may be easier to enter into unwanted amendments if the agreement is oral or if there is no restriction that all amendments must be in writing, and the parties discuss the terms or possible changes even informally. Such discussions give the other party an argument that an amendment was intended. If you have any questions or concerns about how to amend a contract, or whether a writing or discussion constitutes an amendment, it is always a good idea to consult an attorney.

Question 5

When is it a good idea to have a contract?

Accepted Answer

A contract is an agreement between at least two people or companies, in which they each promise to do something for the other in exchange for a benefit for themselves. That can be something simple, like, "I will pay you $10 to wash my car." Or, it can be something a lot more complicated. When is it a good idea to have a contract? Any time you want to make sure the agreement you are entering into can be enforced. Otherwise, the other party can always say that there was not really any agreement between you. You can enter into a contract without writing down the terms if, for example, you tell someone you will do something for him and he promises to pay you for it (like washing a car for a price), it is an oral contract. You do not always have to put it on paper and sign it. However, if you do not have it in writing you will not have something to point to that contains all the terms you want the other party to perform --or proof of what you told the other person that you would do. There are some kinds of contracts that must be in writing, and those are often established by the Statute of Frauds--a general rule of law that has been established over time. The kinds of agreements included in the Statute of Frauds vary in different jurisdictions, though, so you may need to find out the laws of your state governing written contracts. Here are the kinds of contracts generally required under the Statute of Frauds to be in writing: Contracts that, by their terms, can’t be performed within a year. Contracts for the sale of goods that cost more than a specified amount of money--usually $5,000 according to Section 2-201 of the Uniform Commercial Code, another general rule of law which has been adopted by many states. Contracts for the sale of an interest in land. A promise made in consideration of marriage, like a prenuptial agreement. A promise to pay debts on behalf of another. A promise by an executor of an estate to pay some of the estate’s debts. If your agreement is not one included in the Statute of Frauds where you live or where your deal is to be transacted, then you may enter into an oral contract, but beware. Oral contracts are sometimes said to be worth the paper they are written on. And as you may know, even written contracts are subject to interpretation, so they should be as precise as possible regarding what you want them to say.

Contract Law

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