Contracts are a part of our everyday life, arising in collaboration, trust, promise and credit.
How are contracts formed? What makes a contract enforceable? What happens when one party breaks a promise?
FROM TRUST TO PROMISE TO CONTRACT
BASICS AND INSIGHT OVERVIEW
What is Contract
An Agreement creating obligations enforceable by law.
The basic elements of contract are:
What is the purpose of Contract Law
Contract law is the body of civil law dealing with interpretation
and enforcement of written agreements between parties.
However A Contracts does not have to be in writing in
order to be binding
Building a ladder of trust
Coordination between Voluntary Parties
There has to be:
Communication, Agreement, Understanding, and Trust
What is trust?
A crucial notion that is going to underlie everything we're talking about. That's
Principles: Offer & Acceptance
Offer & Acceptance
I offer my
500$ per month
Here is 500$
What is an empty bag
There are conversations, dealings, which looks like bargains, but when you think
about them carefully, they're not bargains at all.
Here's an example, quite a common one. A one Side promise or promises that
looks like binding but they are not.
A Big company contracted with supplier to buy a specific good at a index price
when ever they needed it.
Can we see What is this bargain looks like?
What makes an enforceable contract
The four principles:
First one: intend to have a legal relations:
Family, friend promises are not considered as a pounding contract unless it is super serious from both
Second one: Serious sides:
If the promises considered as frolic this does not considered as a Contract.
Third one: Morals and ethics
Must be considered in Contracts. An immoral situation are not considered as a pounding Contract at
Court. Another side of the third principle is that promise for a Gift genuinely and/ or an unserious
Fourth one: Gift or bargain:
Not in Common Law the Court is to enforce promise of Gift neither enforcing bargains.
What Doesn’t make an enforceable
• Krell v. Henry
• Raffles v
• Rose the cow:
Interpretation of Contract
Interpretation is everywhere. It’s present in an ordinary conversations.
It presents in trying to understand Koran, Bible, poem, even in interpretation of
play by SHAKESPEARS and also in constitution for people to keep and bear arms.
Interpretation is act of explaining reframing or otherwise showing
your own Understanding of something.
How do court
interpret the contract
under English law
Remedies and Specific performance
when we do have a contract and one of the parties breaks his/her promise,
when there's what's called a breach of contract. We've said that a contract is a promise the
government will stand behind.
The government, the courts, have ways of making people do things they ought to do, or to
respond when they don't want to do what they ought.
Most forcefully and directly, a court can order someone to keep his promise and to threaten to
put him in jail if he doesn't do it. That is called specific performance.
The court can do something else,
and that's what usually happens in the case of a broken contract.
It doesn't order the contract breaker to keep his promise.
Instead, it orders him to pay the victim of the breach a sum of money.
And why is that?
what they do in the largest number of cases,
is not to force somebody to take any particular action.
What they prefer to do is to make the party in breach pay money.
Principle of Expectation Damages: You're entitled to the value of what you have been promised.
There are two ways to get here: cost of completion and Diminution of value.
Cost of completion (used by the court in Groves v. Wunder):
the cost of putting you in the position you would have been in, had the contract been fulfilled
(an easy way to think about this is the cost of paying a third party to fulfill the obligations of the
Diminution of value (used by the court in Peevyhouse v. Garland):
is a legal term of art used when calculating damages in a legal dispute, and describes a
measure of value lost due to a circumstance or set of circumstances that caused the loss
The difference in value between the state of affairs due to the contract breach and the state of
affairs had the contract been completed .
What's Commercial impracticability:
Some times remedies with specific performance gets impracticable
A party to a contract may be relieved of his contractual obligations in the event
such obligations have been made excessively expensive, harmful, or difficult to
perform. If the parties cannot agree to change the terms of the contract, or to
cancel the contract, it would become necessary to prove to a court the
commercial impracticability of performing the specific obligations.
i.e.: Force Majeure
Bonds are the surety given to employer by the contractor (promisor) as to assure specific
Performance bonds have been around since 2,750 BC. The Romans developed laws of surety
around 150 AD, the principles of which still exist.
The Miller Act : codified as amended in Title 40 of the United States Code) requires prime
contractors on some government construction contracts to post bonds guaranteeing both
the performance of their contractual duties and the payment of their subcontractors and
The Miller Act addresses two concerns that would otherwise exist in the performance of federal
government construction projects:
Performance Bonds: The contractor's abandonment or other non-performance of a government
job may cause critical delays and added expense in the government procurement process. The
bonding process helps weed out irresponsible contractors while the bond itself defrays the
government's cost of substitute performance. The subrogation right of the bond surety against
the contractor (i.e., the right to sue for indemnification) is a deterrent to non-performance.
Payment Bonds: Subcontractors and material suppliers would otherwise be reluctant to work on
such projects (knowing that sovereign immunity prevents the establishment of a mechanic's lien)
- decreasing competition and driving up construction costs.
It is often asserted that fraud is the only ground for restraining unfair
calls against on-demand performance bonds. Indeed, there is a view
that it is extremely difficult to obtain injunctive relief in relation to
unfair calls. This is not surprising given the high evidentiary burden
required to establish fraud.
• CONTRACTX COURSE BY RITCHEL FRIED –HARVERDX & EDX
• ASHURST LLP PUBLISHED PAPERS - INTERPRETATION OF CONTRACTS UNDER ENGLISH LAW