A contract is a lawfully binding bargain that exists between two or more persons, institutions, parties or organizations (Blum, 2011). This may involve an agreement for employment, order of goods, buying a house among others. The promises reached by the parties involved outline the rights and commitments of the contractual parties. Contracts are enforceable in law by the courts, and in case either of the parties breaches part of, or all contractual obligations, the non-breaching party is entitled to receive remedies through the courts (Blum, 2011).
The Essential Elements of a Contract
Offer; this is a statement of willingness or any other indication that the individual or party is ready to enter into a contract with another party on particular terms. The offer must be conveyed in a way that promotes acceptance, without any other conditions required of the person other than to show acceptance (Chadman, 2009). The accepting person must understand that his assent of the offer completes the contract and there is no contract without offer.
Acceptance; acceptance of an offer is the indication by the party receiving the offer that the offer is welcomed. It is the show of assent to the bargain under the terms thereof made by the person offering as they are, without altering any of the terms. Any change of the proposed terms leads to a rejection of the whole offer and amounts into a counteroffer, which must be acknowledged by the other party. Equally, the acceptance must be done before it expires, unless the offer is renewed (Emanuel, 2006).
Legal purpose; this is very essential element that requires that a contract can only exist if its objective is for a legal purpose or activity. Any contract must not involve an activity that contravenes the laws of the land. For example, a contract that involves illegal distribution of narcotic drugs is considered not binding, because its tenacity and intention is illegal.
Mutuality of obligation; this element refers to the mutual understanding of the parties and their assent to the expression of their agreement. The contract parties must approve to the same course, in the same mind and time. The understanding of the agreement is based on the objective standards set by the parties, but not on the unexpressed subjective intention (Blum, 2011). Determination of the presence of the mutual assent can be proved by the court, through analysis of the communications exchanged between the parties and further the actions and situations surrounding these communications.
Any inconsistency of thoughts concerning the contract by either party necessitates no contract. This is because, for contract to be enforceable in future without challenge, the parties must fully agree on the vital terms of the contract and the mutual understanding between the parties must not diverge materially from the original offer, a fact that is open to legal challenge (Chadman, 2009).
Certainty of subject matter; this element stipulates that a contract is legally binding only if its terms are adequately defined to facilitate clear understanding of the obligation by the court in case of a dispute , and for the court to enforce the contract. The agreement must be in simple and easy language that is easy to interpret with very certain intentions. The regulations concerning uncertainty of material terms of a contract are dependent on the idea that a party cannot enter into an agreement unless the terms of that contract are substantially certain.
In case some terms that are relevant in such a contract are omitted, the courts usually have implied terms that are employed to maintain enforceability of the contract and sustain the agreement by providing the missing terms, should there be a legal challenge.
Consideration; thisis also an essential element of a valid contract where only the parties needs to review whether or not it is a good bargain to their satisfaction. The law necessitates that there be adequate consideration by giving something of value to the promisor, to prove the commitment, and should not be anything promised or given in the past. This may be in form of a right, interest, or benefit that one party is entitled to, or instead; forbearance, or obligation that is assumed by the other party.
Competent Parties; a contract must be between parties who are competent and authorized by law for it to be legally binding. For example, an agreement between a child and an adult on purchase of land may not be binding but considered exploitative.
Remedies In Case of a Breach
Whenever a contract is breached by either of the contractual parties, the non-breaching person has a legal right to claim for the damages incurred as a result of the breach. This can also be an award of money, envisioned to compensate the party for the forfeiture of the bargain (Blum, 2011). The remedies include;
Compensatory damages; these are remedies that restore the value of the bargain to the non-breaching party and ensures that the person remains in the same position as if the contract had been fully executed. The amount to be awarded for breach depends on the type of contract involved and which party broke the contract. The non-breaching party has a legal right to demand for compensation of the damages from the breaching party
Liquidated damages; these are damages agreed on by the parties in advance, to be paid in case the contract is breached by either party. This is lawful, only if the actual damages are difficult or impracticable to define, and the liquidated amount must be realistic and reasonable in such situations. This is commonly preferred by businesses in their commercial contracts, since it helps to provide certainty, evade lawsuits, and gives an incentive to people to sign contracts (Chadman, 2009).
Consequential damages; these are damages that are foreseeable by the breaching party arising from circumstances outside the bargain. This type of damage can be executed if the breaching party is aware or is perceived to be aware that the breach will inflict distinct damages to the other party.
Nominal damage; this occurs when the non-breaching party sues the other party even though no financial loss has been incurred and is normally awarded in a small amount.
The non-breaching party can also rescind the contract and recover restitution. Rescission is a move to undo, or cancel a bargain, to return the non-breaching parties to the state they were in before the transaction. This is an option pursued in case of duress, fraud, mistake, or failure of consideration in the subsequent levels (Emanuel, 2006). The rescinding party must issue immediate notice to the breaching party and return to each other all the items such as goods, property and money previously issued.
Contracts exist all over the world and are lawfully binding agreements between two or more parties, which are enforceable by law through the courts. Agreements must comprise all the essential elements to make up a contract. These elements include; presence of an offer, acceptance of an offer, legal purpose of the agreement, mutual obligation, and certainty of the subject matter. It also involves consideration whether the deal is a good bargain and competence of the party involved (Chadman, 2009). Non-breaching parties have legal rights to claim damages from the breaching party for the injuries caused.