Contracts come in many forms and eve to be categorized to understand their function. Some contracts have legally binding obligations while other do not. In the paper I am going to discuss three topics. First, I will analyze the elements necessary to form a valid contract between two parties. Second will provide to primary legal defenses a party may have against forming a contract. And last, I am going to evaluate remedies for a breach of contract that a party may have against a breaching party. Elements of a Valid Contract The elements of a valid contract consist of four elements.
The first element of valid contract is “offer and acceptance”, these two in combination create what is called mutual assent (Melvin, 201 1). These two alone do not create a valid contract. They must contain three other element to form a valid contract, these three elements are consideration, capacity, and legality. Part one of making a valid contract is the offer. An offer is a promise or commitment to do (or refrain from doing) a specified activity (Melvin, 2011). In order for an offer to have legal effect, the party making the offer must have an objective intent.
Meaning that the offering party must be willing to accept he terms of their offer within reasonable means. Part two of the first element is acceptance. Melvin (2011) stated, “Acceptance is an offers expression of agreement to the terms of the offer” (peg. 33). This is usually done in a written or oral manner, but an offer can also be accepted if action or conduct is displayed by the offered. As stated before the second element of a contract is consideration. This elements function is to indicate what promises are binding and those that are not binding.
In most situations a contract will not be enforced if the accepting party has not been given consideration of the remises. Before this element can be fulfilled both parties must suffer what is called legal detriment. The way to satisfy this is for a party to promise to perform something or refrain from doing something. Capacity is the element of a contract. The capacity element is simply one’s ability to fully understand the terms of the contract. This means that any party with limited power cannot validly enter a contract with enforceability.
This limited power usually consist of minors and anyone with a mental incapacity (Melvin, 2011 Due to their lack of maturity or mental capacity, they cannot be held responsible for upholding the terms of a contract. Contracts of this sort can only be valid and enforceable once this capacity has been regained. The last element off valid contract is legality. If a contract is to be valid and enforceable the terms of the contract must be legal. This means any contracts that involve gambling betting, or those that violate any law is not legal and therefore not valid and/ or enforceable.
For valid contracts to form these four elements must be met. Without meeting the conditions of all four elements any contract entered cannot be enforced by either party nor by the law. Defense against Contract Formation At some point someone comes to a point where they want to avoid forming a contract or avoid a contract being enforced. Individuals have some way. В«s to defend themselves against these contract formations or enforcements. There are few ways that this defense can be achieved. The method of defense is legal capacity. Legal capacity is someone legal ability to form contracts.
If someone is a minor, mentally impaired, or the under influence of drugs or alcohol they can claim that they did not have the capacity to legally enter the contract and the contract can be deemed void. The next defense is duress. Duress is claimed when an individual experiences some type of pressure that makes them feel threatened or coerced into signing a contract. The burden of proof is left to the claimant for this type of claim. The claimant must prove that any reasonable person in their position would have signed the contract against his or her will (David, 2014).
This claim can come in multiple forms. Such as economic, physical, and emotional. An individual’s next defense against contract formation is unconscionably. unconscionably can be claimed when the substantive terms of a contract are unfair, one-sided or oppressive. David (2014),” If the court finds a gross inequality of bargaining power, it will not enforce the agreement because of procedural unconscionably. This creates an equal footing for both parties” (Unconscionably). My last defense against contract formation are mistakes.
For this defense to apply both parties must mutually understand what assumptions the contract was based upon. If one party denies understanding the contract for negligent reasons they are still bond by the contract. Remedies According to Melvin (201 1), the law provides certain relief for aggrieved arties that suffer losses as a result of another party breach of contract. These relief methods are called remedies. These contract breaches usually result in the non-breaching being awarded money from the beaching party, but there are others where money damages are insufficient.
There are seven types of remedies; compensatory damages, consequential damages, restitution, liquidated damages, specific performance, injunctive relief, and reformation. Some of these remedies are what is called equitable remedies. Meaning that money is not awarded but something of equal value presented by other means. Compensatory damages are damages awarded to the non- breaching party to put them in the same position they would have been in if the other party had performed as agreed (Melvin, 2011).
This usually results in out of pocket cost and the potential profits that would have been awarded to the non-breaching party. Consequential damages compensate the non- breaching party for foreseeable indirect losses not covered by the compensatory damages (Melvin, 2011). The non-offending party is usually entitled to whatever damages are caused by the unique circumstance. Melvin (201 1) stated,” Restitution is a remedy designed to prevent unjust enrichment f one party in an agreement. This remedy allows the non-breaching party to rescind the contract to receive fair market value for any services rendered. (p. 172). Liquidated damages are damages that both parties agree ahead of time. This remedy covers any damages to complicated to determine as actual damages. The damages set here are usually set as a fixed amount prior to any agreement. Specific performance is an equitable remedy. This type of remedy is performance based in a sense that the court may force the breaching party to complete the specified activity. This is only enforced when none damages are inadequate. Injunctive relief is a remedy that stop or prevents certain acts from happening.
For example in my oil field servicing business we constantly have to deal with startup companies over bid our private clients. When to owners attempt to breach the contract with us we have to file injunctive relief to retain the site. Reformation is a remedy to contractual disputes between parties. When parties initially agree to the terms of a contract but did not understand perfectly what the terms meant reformation can take place to rectify the dispute. So essentially the contract is edified so both parties to understand.
As an example once again, with my company, I had a contract to clean a well site for a private owner every 1 80 calendar days for a set price of each servicing. When the time came for the owner to pay he misunderstood the price of the service and underpaid my company. When we looked at the contract the MM,’near was not mistaken about the price stated on the contract. At that point we held to his price for that servicing and modified the contract for future services. Conclusion Contracts hold a great deal of power for protecting people as well as connecting people.