Nature of Contracts

Practically every personal business activity involves a contract; the purchase of a color TV , the renting of an apartment , buying a property. In each transaction relating to the acquisition of raw materials, their manufacture, and the distribution of the finished product by business, there are contracts that define the relationships and the rights and obligations of the parties. As pervasive as contracts are in our lives, the legal language of contracts is not very familiar to most of us. For that reason this article is devoted primarily to the terminology or vocabulary that is needed to work with contract law.

Definition of a Contract

A contract is a binding agreement. By one definition a contract is "a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty;Contracts arise out of agreements; hence a contract may be defined as an agreement creating an obligation.

The substance of the definition of a contract is that by mutual agreement or assent the parties create enforceable duties or obligations that are legally binding. That is each party is obligated to do or to refrain from doing certain acts. The substance of the definition of a contract is that by mutual agreement or assent the parties create enforceable duties or obligations that are legally binding.

Elements of a Contract

The elements of a contract are : 1) an agreement , 2) between competent parties , 3) based upon the genuine assent of the parties, 4) supported by consideration , 5) made for lawful objective, and 6) in the form required by law, if any. These elements will be considered bellow.

Subject Matter of Contracts

The subject matter of a contract may relate to the performance of personal services, such as contracts of employment to work on an assembly line in a factory, to work as a secretary in an office, or to build a house. The contract may provide for the transfer of ownership of property, such as a house (real property) or an automobile (personal property), from one person to another. A contract may also call for a combination of these things. For example, a builder may contract to supply materials and do the work involved in installing the materials, or a person may contract to build a house and then transfer the house and the land to the buyer.

Parties to a contract

A person who makes a promise is a PROMISOR, and the person to whom the promise is made is called the PROMISEE. If the promise is binding, it imposes upon the promisor a duty or obligation and the promisor may be called the OBLIGOR. The promisee who can claim the benefit of the obligation is also called the OBLIGEE. The parties to a contract are said to stand in privity with each other, and the relationship between them is termed privity of contract.In written contracts, parties may be referred to by name. More often, however they are given special names that serve better to identify each party.A party to a contract may be an individual, a partnership, a corporation, or a government. A party to a contract may be an agent acting on behalf of other person. There may be one or more persons on each side of the contract. In some cases there are three-sided contracts, as in a case of credit card transaction, which involves the company issuing the card , the holder of the card, and the business furnishing goods and services in reliance on the credit card.