Know The Enforceability of a Contract under Common Law System

Contract Illustration

A contract is an agreement between parties concerning the object agreed. People from various backgrounds had at least done contracting. Not all contracts shaped as a formal letter between two parties; a verbal offer and acceptance can be viewed as a valid contract as long as it does not violate the mandatory standard rule within. This mandatory standard rule is regulated by particular state law where the contract is formed (e.g. when a contract is form in California, both the contract and the parties involved will abide to the California rule).

A valid contract is a contract that met the criteria for it to become enforceable. These criteria are as follows.

1. Agreement (including offer, acceptance, and assent from both parties);
2. Consideration (both parties must invest a value in the contract);
3. Capacity; and
4. Legality.

Agreement

Offer

There will always be a person who offers something so the other person can accept the offer in agreeing. There are terms in order to illuminate further; The Offeror and The Offeree. The Offeror is the person who makes the offer, and The Offeree is the person to whom The Offeror intends to offer. The offer itself had its necessities to fulfill to make it valid such as follows;

1. The Offeror intends to make the offer;
2. The offer is delivered with proper communication for The Offeree to apprehend what The Offeror offers; and
3. The Offeror composed the material terms in the offer. These material terms observe by the product’s delivery cost, tax, and other crucial fundamentals for the offer.

Acceptance

When a person made an offer, the other person either accepts or rejects the offer. These are what we called acceptance. A valid acceptance is unequivocal. The Offeror must fully perceive The Offeree intention whether to accept or to decline.

Hereafter, The Offeree can only accept the offer given by The Offeror. The previous offer will count as null if The Offeree makes a counter-offer — the Offeree becomes The Offeror and vice versa. This principle is known as The Mirror Image Rule; you only accept what is offered to you.

Regarding the above, an acceptance must be addressed via proper communication agreed; by the authorized means. For instance, Person A offer something to Person B with a condition Person B can only accept the offer by sending an email regarding his/her willingness to accept. Nevertheless, Person B sends a voicemail to signifies his/her willingness. Although Person B accepts the offer, Person B’s acceptance is not valid by reason of not through the authorized means.

Another vital principle to remember concerning an acceptance is The Mailbox Rule. The Mailbox Rule defines that the minute The Offeree sends an acceptance letter in the mailbox — or email nowadays — even if The Offeror did not receive the acceptance yet, the acceptance made by The Offeree is valid.

Assent

A key to satisfy an assent is both parties have meeting of the minds or agree on the same thing. If accomplish, the requirement for assent is fulfilled. Nevertheless however, there are four things that can negate the assent.

• Mistakes. As a human, we sure do made a lot of mistakes, including when construing a contract. Even though it can negate the assent, a mistake alone doesn’t voiding a contract. If the mistake concerning the fact or the object of the contract, the contract can be rescinded with mutual agreement. Contrast, if the mistake concerning the value of the contract, the contract is still enforceable.
• Fraudulent misinterpretation. Not only voiding the contract, an act of defraudment is illegal hence have a criminal sanction with vary type of affliction depending on the state you live in. Respecting the contract law, there are two types of fraudulent misinterpretation; fraudulent in inducement signify a fake testimonial upon the object of the contract and fraudulent in inception signify a misrepresentation on the paperwork for the contract to become enforceable.
• Duress and undue influence. Duress betoken as a threat of harm in order for the party to enter and bound to the contract whilst undue influence expresses manipulation on one-party fiduciary relationship with mental or physical illness leading to incapability on having common sense before entering the contract.
• Unconscionability. A judge can null the contract if the contract itself have a exceptionally unfair terms. Particularly, to decide if the contract has an unconscionability clause, the judge examine the parties involved, whether they have grossly unequal bargaining power or not (examine if one party have a bigger or special influence to the lesser party to make it enter the contract by perforce).

Consideration

Consideration is define as what the party can bring to the contract in order to make the contract valuable. Consideration takes two form; a promise (notwithstanding, some promises don’t enact as a sufficient consideration) or an action. Besides six things below that can negate a consideration, all act or promises are consider as valid.

• Gratuitous promises. A promise of a gift is not a valid consideration except if it’s follow with a strong dependency and an action by the promisee. This is called promissory estoppel and its function as legal assurance for the disadvantaged party.
• Past consideration. An act a party had done before the offer has been made cannot be scrutinized as a valid consideration. Example, Person A offer Person B to do 100 pushups for $100. To fulfill Person A promise, Person B must do 100 new pushups, not the pushups he do yesterday or 30 minutes before the offer is made. Intelligibly, consideration requires the creation of new value.
• Preexisting duty. An obligation or duty can not be acknowledge as a sufficient consideration. Example, you can’t offer $100 to a police officer for ensuring a safe neighborhood because it’s a police officer duty to ensure a safe neighborhood.
• Illegal consideration. Same as preexisting duty, an act to not commit a crime isn’t a valid consideration forasmuch as it’s an obligation for citizens to abide the law.
• Illusory promise. A promise which give the promisor a discretion (freedom for the promisor whether he will fulfill the promise or not) can’t be interpret as a valid consideration. Example, Person A promise Person B for $100 if A feel like it. Consequently, Person A promise can’t be enforce and does not constitute as a valid consideration.
• Partial debt payment . A promise by the promisor to pay partial his/her debt for a new consideration isn’t valid. As stated above, a consideration requires the creation of a new value. It all comes back to preexisting duty; to pay debts are obligatory thereupon can not be acknowledge as a sufficient consideration.

Capacity

The capacity holds the prime role on depending whether the contract is enforceable or not. The capacity can be divided by two; a valid capacity for natuurlijke persoon (a human) and recht persoon (legal entity). Basically a valid recht persoon is a person appointed to represent and carrying out legal actions on the behalf of the legal entity. Habitually his/her competency proven with a procuration letter from his/her superior or the person in charge. For the representee to act out of the company behalf, henceforward shall be known as ultra vires, resulting in contract to be void.

Differ from above, is fundamental for a natuurlijke persoon to not be in these conditions to make a contract enforceable.

• Insane. Insane is narrow into two; adjudged insane and insane but not adjudged insane. Adjudged insane expound on a verdict by the court stating the person is insane. All contracts affiliated with an adjudged insane person unquestionably be void. Similar, insane but not adjudged insane imply the person is insane but the court doesn’t issue a verdict stating it. All contracts formed with an insane but not adjudged insane person are voidable thence emerge the obligation for the insane person to restore the condition as before or what is called the duty of restitution to make the contract be void.
• Intoxicated. Intoxicated can be render from a lot of perspectives, whether the person intoxicated with medication, alcohol, or something else which effect the mind of the person on making decisions. The rule applied is same as the contract made with insane but not adjudged insane person.
• Infant. The context in here does not refer to a little child, but more to the minors (different state have different age rule regarding when the person can be consider as an adult). If insane but not adjudged insane voidable contract rule requires the person restore the condition as before he/she enter the contract, infants don’t have the duty of restoration to make a contract void, means he/she can void the contract unilaterally without having to pay the damage cause. However, this privilege have limitations; (1) If the person intended to damage the object of the contract or (2) the person lies about his/her age before entering contract. If the disadvantage party succeeded in verify on one of the two conditions, he/she is obligate to do a restitution.

Legality

Legality rotates in the legal aspect both material and formal form of the contract. A contract is instantly void if does not based with legality such as follows.

• To commit a crime (private illegal gambling, annihilation, etc)
• Usurious contract, a contract with excessive interest surpassing the law
• Against the public policy
• Violation of licensing statutes, contracting with an unlicensed party.

Those are the basic knowledge to understand what makes a contract enforceable or not. It’s important to always fully comprehend the prerequisites within before entering the contract to avoid unwanted conditions. On that account, it’s best for you to consul with an expert before bounding yourself with other party wherefore act of default precipitate in a serious compensation with the possibility on surmounting the value of the contract itself.