An agreement with specific terms between two or more persons or entities in which there is a promise to do something in return for a valuable benefit known as consideration.-Discuss
Introduction:
We engage ourselves voluntarily in promises or agreements almost every day and as a beginner we need to know when a dealing (promise, agreement) becomes contract, the consequences of breaching contracts and how law of contract is enforced .Contracts and promises are widely regarded as cognate ideas. In particular, it is widely believed that contractual obligations share with their promissory counterparts the characteristic of being self-imposed, or voluntarily acquired. Contractual obligations are thought to belong to the same class as promissory obligations, a class that is distinguished by the voluntariness of the obligations within it.
This paper aims to find why and how such voluntariness exists in the law of contract even though contract creates legal relations. And as a result this paper will also focus on the enforcement of law of contract and how it is confined with voluntarily created civil obligation.
Contract:
An agreement with specific terms between two or more persons or entities in which there is a promise to do something in return for a valuable benefit known as consideration.
The existence of a contract requires finding the following factual elements:
· An offer and acceptance of that offer which results in a meeting of the minds (voluntary provided consent);
· An intention to create legal relationship should be there by both the parties.
· There must a lawful consideration.
· Capacity of parties
· Free consent
· Legality of the object
· Certainty
· Possibility of performance
· Void agreements
· Writing, registration and legal formalities
Contract law tends to be the means of supporting the bargain and of ensuring that there will be a remedy if the agreement is not carried out according to the terms laid down by the parties.
Reasons that contracts are enforced:
Contract is an enforceable agreement between two parties. The rules regarding enforceability of agreements obviously grew out of the need for certainty in relationships, whether between business or between private individuals. We can none of us safely conduct ourselves without knowing that we are able to rely on arrangements that we have made.
The enforceability of contracts is based on three significant factors:
- An agreement made between two parties creates legitimate expectations in both that the terms of the agreement will be carried out and they will receive whatever benefit that is expected from the agreement.
- Parties will commonly risk expenditure or do work in reliance on a promise that a particular agreement will be carried out.
- It is simply unfair that if one party is ready to perform, or indeed has performed, their part of the bargain the other party should escape or avoid his obligations without some means of redress for the injured party.
The Concept of Freedom or Voluntariness of a contract:
Freedom or voluntariness of contract is not just something that we expect-the right to contract and on the terms that we want – it is also the heart of contract law. In the nineteenth century, when many of the rules of contract law were devised, Britain was subject to what was known as laissez-faire economics. In modern times politicians as well as economists refer to this as ‘the market and there is a prevailing theory that market people.[1]
The basic proposition in any case is that the parties to a contract should be free to include in a contract whatever terms they choose. In this way the courts will not interfere in contracts by trying to make a bad bargain to good. They will merely ensure that there is a bargain and that it has been created. Tritely identified this point clearly when he said:
‘In its most obvious sense, the expression ‘freedom of contract’ is used to refer the general principle that the law does not restrict the terms on which the parties may contract: it will not give relief merely because the terms of contract are harsh or unfair to one party.’[2]
The idea of freedom of contract is central to contracts and it runs through many of the individual rules of contract law:
- An agreement (offer and acceptance) is said not to exist unless there is a ‘consensus ad idem’, the so-called mutuality of the parties. So even though the parties think that they have agreed on something, there will not be an enforceable contract between them unless the mutuality can be shown. The law prevents one party from forcing goods and services on another party without well as in statutes such as the Unsolicited Goods and Services Act 1971.
- Contract law only concerns itself with the enforcement of bargain. The rules on consideration, including the most modern case law such as Williams vs. Roffey Bros & Nicholls Contractors Ltd [1990] All E.R 512, demonstrate that the courts are not interested in the quality of the bargain that parties freely reach. They are rarely concerned in the existence of a bargain that is then enforceable.
- The requirement that an enforceable agreement must also include within it the intention that the parties are legally bound is another example of freedom or voluntariness of contract. Many agreements are reached between parties where they would not consider that they had brought themselves within law. We are free to make contracts where we agree to be bound. We will not be bound by agreements that we never intend should carry any legal weight. Even if it is wrong that we break these agreements, it is equally wrong that we should be hauled before the courts for a promise that has no legal basis which for some reason we cannot keep, and the law sensibly recognizes this.[3]
- Freedom of contract is recognized also in the face that many of the terms or obligations of the contract by which the parties are then bound are decide upon by the parties themselves. Where bargaining strength is equal, the law will even allow terms that are clearly disadvantageous to a party if he freely agreed to be bound by it. A very extreme example of this can be seen in the so-called ‘securicor cases’ in exclusion clauses.
- Even though the court can be seen to be operating in a protectionist manner towards one party, the rules relating to the various vitiating factors are in effect another example of freedom of contract. This relates back to the idea of a consensus ad idem. If a party is entering a contract only because of false information, or being mistaken as to material facts, or is in any way coerced to enter the contract, then the law will declare the contract void or will set it aside. This will happen because the basis of contracting must be that a party enters the arrangement with free will by exercising choice.
- Freedom can even be seen in one sense in the rule of discharge. For instance when a party has failed to perform all obligations under the contract precisely, it may still be possible for the other party to accept part-performance, and inevitably to pay only for the part done or given. In the same way, the rules on breach of contract allow a party who is the victim of the breach of central term to choose between giving up his own obligations or continuing with the contract, if it would be advantageous, and merely gaining compensation for the breach in question.
As the law of contract has developed, however, it has also been recognized that the parties to a contract cannot be given unlimited freedom and the law has in many instances intervened to give greater protection to the parties. There are number of reasons for this.
So at the first place parties create a contract by giving consent voluntarily but once a contract is properly formed, parties become obliged to perform the terms and conditions of that contract. At this point if they failed to do so and thus breach the contract, law of contract is there to make them liable for not performing those terms and conditions.
Civil obligation:
The phrase ‘civil obligations’ refers, by use of the word ‘civil’, to the distinction between private and public law, with civil obligations being obligations in private law The obligations of private persons in their relations inter se are always civil obligations. Cases where civil obligations have been found involve: contract law, commercial law; the law of tort; family law; the law of succession; employment law; and the law of real property.
Power conferring rule, Duty imposing rule and law of contract:
Legal philosopher, H.L.A. Hart divided the entire legal rules into two categories: power conferring rules and duty imposing rules.
Duty imposing rules make people bound to follow them. There remains no scope to rely on their intentions or voluntariness. Power conferring rules are those that give one powers to involve in certain legal activities such as making contracts with another parties.
The rules of contract law are different. It’s true that contract remedies do provide sanctions (or prices) for breaking contracts, but most of contract law is about making contracts.
Duty imposing rules are rules of conduct; they tell you what you are legally obligated to do (or refrain from) and what consequences attach to obedience or disobedience. Thus, the criminal law rules that prohibit theft forbid certain conduct and provide for penalties for violating the prohibition.
On the other hand, power conferring rules are legal rules that allow for the creation, extinction, and alteration of powers. Thus, contract law empowers individuals and firms to make contracts; contract law themselves are usually collections of duty imposing rules.
Contract law is concerned with extralegal wrongs such as breaking a promise, causing reliance harms, or unjustly enriching oneself at the expense of another. Consider, for example, Charles Fried’s claim that “since a contract is first of all a promise, the contract must be kept because a promise must be kept,” or Patrick Atiyah’s arguments that contract law is designed to compensate for reliance-based harms and prevent unjust enrichment. While Fried and Atiyah make very different claims about the point of contract law, they agree that it is meant to impose duties on persons who enter into agreements for consideration
More precisely, contract law are rules that govern conduct towards performing a contract and if not, the legal consequence- it suggests that if one party breaches any civil obligation that both the parties created voluntarily with consent ; laws of contract will be enforced to them by dint of duty imposing rule.
So the structure of contract law suggests that they function first to create powers. By using these powers individuals enter into various contracts in their day to day life using their own will and intention (voluntarily) and thus to perform the contracts becomes a civil obligation for them. If the contract is not performed by either of the two parties then the contract will be enforced by the court by using law of contract. Here contract law imposes duties on parties to fulfill their civil obligations no matter whether they want to do so or not
Conclusion:
We have found out what are the elements of proper contract. Then gradually we go deep inside the law of contract and found out the freedom of law of contract – which means there must be mutuality of the parties, enforcement of bargain, intention, terms or condition. All these refer that contracts are formed voluntarily with mutually created terms or condition which create obligation in the relation of private person or the parties known as civil obligation.
Then we see that contract law is enforced when these civil obligations are violated by either of the parties. And that is where we found that law of contract is a compound rule as it primarily deals with power conferring rules and with the breach of contract it implies duty imposing characteristics.
So, it’s clear that law of contract confines itself to the enforcement of voluntarily created civil obligation.
References:
1 .P. G. Michael (2007)- Queens university ( faculty of law ) Law and philosophy vol. 26 no.6.p.531.
available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=976825
2. See: http://legal-dictionary.thefreedictionary.com/contract
4. Turner, c. (2008).unlocking contract law, 1.1.4, p.5(j.martin &c.turner,Eds.): Hodder &Stoughton.
5. Turner,c.(2008).unlocking contract law, 1.2, p.5-7 (j.martin &c.turner,Eds.): Hodder &stoughton.
6. G.H Treitel, An Outline of the Law of Contracts (5th edn, Butterworths, 1995)
7.<href=”#30382832295F436F6E737469747574696F6E616C204C61775F3037283133342D313537295F32_11″>http://www.lexisnexis.com/uk/legal/#30382832295F436F6E737469747574696F6E616C204C61775F3037283133342D313537295F32_11
8. K.Grerory, Georgetown university(April 26,2009)
available at: http://legalworkshop.org/2009/04/26/three-pictures-of-contract-duty-power-and-compound-rule
[1] Turner,c.(2008).unlocking contract law, 1.2, p.5(j.martin &c.turner,Eds.): Hodder &stoughton.
[2] G.H Treitel, An Outline of the Law of Contracts(5th edn, Butterworths, 1995)
[3] Turner,c.(2008).unlocking contract law, 1.2, p.6(j.martin &c.turner,Eds.): Hodder &stoughton.
[4] K.Grerory, Georgetown university(April 26,2009) available at: http://legalworkshop.org/2009/04/26/three-pictures-of-contract-duty-power-and-compound-rule