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contract definition - legal

n

Any legally binding agreement voluntarily entered into by two or more parties that places an obligation on each party to do or not do something for one or more of the other parties and that gives each party the right to demand the performance of whatever is promised to them by the other parties. To be valid, all parties must be legally competent to enter a contract, neither the objective nor any of the obligations or promised performances may be illegal, mutuality of the agreement and of its obligations must exist, and there must be consideration. See also acceptance, offer, privity, tender, breach of contract, and bargain.

v

To enter into or settle by a contract or to make a legally binding promise.

n

The document containing the terms of a contract.
adhesion contract
A contract that is so highly restrictive of one party’s rights and liabilities, but not of the other, that it is doubtful that it is a truly voluntary and uncoerced agreement. The concept typically arises in the context of standard-form contracts that are prepared by one party, not subject to negotiation, and offered on a “take it or leave it” basis. If the terms of the contract are extremely burdensome or oppressive, the court may not enforce it on the grounds that it is unconscionable. Also called contract of adhesion. See also boiler plate, fine print, and unconscionable.
aleatory contract
A contract in which the performance promised by at least one party depends upon the occurrence of an uncertain future event. For example, a contract with an insurance company for the payment of proceeds in the event that an injury is suffered in the future in an automobile accident.
bilateral contract
A contract wherein each party is obligated to fulfill a promise made to the other party and is entitled to the completion of a promise made by the other party.
breach of contract
See breach of contract.
completely integrated contract
. One or more documents adopted by the parties as expressing the complete and exclusive statement of all the terms of their contract. Also called entire agreement of the parties, entire contract, or entire contract of the parties. See also partially integrated contract and severable contract.
contract implied in fact
See implied-in-fact contract.
contract implied in law
See implied-in-law contract.
contract of adhesion
See adhesion contract.
contract under seal
A promise to do or not do something that is physically delivered to the promisee in a sealed instrument. Under common law, such a promise bound the promisor even if there was no consideration, but the use of such contracts has been modified or eliminated in most states. Also called covenant and sealed instrument.
cost-plus contract
A contract in which the payment for work done or supplies provided equal the total costs that the contractor incurs, plus a fixed fee or a percentage of the profits. Frequently used in transactions with the government.
divisible contract
See severable contract.
executed contract
  1. A contract in which all the promises owed by the parties have been performed and all the obligations have been discharged. See also executory contract.
  2. A signed contract.
executory contract
A contract in which all or a portion of the promised contained therein have not yet been performed. See also executed contract.
express contract
A contract whose terms have been clearly expressed in words, whether spoken or in writing, between the parties. See also oral contract, written contract, and implied contract.
freedom of contract
See freedom of contract.
illusory contract
A contract in which the only consideration given by one party is an illusory promise. For example, “For $500, I will provide housekeeping services whenever I am available for the next year.” Traditionally, such a contract was unenforceable, but in modern court decisions, a duty to act in good faith is often read into the promise and the contract is enforced accordingly.
implied contract
  1. See implied-in-fact contract.
  2. See implied-in-law contract. See also express contract.
implied-in-fact contract
A contract based on the tacit understanding or an assumption of the parties and evidenced by the partiesÂ’ conduct. For example, if a person drives her vehicle to a service station and opens the gasoline tank so that the service attendant can fill it, there is an implied promise on the part of the driver to pay for the gasoline, even if nothing is said between the driver and the attendant. Also called contract implied in fact. See also implied-in-law contract.
implied-in-law contract
A contractual obligation imposed by the law because of the partiesÂ’ conduct or a special relationship between them or to prevent unjust enrichment. For example, when someone receives and uses goods that were intended for another, the law will impose an obligation on the recipient of the goods to pay for them. The obligation is imposed even if there is opposition or no assent from the party whom the obligation is being imposed upon. Also called contract implied in law and quasi contract. See also implied-in-fact contract.
installment contract
  1. A contract in which the obligations of one or more parties (for example, the delivery of goods, performance of services, or payment of money) is authorized or required to be completed in a series of increments over a period of time.
  2. Under the Uniform Commercial Code, a contract that authorizes or requires the delivery of goods in separate lots that will each be separately accepted. A severable contract; each delivery is, in reality, an independent contract.
integrated contract
One or more documents expressing one or more terms of a contract in its final form. See also completely integrated contract, partially integrated contract, and integration.
oral contract
An express contract that is not in writing or has not yet been signed by the parties who will be obligated to do or not do something under its terms. See also written contract.
output contract
A contract in which a buyer agrees to purchase at a set price all quantities of a particular good or service that the seller can provide over the duration of the contract. See also requirements contract.
partially integrated contract
An integrated contract of which one or more of its terms is not yet in its final written form. See also completely integrated contract.
privity of contract
See privity.
quasi contract
  1. See implied-in-law contract.
  2. A name for a claim for relief for restitution, especially one for quantum meruit.
requirements contract
A contract in which a seller agrees to provide at a set price all quantities of a particular good or service that the buyer needs over the duration of the contract and the buyer agrees, during that time, to obtain those goods and services only from the seller. See also output contract.
sealed contract
See contract under seal.
severable contract
A contract with two or more distinct components any one of which, if breached or invalidated, may be considered as an independent contract and not affect the other components of the contract and the partiesÂ’ rights and obligations thereunder or put the promisor in breach of the entire contract. For example, a contract to purchase an automobile and to have a radio installed in it before delivery may be regarded as severable if the radio is not installed when the vehicle is delivered. Also called divisible contract. See also installment contract, completely integrated contract, and severability clause.
standard-form contract
A contract containing set terms that is repeatedly used and usually mass produced or preprinted by a party or an industry with only a few blank spaces to be filled in and with a few predetermined alternate and optional clauses to choose from to accommodate slight additions and modifications.
subcontract
A contract whereby a party procures the performance of a part or all of his obligations under another contract by hiring another party to perform those obligations for him.
unilateral contract
A one-sided contract in which one party promises to do or not do something in exchange for the performance of an act that is not promised to be done. For example, if a reward is offered for the return of a lost watch, nobody is promising to return the watch, but if it is returned, the promisor will be required to pay the promised reward.
void contract
  1. A contract that is not legally enforceable. See also voidable contract.
  2. A contract whose terms have been completely fulfilled.
voidable contract
  1. A contract that can be voided at the will of one or more parties. The power to void the contract is not necessarily available to all the parties of the contract. For example, a person who is under the age of capacity can reject her rights and obligations under a contract and make it void without any repercussions, but until she does so, the contract is valid. However, an adult who entered that same contract cannot void it, and any attempt to do so will be a breach of contract and make her liable for damages.
  2. A contract that is void to a wrongdoer, but not to the party who is wronged unless the injured party decides to treat the contract as void. See also void contract.
written contract
An express contract that is written and has been signed by the parties who will be obligated to do something or not do something under its terms. See also oral contract.
yellow dog contract
An employment contract whereby an employee agrees, as a condition of employment, not to remain in or to join a union during the course of his employment and to quit his job if he does. Such contracts are unenforceable in federal courts and are illegal in most states.

Webster's New World Law Dictionary Copyright © 2006 by Wiley Publishing, Inc., Hoboken, New Jersey.
Used by arrangement with John Wiley & Sons, Inc.

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