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
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
-
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.
- 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
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
-
See implied-in-fact
contract.
- 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 parties’ 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
parties’ 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
-
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.
-
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
quasi contract
-
See implied-in-law
contract.
- 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 parties’ 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
-
A contract that is not legally enforceable. See also voidable contract.
- A contract
whose terms have been completely fulfilled.
voidable contract
-
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.
- 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.
