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a. An agreement between two or more parties, especially one that is written and
enforceable by law. See synonyms at bargain.
b. The writing or document containing such an agreement.
2. The branch of law dealing with formal agreements between parties.
3. Marriage as a formal agreement; betrothal.
4. Games.
a. The last and highest bid of a suit in one hand in bridge.
b. The number of tricks thus bid.
c. Contract bridge.
5. A paid assignment to murder someone: put out a contract on the mobster's life.

v., -tract·ed, -tract·ing, -tracts. (kən-trăkt', kŏn'trăkt')

1. To enter into by contract; establish or settle by formal agreement: contract a marriage.
2. To acquire or incur: contract obligations; contract a serious illness.
a. To reduce in size by drawing together; shrink.
b. To pull together; wrinkle.
4. Grammar. To shorten (a word or words) by omitting or combining some of the letters or
sounds, as do not to don't.
1. To enter into or make an agreement: contract for garbage collection.
2. To become reduced in size by or as if by being drawn together: The pupils of the patient's
eyes contracted.
phrasal verb:
contract out
1. To engage a person outside an organization by contract to undertake or produce.
[Middle English, from Latin contractus, past participle of contrahere, to draw together, make a
contract : com-, com- + trahere, to draw.]
contractibility con·tract'i·bil'i·ty or con·tract'i·ble·ness n.
contractible con·tract'i·ble adj.



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Marketing Dictionary: contract
In general: legal agreement between two or more parties, such as that between an advertising
agency and its clients, that describes the services to be performed and the price and payment
Direct marketing: see trailer.
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Banking Dictionary: Contract
1. General. An agreement backed by lawful consideration to carry out actions, exchange assets,
or refrain from doing things. A legally valid contract is reached through mutual agreement by
persons with the capacity to negotiate, in which each gives up something of value. It must be for
a lawful purpose.
2. _Futures. (1) A trading unit in a financial future; (2) An agreement between buyer and seller
of a futures contract as defined by a commodities exchange or exchange clearinghouse.
3. Foreign Exchange. An agreement by two parties to exchange one currency for another at a
specified future date.

Real Estate Dictionary: Contract

An agreement between competent parties to do or not to do certain things for a Consideration.
Example: To have a valid contract for the sale of real estate there must be:
1. An Offer
2. An Acceptance
3. Competent Parties
4. Consideration
5. Legal Purpose
6. Written Documentation
7. Description of the Property
8. Signatures By Principals or their Attorney-In-Fact

Thesaurus: contract
1. A legally binding arrangement between parties: agreement, bond, compact, convention,
covenant, pact. See agree/disagree.
2. An agreement, especially one involving a sale or exchange: bargain, compact, covenant,
deal, transaction. See agree/disagree.
1. To enter into a formal agreement: bargain, covenant. See agree/disagree.
2. To assume an obligation: engage, pledge, promise, undertake. See agree/disagree,
3. To become affected with a disease: catch, develop, get, sicken, take. Idioms: come down
with. See get/lose.
4. To reduce in size, as by drawing together: compact, compress, constrict, constringe,
shrink. See increase/decrease.

Antonyms: contract

Definition: agreement, deal
Antonyms: disagreement, misunderstanding

Definition: catch disease
Antonyms: give

Definition: come to terms
Antonyms: break off, disagree

Definition: condense
Antonyms: amplify, dilate, enlarge, expand, extend, increase, lengthen, spread, stretch

Dental Dictionary: contract

1. an agreement based on sufficient consideration between two or more competent parties to do
or not to do something that is legal. 2. a legally enforceable agreement between two or more
individuals or entities that confers rights and duties on the parties. Common types of contracts
include (1) those contracts between a dental benefits organization and an individual dentist to
provide dental treatment to members of an alternative benefits plan. These contracts define the
dentist’s duties both to beneficiaries of the dental benefits plan and the dental benefits
organization, and usually define the manner in which the dentist will be reimbursed; and (2)
contracts between a dental benefits organization and a group plan sponsor. These contracts
typically describe the benefits of the group plan and the rates to be charged for those benefits.

US Supreme Court: Contract

The Supreme Court has had little impact on contract law, a fact largely attributable to structures
and attitudes within the federal system that seek to preserve the states as separate law‐making
authorities (see Federalism). The Court has played a more significant role in other areas of
commercial law, such as admiralty and bankruptcy, for which there are constitutional provisions
assigning responsibility to the national government. There is no comparable provision for
contracts. Thus, with few exceptions, contract law has been viewed as within the purview of the

Some parts of the Constitution do, however, relate tangentially to contract law. Here the Court
has had a significant impact, but one that affects the structures of government rather than the
substance of contract law. For example, because the Constitution and national laws are supreme
(Art. VI, sec. 2), the Court is the final arbiter of disputes originating in procurement contracts to
which the federal government is a party.

The other two relevant provisions of the Constitution are the Contracts Clause (Art. I, sec. 10, cl.
1) and the Due Process Clauses of the Fifth and Fourteenth Amendments. The Court early
applied the Contracts Clause, which prohibits states from interfering with the obligation of
contracts, in Fletcher v. Peck (1810) and Dartmouth College v. Woodward (1819). In both cases
the Court declared state laws unconstitutional as interferences with the obligation of contracts. In
the process, the Court gave such a broad definition to “contract” that for most of the nation's
history private individuals have had great freedom to form their own contracts. Only under the
pressures of the Great Depression did the Court retreat and allow states to modify contracts, and
then only to declare a temporary moratorium on making mortgage payments in Home Building
& Loan Association v. Blaisdell (1934).

In Lochner v. New York (1905) and Adkins v. Children's Hospital (1923), the Court also excepted
important areas from state intervention when it used the Due Process Clauses to protect “freedom
of contract” in striking down regulations of conditions of employment such as wages and hours
(see Contract, Freedom of). But beyond ensuring a wide range for individual action in shaping
contractual relations, the Court again had little to do with the doctrine of contract law.

The only significant exceptions to the Court's general inefficacy with respect to contract law
occurred during the second half of the nineteenth century. The Court's influence on commercial
law in general peaked in the half‐century following Swift v. Tyson (1842), a decision that held
that federal courts could decide questions of commercial law in accord with general principles,
without being restricted to the decisions of the state in which the case arose. Thus, for half a
century or so, the Court's search for a uniform federal common law coincided with similar
interests in uniformity that originated in the growing commercial economy. In the end, however,
the Court proved unable to satisfy the calls for a uniform national law.

Even at the peak of its influence on contract law, the Court tended to hear major issues only
occasionally—for the simple reason that the Supreme Court is a court of limited jurisdiction.
State courts, by contrast, are courts of general jurisdiction, which can hear and decide any issue
(see Judicial Power and Jurisdiction). By the end of the nineteenth century, therefore, a number
of organizations began to look elsewhere for uniformity. In light of the contemporaneous view
that Congress's powers over commerce were limited, the only path to uniformity was for each
state legislature to adopt the same act. Moreover, the Court itself backed away from a federal
common law when it reversed Swift in Erie Railroad v. Tompkins (1938). In the years since Erie
the Court has regularly declined to hear contract cases, thereby continuing its minimal impact on
the substantive law.
— Walter F. Pratt, Jr.

Political Dictionary: contract

An agreement made between two or more persons to secure a result which each intends should
benefit him or her. Although every participant anticipates a gain, it does not follow that each will
benefit to an equal amount; indeed, one or more may lose in the event. Legal systems and their
students are concerned with questions like: Which contracts should be legally enforceable?
Should contracts be enforced by requiring that they be carried out, or by assessing compensation
due to the aggrieved party if they are not? What is the proper way to analyse a contract—as a
pair of promises, as an offer coupled with an acceptance, as a promise given for a reasonable
consideration? Contracts are also of importance in exemplifying the relation between rights and
duties, which seems particularly symmetrical in the case of consensual contract. Each party
acquires duties and rights as a result of the contract, and one person's right has a clear relation
with other persons' duties. An important political application has been the social contract, under
which the state, the political community, or legitimate authority is seen as the consequence of a
contract drawn up to secure that result. The idea of a social contract has been criticized for
historical inadequacy, and for misconceiving the relation between individuals and society or the
state. Nevertheless, the contractarian tradition still flourishes in political theory. For example,
John Rawls (1921-2002) (A Theory of Justice, 1971) has asked what individuals in specified
conditions would hypothetically agree to, what sort of contract they would accept, if they were
trying to agree on critical standards of justice—although whether this approach is illuminating is
— Andrew Reeve

Britannica Concise Encyclopedia: contract

Agreement between two or more parties that creates for each party a duty to do something (e.g.,
to provide goods at a certain price according to a specified schedule) or a duty not to do
something (e.g., to divulge an employer's trade secrets or financial status to third parties). A
party's failure to honour a contract allows the other party or parties to bring an action for
damages in a court of law, though arbitration may also be pursued in an effort to keep the matter
confidential. In order to be valid, a contract must be entered into both willingly and freely. A
contract that violates this principle, including one made with a legal minor or a person deemed
mentally incompetent, may be declared unenforceable. A contract also must have a lawful
For more information on contract, visit Britannica.com.
Architecture: contract
A legally enforceable promise or agreement between two or among several persons. Also see

Archaeology Dictionary: contract

A legally binding agreement between two or more parties in which there is
an acceptance by one party of an offer made by the other party, there is
evidence that the acceptance is intentional, and there is some kind of
consideration or benefit that one party must confer on the other in return for
the benefit received. Archaeological work is increasingly regulated by
contracts which variously take the form of ‘standard form contracts’ for
regular and routine work; ‘design and execute contracts’ in which the
contractor devises a programme of work, agrees it with the other parties,
and then carries it out; and ‘fixed-price contracts’ where a contractor agrees
to carry out an agreed piece of work for an agreed sum.

Columbia Encyclopedia: contract,

in law, a promise, enforceable by law, to perform or to refrain from performing some specified
act. In a general sense, all civil obligations fall under tort or contract law. Torts are usually
characterized as violations of duties that are imposed on all persons and that have been
established entirely by law. In contracts, on the other hand, the parties determine, at least in part,
what their obligations to one another will be. Special types of contracts are given separate
articles, e.g., negotiable instrument, insurance, and deed.
Criteria for Enforcement
For a contract to be valid, both parties must indicate that they agree to its terms. This is
accomplished when one party submits an offer that the other accepts within a reasonable time or
a stipulated period. If the terms of the acceptance vary from those of the offer, that “acceptance”
legally constitutes a counteroffer; the original offering party may then accept it or reject it. At
any time prior to acceptance, the offer may be rescinded on notice unless the offering party is
bound by a separate option contract not to withdraw. Only those terms expressed in the contract
can be enforced; secret intentions are not recognized. For a contract to be binding, it must not
have an immoral or a criminal purpose or be against public policy.
Other criteria for the enforcement of contracts have varied. In the earliest type of enforceable
promises, it was the form of the contract (e.g., a sealed instrument) or the ceremony
accompanying its execution that marked the essence of the transaction; contracts not sealed or
not dignified by ceremonies held a lesser status, and were therefore not always enforceable. The
importance of promises in commercial and industrial society produced a new criterion, and
generally a promise is now enforceable only if it is made in exchange for consideration, i.e., a
payment, for some action, or for another promise. In some jurisdictions, statutes have made
certain promises enforceable without consideration, e.g., promises to pay debts barred by the
statute of limitations. To be enforceable, most contracts must be in writing, to comply with the
Statute of Frauds (see Frauds, Statute of).
Since a contract is an agreement, it may be made only by parties with the capacity to reach an
understanding. Therefore, individuals suffering from severe mental illness are unable to make
binding contracts. Until the late 19th cent., married women were also without contractual
capacity, because at common law they were considered the creatures of their husbands and
without wills of their own (see husband and wife); this disability has been removed by statute
universally. Minors are not bound by their contracts, but they are responsible for the value of
goods received in contracts made for necessities of life. Otherwise, a minor may denounce his
contracts at any time and on attaining majority may elect whether to affirm or repudiate them
(see age of consent).
A contract must also be the uncoerced agreement of the parties; thus, if it is procured by duress
or fraud it is void. A contract can be unenforceable if it is so one-sided as to be found
unconscionable, where the terms are unreasonably favorable to one party; often the material that
constitutes unconscionability is buried in fine print or expressed in obfuscatory jargon. Adhesion
contracts, which afford no occasion for the weaker party to bargain over their terms, are often
offered to purchasers of consumer goods and services, but are not necessarily unconscionable.
Termination of Contracts
While a contract is still wholly or partly unperformed it is termed executory; contracts may
terminate, however, in ways other than by being fully executed. If the object of the contract
becomes impossible or unlawful, if the parties make a novation (a new superseding agreement),
or if the death of one party prevents that party from rendering personal services he or she had
agreed to perform, the contract is terminated. The injured party may also treat the contract as a
nullity if the other party refuses to perform. The law provides several remedies for breach of
contract. The most usual is money damages for the loss incurred. In cases where some action
other than the payment of money was contracted for, a court may grant the plaintiff an injunction
ordering specific performance. If one party is unjustly enriched by a contract that he or she then
repudiates legally, restitution may be required. A typical example of this is ordering a minor who
revokes a contract to restore the things of value that were obtained.
See studies by E. J. Murphy and R. E. Speidel (1984); H. Collins (1986); R. B. Summers and R.
A. Hillman (1987); P. S. Atiyah (1988).

Law Dictionary: Contract

A promise, or set of promises, for breach of which the law gives a remedy, or the performance of
which the law in some way recognizes as a duty. 1 Williston, Contracts §1 (4th ed. 1990). The
essentials of a valid contract are "parties competent to contract, a proper subject-matter,
consideration, mutuality of agreement, and mutuality of obligation," 286 N.W. 844, 846; "a
transaction involving two or more individuals whereby each becomes obligated to the other, with
reciprocal rights to demand performance of what is promised by each respectively." 282 P. 2d
1084, 1088. "The total legal obligation which results from the parties' agreement as affected by
law." U.C.C. §1-201 (11). Types of contracts include:
aleatory contract see aleatory [ALEATORY CONTRACT].
bilateral contract one in which there are mutual promises between two parties to the contract,
each party being both a promisor and a promisee. Corbin, Contracts §21 (one-vol. Ed. 1952).
conditional contract a contract, the performance of which depends on an operative fact (a fact or
event that affects legal relations; it is a cause of some change in those legal relations). Corbin,
Contracts §627 (one-vol. Ed. 1952). A contract, the performance of which depends on an event,
not certain to occur, which must occur, unless its non-occurrence is excused before performance
under the contract becomes due. See Restatement (Second), Contracts §224.
contract of adhesion see adhesion contract.
contract of hazard see sale [SALE IN GROSS].
contract under seal see SPECIAL CONTRACT (below). See also sealed instrument; specialty.
cost-plus contract "one where the total cost to the contractor represents the whole payment to be
made to him, plus a stated percentage of profit," 59 N.W. 2d 368, 370; frequently used in
government contracts and in situations where the production or construction costs are not
presently determinable. See, e.g., 139 F. 2d 661, 667; 144 F. 2d 207, 208.
formal contract see sealed instrument.
freedom of contract see freedom of contract.
implied contract see QUASI [IMPLIED] CONTRACT (below).
installment contract see installment contract.
option contract see option contract.
oral contract one which is not in writing or which is not signed by the parties; "within the statute
of frauds [it] is a real existing contract which lacks only the formal requirement of a
memorandum [signed by the party to be charged] to render it enforceable in litigation." 84 N.E.
2d 466, 467.
output contract where one promises to deliver his entire output to another and the other promises
to accept the entire output supplied. See U.C.C. §2-306.
quasi [implied] contract a contract created by the law for reasons of justice, without any
expression of assent and sometimes even against a clear expression of dissent. For example, B
finds or steals A's money and refuses restitution; he is under a quasi-contractual duty to make
such restitution. The chief reason why such contracts were classified as quasi or "implied in law"
was that they were classified as such both in Roman Law and in English Common Law. See
Corbin, Contracts §19 (one-vol. Ed. 1952). See also quasi [QUASI CONTRACTS].
requirements contract where one party agrees to purchase all his requirements of a particular
product from another. See 276 F. 2d 1; U.C.C. §2-306.
severable contract see severable contract.
simple contract see sealed instrument [SIMPLE CONTRACT].
special contract a CONTRACT UNDER SEAL; a specialty. See sealed instrument.
unilateral contract one in which no promisor receives a promise as consideration for his promise,
Corbin, Contracts §21 (one-vol. Ed. 1952); one-sided agreement whereby one makes a promise
to do, or refrain from doing something in return for a performance not a promise.
See also adhesion contract; breach (of contract); privity[PRIVITY OF CONTRACT]; retail
installment contract; tender; usurious contract; yellow dog contract.
Economics Dictionary: contract
A legally binding agreement between two or more parties.

Veterinary Dictionary: contracted

Having undergone contraction, especially in length.
• c. foal syndrome — a congenital disease of unknown origin in foals characterized by
contractural deformities of axial and appendicular joints. Asymmetry of the skull,
eventration of viscera, torticollis and scoliosis may also be present.
• c. foot — see contracted heels (see below).
• c. heels — the heels of affected horses are drawn in, the bars are almost parallel and the
frog is much reduced in size. Lameness is a common accompaniment. Called also
contracted hoof, contracted foot.
• c. hooves — see contracted heels (above).
• c. tendon — see tendon contracture.

Contracted foal syndrome. By permission from Knottenbelt

DC, Pascoe RR, Diseases and Disorders of the Horse,
Saunders, 2003
• c. foot — see contracted heels (see below).
• c. heels — the heels of affected horses are drawn in, the bars are almost parallel and the
frog is much reduced in size. Lameness is a common accompaniment. Called also
contracted hoof, contracted foot.
• c. hooves — see contracted heels (above).
• c. tendon — see tendon contracture.

Word Tutor: contract

IN BRIEF: An agreement, often written.

The contract was signed by both parties after they agreed on the terms.

Wikipedia: contract

Contract Law
Part of the common law series
Contract formation
Offer and acceptance · Mailbox rule
Mirror image rule · Invitation to treat
Firm offer · Consideration
Defenses against formation
Lack of capacity to contract
Duress · Undue influence
Illusory promise · Statute of frauds
Non est factum
Contract interpretation
Parol evidence rule
Contract of adhesion
Integration clause
Contra proferentem
Excuses for non-performance
Mistake · Misrepresentation
Frustration of purpose · Impossibility
Impracticability · Illegality
Unclean hands · Unconscionability
Accord and satisfaction
Rights of third parties
Privity of contract
Assignment · Delegation
Novation · Third party beneficiary
Breach of contract
Anticipatory repudiation · Cover
Exclusion clause · Efficient breach
Fundamental breach
Specific performance
Liquidated damages
Penal damages · Rescission
Quasi-contractual obligations
Promissory estoppel
Quantum meruit
Subsets: Conflict of law
Commercial law
Other areas of the common law
Tort law · Property law
Wills and trusts
Criminal law · Evidence
A contract is a legally binding exchange of promises or agreement between parties that the law
will enforce. Contract law is based on the Latin phrase pacta sunt servanda (pacts must be
kept).[1] Breach of contract is recognised by the law and remedies can be provided. Almost
everyone makes contracts every day. Sometimes written contracts are required, e.g., when
buying a house.[2] However the vast majority of contracts can be and are made orally, like buying
a law text book, or a coffee at a shop. Contract law can be classified, as is habitual in civil law
systems, as part of a general law of obligations (along with tort, unjust enrichment or restitution).
Contractual formation
The Carbolic Smoke Ball offer, which bankrupted the company because it could not fulfill the
terms it advertised
In common law, there are three key elements to the creation of a contract. These are offer and
acceptance, consideration and an intention to create legal relations. In civil law systems the
concept of consideration is not central. In addition, for some contracts formalities must be
complied with under what is sometimes called a statute of frauds.
One of the most famous cases on forming a contract is Carlill v. Carbolic Smoke Ball
Company,[3] decided in nineteenth century England. A medical firm advertised that its new
wonder drug, a smoke ball, would cure people's flu, and if it did not, buyers would receive £100.
Many people sued for their £100 when it did not work. Fearing bankruptcy, Carbolic argued the
advert was not to be taken as a serious, legally binding offer. It was merely an invitation to treat,
or mere puff, a gimmick. But the court of appeal held that to a reasonable man Carbolic had
made a serious offer. People had given good "consideration" for it by going to the "distinct
inconvenience" of using a faulty product. "Read the advertisement how you will, and twist it
about as you will," said Lord Justice Lindley, "here is a distinct promise expressed in language
which is perfectly unmistakable".
Offer and acceptance
Main article: Offer and acceptance
Perhaps the most important feature of a contract is that one party makes an offer for a bargain
that another accepts. This can be called a 'concurrence of wills' or a 'meeting of the minds' of two
or more parties. There must be evidence that the parties had each from an objective perspective
engaged in conduct manifesting their assent, and a contract will be formed when the parties have
met such a requirement.[4] An objective perspective means that it is only necessary that somebody
gives the impression of offering or accepting contractual terms in the eyes of a reasonable
person, not that they actually did want to contract.
The case of Carlill v. Carbolic Smoke Ball Co. (above) is an example of a 'unilateral contract',
obligations are only imposed upon one party upon acceptance by performance of a condition. In
the U.S., the general rule is that in "case of doubt, an offer is interpreted as inviting the offeree to
accept either by promising to perform what the offer requests or by rendering the performance,
as the offeree chooses."[5]
Offer and acceptance does not always need to be expressed orally or in writing. An implied
contract is one in which some of the terms are not expressed in words. This can take two forms.
A contract which is implied in fact is one in which the circumstances imply that parties have
reached an agreement even though they have not done so expressly. For example, by going to a
doctor for a checkup, a patient agrees that he will pay a fair price for the service. If he refuses to
pay after being examined, he has breached a contract implied in fact. A contract which is implied
in law is also called a quasi-contract, because it is not in fact a contract; rather, it is a means for
the courts to remedy situations in which one party would be unjustly enriched were he or she not
required to compensate the other. For example, say a plumber accidentally installs a sprinkler
system in the lawn of the wrong house. The owner of the house had learned the previous day that
his neighbor was getting new sprinklers. That morning, he sees the plumber installing them in his
own lawn. Pleased at the mistake, he says nothing, and then refuses to pay when the plumber
hands him the bill. Will the man be held liable for payment? Yes, if it could be proven that the
man knew that the sprinklers were being installed mistakenly, the court would make him pay
because of a quasi-contract. If that knowledge could not be proven, he would not be liable. Such
a claim is also referred to as "quantum meruit". [6]
See also: Invitation to treat
Consideration and estoppel
Main articles: Consideration and Estoppel
Consideration is a controversial requirement for contracts under common law (for example
money). It is not necessary in civil law systems,[7] and for that reason has come under increasing
criticism. The idea is that both parties to a contract must bring something to the bargain. This can
be either conferring an advantage on the other party, or incurring some kind of detriment or
inconvenience. Three rules govern consideration.
• Consideration must be sufficient, but need not be adequate. For instance, agreeing to buy
a car for a penny may constitute a binding contract.[8] While consideration need not be
adequate, contracts in which the consideration of one party greatly exceeds that of
another may nevertheless be held invalid for lack of sufficient consideration. In such
cases, the fact that the consideration is exceedingly unequal can be evidence that there
was no consideration at all. Such contracts may also be held invalid for other reasons
such as fraud, duress, unequal bargaining power, or being contrary to public policy. In
some situations, a collateral contract may exist, whereby the existence of one contract
provides consideration for another. Critics say consideration can be so small as to make
the requirement of any consideration meaningless.
• Consideration must not be from the past. For instance, in Eastwood v. Kenyon,[9] the
guardian of a young girl raised a loan to educate the girl and to improve her marriage
prospects. After her marriage, her husband promised to pay off the loan. It was held that
the guardian could not enforce the promise as taking out the loan to raise and educate the
girl was past consideration, because it was completed before the husband promised to
repay it.
• Consideration must move from the promisee. For instance, it is good consideration for
person A to pay person C in return for services rendered by person B. If there are joint
promisees, then consideration need only to move from one of the promisees.
Civil law systems take the approach that an exchange of promises, or a concurrence of wills
alone, rather than an exchange in valuable rights is the correct basis. So if you promised to give
me a book, and I accepted your offer without giving anything in return, I would have a legal right
to the book and you could not change your mind about giving me it as a gift. However, in
common law systems the concept of culpa in contrahendo, a form of 'estoppel', is increasingly
used to create obligations during pre-contractual negotiations.[10] Estoppel is an equitable
doctrine that provides for the creation of legal obligations if a party has given another an
assurance and the other has relied on the assurance to his detriment. A number of commentators
have suggested that consideration be abandoned, and estoppel be used to replace it as a basis for
contracts.[11] However, legislation, rather than judicial development, has been touted as the only
way to remove this entrenched common law doctrine. Lord Justice Denning famously stated
"The doctrine of consideration is too firmly fixed to be overthrown by a side-wind."[12]
See also: Consideration under English law and Consideration under American law
Intention to be legally bound
There is a presumption for commercial agreements that parties intend to be legally bound. On the
other hand, many kinds of domestic and social agreements are unenforceable on the basis of
public policy, for instance between children and parents. One early example is found in Balfour
v. Balfour.[13] Using contract-like terms, Mr Balfour had agreed to give his wife £30 a month as
maintenance while he was living in Ceylon (Sri Lanka). Once he left, they separated and Mr
Balfour stopped payments. Mrs Balfour brought an action to enforce the payments. At the Court
of Appeal, the Court held that there was no enforceable agreement as there was not enough
evidence to suggest that they were intending to be legally bound by the promise.
The case is often cited in conjunction with Merritt v. Merritt.[14] Here the court distinguished the
case from Balfour v. Balfour because Mr and Mrs Merritt, although married again, were
estranged at the time the agreement was made. Therefore any agreement between them was made
with the intention to create legal relations.
The abstraction principle
Main article: Abstraction principle
Germany has a special approach to contracts, which ties into property law. Their 'abstraction
principle' (Abstraktionsprinzip) means that the personal obligation of contract forms separately to
the title of property being conferred. When contracts are invalidated for some reason, e.g. a car
buyer was so drunk that he lacked legal capacity to contract,[15] the contractual obligation to pay
can be invalidated separate from proprietary title of the car. Unjust enrichment law, rather than
the law of contract, is then used to restore title to the rightful owner.
Formalities and writing
Main article: Statute of frauds
Contrary to common wisdom, an informal exchange of promises can still be binding and legally
as valid as a written contract. A spoken contract should be called an oral contract, which might
considered a subset of verbal contracts. Any contract that uses words, spoken or written, is a
verbal contract. Thus, all oral contracts and written contracts are verbal contracts. This is in
contrast to a "non-verbal, non-oral contract," also known as "a contract implied by the acts of the
parties", which can be either implied in fact or implied in law.
Most jurisdictions have rules of law or statutes which may render otherwise valid oral contracts
unenforceable. This is especially true regarding oral contracts involving large amounts of money
or real estate. For example, in the U.S., generally speaking, a contract is unenforceable if it
violates the common law statute of frauds or equivalent state statutes, which require certain
contracts to be in writing. An example of the above is an oral contract for the sale of a
motorcycle for US$5,000 in a jurisdiction which requires a contract for the sale of goods over
US$500 to be in writing to be enforceable. The point of the Statute of Frauds is to prevent false
allegations of the existence of contracts that were never made, by requiring formal (i.e. written)
evidence of the contract, however, a common remark is that more frauds have been committed
through the application of the Statute of Frauds than have ever been prevented. Contracts that do
not meet the requirements of common law or statutory Statutes of Frauds are unenforceable, but
are not necessarily thereby void. However, a party unjustly enriched by an unenforceable
contract may be subject to restitution for unjust enrichment. Statutes of Frauds are typically
codified in state statutes covering specific types of contracts, such as contracts for the sale of real
In Australia and many, if not all, jurisdictions which have adopted the common law of England,
for contracts subject to legislation equivalent to the Statute of Frauds, there is no requirement for
the entire contract to be in writing, although there must be a note or memorandum evidencing the
contract, which may come into existence after the contract has been formed. The note or
memorandum must be signed in some way, and a series of documents may be used in place of a
single note or memorandum. It must contain all material terms of the contract, the subject matter
and the parties to the contract. In England and Wales, the common law Statute of Frauds is still
in force, but only for guarantees, which must be evidenced in writing, although the agreement
may be made orally. Certain other kinds of contract must be in writing or they are void, for
instance, for sale of land under s. 52, Law of Property Act 1925.
If a contract is in a written form, and somebody signs the contract, then the person is bound by
its terms regardless of whether they have read it or not,[16] provided the document is contractual
in nature.[17] Furthermore, if a party wishes to use a document as the basis of a contract,
reasonable notice of its terms must be given to the other party prior to their entry into the
contract.[18] This includes such things as tickets issued at parking stations.
See also: Non est factum
Uncertainty, incompleteness and severance
If the terms of the contract are uncertain or incomplete, the parties cannot have reached an
agreement in the eyes of the law.[19] An agreement to agree does not constitute a contract, and an
inability to agree on key issues, which may include such things as price or safety, may cause the
entire contract to fail. However, a court will attempt to give effect to commercial contracts where
possible, by construing a reasonable construction of the contract.[20]
Courts may also look to external standards, which are either mentioned explicitly in the
contract[21] or implied by common practice in a certain field.[22] In addition, the court may also
imply a term; if price is excluded, the court may imply a reasonable price, with the exception of
land, and second-hand goods, which are unique.
If there are uncertain or incomplete clauses in the contract, and all options in resolving its true
meaning have failed, it may be possible to sever and void just those affected clauses if the
contract includes a severability clause. The test of whether a clause is severable is an objective
test - whether a reasonable person would see the contract standing even without the clauses.
See also: Contra proferentem
Contractual terms
Main article: Contractual term
A contractual term is "[a]ny provision forming part of a contract"[23] Each term gives rise to a
contractual obligation, breach of which can give rise to litigation. Not all terms are stated
expressly and some terms carry less legal gravity as they are peripheral to the objectives of the
Classification of Term
• Condition or Warranty[24]. Conditions are terms which go to the very root of a contract.
Breach of these terms repudiate the contract,allowing the other party to discharge the
contract. A warranty is not so imperative so the contract will subsist after a breach.
Breach of either will give rise to damages.
It is an objective matter of fact whether a term goes to the root of a contract. By way of
illustration, an actress' obligation to perform the opening night of a theatrical production is a
condition,[25] whereas a singers obligation to perform during the first three days of rehearsal is a
Statute may also declare a term or nature of term to be a condition or warranty; for example the
Sale of Goods Act 1979 s15A[27] provides that terms as to title, description, quality and sample
(as described in the Act) are conditions save in certain defined circumstances.
• Innominate term. Lord Diplock, in Hong Kong Fir Shipping Co. Ltd. v Kawasaki Kisen
Kaisha Ltd.[28], created the concept of an innominate term, breach of which may or not go
to the root of the contract depending upon the nature of the breach. Breach of these terms,
as with all terms, will give rise to damages. Whether or not it repudiates the contract
depends upon whether legal benefit of the contract has been removed from the innocent
party. Megaw LJ, in 1970, preferred the use of the classic categorising into condition or
warranty due to legal certainty.[29] This was interpreted by the House of Lords as merely
restricting its application in Reardon Smith Line Ltd. v Hansen-Tangen[30].
Status as a term
Status as a term is important as a party can only take legal action for the non fulfillment of a term
as opposed to representations or mere puffs. Legally speaking only statements that amount to a
term create contractual obligations. There are various factor that a court may take into account in
determining the nature of a statement
Implied Terms
A Term may either be expressed or implied. An Express term is stated by the parties during
negotiation or written in a contractual document. Implied terms are not stated but nevertheless
form a provision of the contract.
• Terms may be implied due to the facts of the preceedings by which the contract was
formed. The Privy Council established a five stage test in BP Refinery Western Port v.
Shire of Hastings.[31] to determine situations where the facts of a case may imply terms
(this only applies to formal contracts in Australia)[32].
Some jurisdictions, notably Australia and Israel, imply a term of good faith into contracts. A final
way in which terms may be implied due to fact is through a previous course of dealing or
common trade practice.
• Terms may also be implied in law.
These are terms that have been implied into standardised relationships.
Common Law.
• Liverpool City Council v. Irwin[33] established a term to be implied into all contracts
between tenant and landlord that the landlord is obliged to keep the common areas in a
reasonable state of repair.
• Wong Mee Wan v Kwan Kin Travel Services Ltd.[34] established that when a tour operator
contracts to for the sale of goods. The most important legislation under United Kingdom
law is the Sale of Goods Act 1979, the Consumer Protection (Distance Selling)
Regulations 2000 and the Supply of Goods and Services Act 1982 which imply terms into
all contracts whereby goods are sold or services provided.
These terms will be implied into all contracts of the same nature as a matter of law.
The rules by which many contracts are governed are provided in specialized statutes that deal
with particular subjects. Most countries, for example, have statutes which deal directly with sale
of goods, lease transactions, and trade practices. For example, most American states have
adopted Article 2 of the Uniform Commercial Code, which regulates contracts for the sale of
goods. The most important legislation implying terms under United Kingdom law are the Sale of
Goods Act 1979, the Consumer Protection (Distance Selling) Regulations 2000 and the Supply
of Goods and Services Act 1982 which imply terms into all contracts whereby goods are sold or
services provided.

See also: Good faith

Setting aside the contract
There can be three different ways in which contracts can be set aside. A contract may be deemed
'void', 'voidable' or 'unenforceable'. Voidness implies that a contract never came into existence.
Voidability implies that one or both parties may declare a contract ineffective at their wish.
Unenforceability implies that neither party may have recourse to a court for a remedy. Recission
is a term which means to take a contract back.
Main article: Misrepresentation
Misrepresentation means a false statement of fact made by one party to another party and has the
effect of inducing that party into the contract. For example, under certain circumstances, false
statements or promises made by a seller of goods regarding the quality or nature of the product
that the seller has may constitute misrepresentation. A finding of misrepresentation allows for a
remedy of rescission and sometimes damages depending on the type of misrepresentation.
According to Gordon v. Selico[35] it is possible to make a misrepresentation either by words or by
conduct, although not everything said or done is capable of constituting a misrepresentation.
Generally, statements of opinion or intention are not statements of fact in the context of
misrepresentation.[36] If one party claims specialist knowledge on the topic discussed, then it is
more likely for the courts to hold a statement of opinion by that party as a statement of fact.[37]
Main article: Mistake (contract law)
A mistake is an incorrect understanding by one or more parties to a contract and may be used as
grounds to invalidate the agreement. Common law has identified three different types of mistake
in contract: unilateral mistake, mutual mistake, and common mistake.
• A unilateral mistake is where only one party to a contract is mistaken as to the terms or
subject-matter. The courts will uphold such a contract unless it was determined that the
non-mistaken party was aware of the mistake and tried to take advantage of the
mistake.[38] It is also possible for a contract to be void if there was a mistake in the
identity of the contracting party. An example is in Lewis v. Avery[39] where Lord Denning
MR held that the contract can only be avoided if the plaintiff can show that, at the time of
agreement, the plaintiff believed the other party's identity was of vital importance. A mere
mistaken belief as to the credibility of the other party is not sufficient.
• A mutual mistake is when both parties of a contract are mistaken as to the terms. Each
believes they are contracting to something different. The court usually tries to uphold
such a mistake if a reasonable interpretation of the terms can be found. Although a
contract based on a mutual mistake in judgement does not cause the contract to be
voidable by the party that is adversely affected. See Raffles v. Wichelhaus.[40]
• A common mistake is where both parties hold the same mistaken belief of the facts. This
is demonstrated in the case of Bell v. Lever Brothers Ltd.,[41] which established that
common mistake can only void a contract if the mistake of the subject-matter was
sufficiently fundamental to render its identity different from what was contracted, making
the performance of the contract impossible.
Duress and undue influence
Main articles: Duress (contract law) and Undue influence
Duress has been defined as a "threat of harm made to compel a person to do something against
his or her will or judgment; esp., a wrongful threat made by one person to compel a
manifestation of seeming assent by another person to a transaction without real volition."[42] An
example is in Barton v. Armstrong,[43] a decision of the Privy Council. Armstrong threatened to
kill Barton if he did not sign a contract, so the court set the contract aside. An innocent party
wishing to set aside a contract for duress to the person need only to prove that the threat was
made and that it was a reason for entry into the contract; the onus of proof then shifts to the other
party to prove that the threat had no effect in causing the party to enter into the contract. There
can also be duress to goods and sometimes, the concept of 'economic duress' is used to vitiate
Undue influence is an equitable doctrine that involves one person taking advantage of a position
of power over another person. The law presumes that in certain classes of special relationship,
such as between parent and child, or solicitor and client, there will be a special risk of one party
unduly influencing their conduct and motives for contracting. As an equitable doctrine, the court
has the discretion to vitiate such a contract. When no special relationship exists, the general rule
is whether there was a relationship of such trust and confidence that it should give rise to such a
presumption.[44] See Odorizzi v. Bloomfield School District.
Main article: Capacity (law)
Sometimes the capacity of either natural or artificial persons to either enforce contracts, or have
contracts enforced against them is restricted. For instance, very small children may not be held to
bargains they have made, or errant directors may be prevented from contracting for their
company, because they have acted ultra vires (beyond their power). Another example might be
people who are mentally incapacitated, either by disability or drunkenness.[45] When the law
limits or bars a person from engaging in specified activities, any agreements or contracts to do so
are either voidable or void for incapacity. The law on capacity can serve either a protective
function or can be a way of restraining people who act as agents for others.
Illegal contracts
Main article: Illegal agreement
A contract is void if it is based on an illegal purpose or contrary to public policy. One example,
from Canada, is Royal Bank of Canada v. Newell.[46] A woman forged her husband's signature on
40 cheques, totalling over $58,000. To protect her from prosecution, her husband signed a letter
of intent prepared by the bank in which he agreed to assume "all liability and responsibility" for
the forged cheques. However, the agreement was unenforceable, and struck down by the courts,
because of its essential goal, which was to "stifle a criminal prosecution." Because of the
contract's illegality, and as a result voided status, the bank was forced to return the payments
made by the husband.
In the U.S., one unusual type of unenforceable contract is a personal employment contract to
work as a spy or secret agent. This is because the very secrecy of the contract is a condition of
the contract (in order to maintain plausible deniability). If the spy subsequently sues the
government on the contract over issues like salary or benefits, then the spy has breached the
contract by revealing its existence. It is thus unenforceable on that ground, as well as the public
policy of maintaining national security (since a disgruntled agent might try to reveal all the
government's secrets during his/her lawsuit).[47] Other types of unenforcable employment
contracts include contracts agreeing to work for less than minimum wage and forfeiting the right
to workman's compensation in cases where workman's compensation is due.
Remedies for breach of contract
Main article: Breach of contract
A breach of contract is failure to perform as stated in the contract. There are many ways to
remedy a breached contract assuming it has not been waived. Typically, the remedy for breach of
contract is an award of money damages. When dealing with unique subject matter, specific
performance may be ordered.
As for many governments, it was not possible to sue the Crown in the U.K. for breach of contract
before 1948. However, it was appreciated that contractors might be reluctant to deal on such a
basis and claims were entertained under a petition of right that needed to be endorsed by the
Home Secretary and Attorney-General. S.1 Crown Proceedings Act 1947 opened the Crown to
ordinary contractual claims through the courts as for any other person.
Main article: Damages
There are four different types of damages.
• Compensatory damages which are given to the party which was detrimented by the
breach of contract. With compensatory damages, there are two kinds of branches,
consequential damages and direct damages.
• Nominal damages which include minimal dollar amounts (often sought to obtain a legal
record of who was at fault).
• Punitive damages which are used to punish the party at fault. These are not usually given
regarding contracts but possible in a fraudulent situation.
• Exemplary damages which are used to make an example of the party at fault to
discourage similar crimes. Fines can be multiplied by factors of up to 50 for such
Whenever you have a contract that requires completing something, and a person informs you that
it will not be completed before they begin your project, this is referred to anticipatory breach.
When it is either not possible or desirable to award damages measured in that way, a court may
award money damages designed to restore the injured party to the economic position that he or
she had occupied at the time the contract was entered (known as the "reliance measure"), or
designed to prevent the breaching party from being unjustly enriched ("restitution").
Specific performance
Main article: Specific performance
There may be circumstances in which it would be unjust to permit the defaulting party simply to
buy out the injured party with damages. For example where an art collector purchases a rare
painting and the vendor refuses to deliver, the collector's damages would be equal to the sum
The court may make an order of what is called "specific performance", requiring that the contract
be performed. In some circumstances a court will order a party to perform his or her promise (an
order of "specific performance") or issue an order, known as an "injunction," that a party refrain
from doing something that would breach the contract. A specific performance is obtainable for
the breach of a contract to sell land or real estate on such grounds that the property has a unique
value. In the United States, specific performance is an illegal remedy for personal services
contracts, or employment contracts, due to the notorious history in the United States involving
involuntary servitude, a.k.a. slavery.
Both an order for specific performance and an injunction are discretionary remedies, originating
for the most part in equity. Neither is available as of right and in most jurisdictions and most
circumstances a court will not normally order specific performance. A contract for the sale of real
property is a notable exception. In most jurisdictions it is enforceable by specific performance.
However, even in this case the defenses to an action in equity (such as laches, the bona fide
purchaser rule, or unclean hands) may act as a bar to specific performance.
Related to orders for specific performance, an injunction may be requested when the contract
prohibits a certain action. Action for injunction would prohibit the person from performing the
act specified in the contract.
In the United States, in order to obtain damages for breach of contract or to obtain specific
performance or other equitable relief, the aggrieved injured party may file a civil (non-criminal)
lawsuit in state court (unless there is diversity of citizenship giving rise to federal jurisdiction). If
the contract contains an arbitration clause, however, the aggrieved party must submit an
arbitration claim in accordance with the procedures set forth in the agreement.
Many contracts provide that all disputes arising thereunder will be resolved by arbitration, rather
than litigated in courts. Customer claims against securities brokers and dealers are almost always
resolved by arbitration because securities dealers are required, under the terms of their
membership in self-regulatory organizations such as the NASD or NYSE, require use of
brokerage agreements that contain arbitration clauses. [48] On the other hand, certain claims have
been held to be non-arbitrable if they implicate a public interest that goes beyond the narrow
interests of the parties to the agreement (i.e., claims that a party violated a contract by engaging
in illegal anticompetitive conduct or civil rights violations). Arbitration judgments may generally
be enforced in the same manner as ordinary court judgements. However, arbitral decisions are
generally immune from appeal in the United States unless there is a showing that the arbitrator's
decision was irrational or tainted by fraud. Virtually all states have adopted the Uniform
Arbitration Act to facilitate the enforcement of arbitrated judgements. Notably, New York State,
where a sizable portion of major commercial agreements are executed and performed, has not
adopted the Uniform Arbitration Act. [49]
In England and Wales, a contract may be enforced by use of a claim, or in urgent cases by
applying for an interim injunction to prevent a breach. Likewise, in the United States, an
aggrieved party may apply for injunctive relief to prevent a threatened breach of contract, where
such breach would result in irreparable harm that could not be adequately remedied by money
Third Parties
Main article: Privity of contract
The doctrine of privity of contract means that only those involved in striking a bargain would
have standing to enforce it. In general this is still the case, only parties to a contract may sue for
the breach of a contract, although in recent years the rule of privity has eroded somewhat and
third party beneficiaries have been allowed to recover damages for breaches of contracts they
were not party to.[50] A recent example is in England, where the Contract (Rights of Third
Parties) Act 1999 was introduced.
Contractual theory
Main article: Contract theory
Contract theory is the body of legal theory that addresses normative and conceptual questions in
contract law. One of the most important questions asked in contract theory is why contracts are
enforced. One prominent answer to this question focuses on the economic benefits of enforcing
bargains. Another approach, associated with Charles Fried, maintains that the purpose of contract
law is to enforce promises. This theory is developed in Fried's book, Contract as Promise. Other
approaches to contract theory are found in the writings of legal realists and critical legal studies
Another dimension of the theoretical debate in contract is its place within, and relationship to a
the wider law of obligations. Obligations have traditionally been divided into contracts, which
are voluntarily undertaken and owed to a specific person or persons, and obligations in tort
which are based on the wrongful infliction of harm to certain protected interests, primarily
imposed by the law, and typically owed to a wider class of persons.
Recently it has been accepted that there is a third category, restitutionary obligations, based on
the unjust enrichment of the defendant at the plaintiff’s expense. Contractual liability, reflecting
the constitutive function of contract, is generally for failing to make things better (by not
rendering the expected performance), liability in tort is generally for action (as opposed to
omission) making things worse, and liability in restitution is for unjustly taking or retaining the
benefit of the plaintiff’s money or work.[51]
Compare with the U.S. context, the Uniform Commercial Code defining "Contract" as "the total
legal obligation which results from the parties agreement"[citation needed] and does not attempt to state
what act is essential to create a legal duty to perform a promise. The common law describes the
circumstances under which the law will recognise the existence of rights, privilege or power
arising out of a promise.