The contracts can either be expressed or implied, written or oral, and play a crucial role in Contract Law. The key essential in the formation of a contract is the agreement of both parties. Therefore, every contract is an agreement, however, not all agreements can be a contract. For example: If “A” decides to sell 50 packets of illegal drugs to “B” and the date and place are agreed upon by them, this makes it an illegal agreement and therefore, this becomes a void contract. To master the art of Contract Law, it is important to understand the common ingredients required to create a valid contract.
- Offer,
- Acceptance,
- Consideration,
- Free consent,
- Sound mind,
- Legal age,
- Mutual obligation,
- Binding rights,
- Lawful object.
In a contract, even a slight grammar mistake can change the meaning of an entire paragraph. As such, it is important to thoroughly read and understand as well read the entire contract repeatedly. Everything in the world right now is governed by contracts. As a client and otherwise, you can make your own stipulations. Moreover, you should also know the important general clauses that need to exist in a contract. This could include:
- Clear mention of the contractual obligations,
- Whether parties agreed to be bound by them?
- How do the parties intend to perform their contractual duties?
- What conditions are set up by the parties?
- What will constitute as a breach of contract?
Naturally contracts are governed by contract law and each country have their own version of contract laws. In India, contract laws are governed under the Indian Contract Act 1872. When creating international commercial contracts, international laws are triggered. As such, parties can also decide by themselves any other governing law that they may want to add in the contract. This may look something like this: “In the case of a dispute, parties are free to appoint a Arbitrator of their choice”, Or “In case of dispute, parties may resolve such dispute under the laws of USA.”
In the USA, contract laws differs from state to state. In addition to this, you also have federal laws, that govern certain areas of contract. “The law governing transactions involving the sale of goods has become highly standardized nationwide through widespread adoption of the Uniform Commercial Code. There remains significant diversity in the interpretation of other kinds of contracts, depending upon the extent to which a given state has codified its common law of contracts or adopted portions of the Restatement (Second) of Contracts.”[1]
Case Laws
In the case of, Laidlaw v. Organ, 15 U.S. 178 (1817) “the seller of tobacco was not entitled to get out of a contract to sell a load at a low price when it transpired that the War of 1812 had ended, and so that prices would rise (because a navy embargo was lifted). Even though the buyer stayed silent about the peace treaty that had just been agreed when he was asked if prices might rise, he was entitled to enforce the contract.”[2]
In the case of, ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996) the click of a button accepting a license’s terms on software counts as agreement.[3]
In the case of, Specht v. Netscape, 306 F.3d 17 (2d Cir. 2002) simply clicking a download button does not indicate agreement to the terms of a contract if those terms were not conspicuous.[4]
Important Clauses
Indemnity: “It is basically about shifting the risk to another party. In case breach of any provision by one party causes loss to another party, the defaulting party has to make good the losses caused to the non-defaulting party. How indemnification will be done should also be mentioned in this clause.”[5]
Force Majeure: “In case any event is beyond the control of parties or unforeseeable, whether the agreement can be terminated due to non-performance by both parties?”[6]
Exclusivity (in some contracts): “The parties can be restrained from providing the same kind of services or entering into the same nature of agreement with a third party during the existence of this agreement.”[7]
Termination Triggers: Things often do not go as planned, which is why you should have a provision that allows parties to dissolve the agreement if a business arrangement or unforeseen circumstance arises.[8]
It is important that every contract shall be drafted in the simplest and easiest terms. In a way that even a layman shall be able to understand it. It is also important to proof read the drafts thrice or you can always get it inspected by a professional. Contract helps you from situations that may put a huge liability on you. Considering the above points in mind, you can be your own lawyer and also be a better negotiator of terms
[1] United States contract law - Wikipedia [2] Laidlaw v. Organ - Wikipedia [3] ProCD, Inc. v. Zeidenberg - Wikipedia [4] Specht v. Netscape Communications Corp. - Wikipedia [5] Important Clauses for forming a Perfect Contract - iPleaders [6] Ibid. [7] See Supra Note 5. [8] Important Clauses In A Contract: Everything You Need to Know (upcounsel.com)
