A brief summary of contract law: key terms, common defenses and general recommendations

Many people and companies enter into contracts without fully understanding the terms. Often neither party is clear about what the contract requires in terms of performance standards, remedies for non-compliance, and whether unwritten terms can supplement the written contract.

This publication is intended to provide a quick guide to some key terms and issues that are relevant in the area of ​​contract law.

What is a contract and how is it formed?

In general, a contract can be defined as a negotiated exchange. The typical contract training process involves an offer, acceptance, mutual consent, and consideration of a promise to do or not to do a particular thing that can be done or omitted. In general, an acceptance must unambiguously accept the terms and conditions of an offer for a contract to arise. Mutual consent is often called “meeting of minds.” If the parties did not agree to the same essential concepts of a deal, then there was no mutual consent because there was no agreement of minds.

What counts as consideration for a contract?

The consideration consists in that a party acquires: (a) some right, interest, profit or benefit; and / or, (b) any indulgence, injury, loss or liability. Consideration is a necessary element of a valid contract in part because its absence can help reveal that a party’s promise to do something was actually done for free. If a court finds that the contractual promises of one of the parties were made free of charge, then the contract is generally invalid and cannot be enforced according to its terms.

What if someone verbally promised something that is not written in the contract?

In such a case, one question is whether the verbal promise preceded the written contract. If the oral promise preceded the written contract and the written contract was intended to be the final expression of the agreement, then the probation rule generally prohibits the introduction of oral communications evidence that contradicts or complements the terms of the written agreement. Therefore, oral promise testimony is quite possible inadmissible in the case of litigation related to a written contract. However, there are several exceptions and nuances that allow attorneys to devise a strategy to best promote a client’s interests depending on the nature of the dispute.

Another question is whether the statute of fraud applies. The fraud statute generally prohibits enforcing the following types of agreements if they are not evidenced by a writing signed by the party against whom it would be enforced: Agreements for the sale of interests in real estate, agreements that by their terms cannot be executed. made within one year, agreements to pay someone else’s debt, and other types of agreements that are listed in state law. For example, ORS 41.580 codifies the fraud statute under Oregon law. Again, an attorney can help navigate the various nuances and exceptions that exist regarding the fraud statute.

What are the agreements, conditions, representations and guarantees?

These terms are often confused, but the general definitions are as follows: A covenant is a promise of action or inaction that applies with respect to future events. A condition is a future and uncertain event whose occurrence or non-occurrence can destroy, create or modify the rights and obligations of one or more parties to the contract. A representation is a supposed statement of fact related to the past or present. A warranty is a statement or promise regarding the present or future quality of goods or services. The nature of a contractual clause has a great impact on how that clause is interpreted and applied. Therefore, it can be crucial to identify whether a specific contractual clause is a covenant, condition, representation, guarantee, or some combination thereof.

What is a choice of law provision?

A “choice of law” or “applicable law” provision of a contract sets out the intent of the parties as to which substantive law of the jurisdiction will govern in the event of a dispute. For example, this type of choice of law provision indicates that, in the event of a dispute, the parties want the court or arbitrator to apply substantive Oregon law to determine the rights and obligations of the parties: “This agreement is governed by the laws of the State of Oregon, without giving effect to any principles of conflict of laws that would give rise to the laws of any other jurisdiction that governs this agreement. “

As you can see from the sample language quoted above, the conflict of laws principles of state laws must also be considered. This is because failure to address such principles in the contract could mean that the substantive law of one state (for example, Oregon) ends up ordering the court or arbitrator to apply the law of another state (for example, Delaware) to finally decide the dispute. For example, under ORS 81.135, a contract that simply states that it is “governed by the laws of the state of Oregon” could eventually be decided on the basis of Delaware law whether the contract was for personal services performed primarily in Delaware. .

What is a layout of place?

A contract venue provision sets forth the intent of the parties as to where a dispute relating to the contract should be litigated or arbitrated. The place may be different from the choice of law. For example, the appropriate place could be any state and federal court located in Multnomah County, Oregon, but the applicable law could come from the state of Washington. In such a case, the Oregon court that will decide the dispute will generally apply the Oregon rules of procedure, but the substantive laws of Washington to resolve the dispute.

What are some common defenses to enforcing a contract?

Contract defenses are often divided into two categories: defenses for the formation of contracts and defenses for the execution of contracts. For example, if a valid contract never arose because the offer and acceptance were not clear and there was no agreement, then there is no valid contract to enforce. Other examples of defenses to training include fraud in the performance of a contract, misrepresentation, concealment, error, duress, undue influence, and lack of awareness. All of these terms require a demonstration of specific legal and factual elements that your attorney can help you analyze.

If a valid contract arose but there are defenses to enforce, then a court or arbitrator could conclude that the contract cannot be enforced as written. Some examples of defenses to enforce a contract are prior material breach and termination of the contract, impossibility, frustrating purpose, non-occurrence of a condition, and unenforceability for reasons of public order. For example, if the obligations of one of the parties under a contract are conditioned on the occurrence of an earthquake, but no earthquake occurs, the corresponding obligations should not be enforced. Again, any of these types of defenses require a specific factual and legal analysis before they can be asserted and used successfully.

If a contract is invalid or unenforceable, does that mean there is no legal recourse for a dispute?

Not necessarily. If there is no valid or enforceable contract, then the area of ​​the law related to “quasi contracts” or “implicit contracts” could still provide a legal remedy for the aggrieved party. Terms such as promissory handicap, unjust enrichment, and quantum meruit are frequently used legal principles that could allow recovery in this area of ​​law. In general, an aggrieved party can obtain restitution for quasi-contractual reasons if a benefit has been awarded, the recipient of the benefit is aware that the benefit was received and, in the circumstances, it would be unfair to allow the withholding of the benefit without requiring the benefit. recipient to pay it.

What should you do in a contract dispute?

For a high value contract, ideally you would work with an attorney to avoid many types of disputes that could have been anticipated by negotiating and carefully reviewing the contract prior to execution. If a dispute is brewing (for example, if you are wondering whether and how to exit the contractual relationship), you should consult with an attorney as soon as possible.

How a party communicates dissatisfaction with a contractual relationship greatly affects where the chips will fall should the dispute reach litigation. An attorney can help you make the most of your communication with another party by researching applicable statutes and case law to recommend your strongest path forward. The attorney may recommend negotiating with the other party to reach an agreement, or the attorney may inform you that you have an immediate legal right to terminate the contract without liability for damages.

If you receive notice that the other party is not satisfied with the contractual relationship or has already filed a lawsuit in court, then it is also important to obtain qualified legal representation.

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