Contracts law governs the formation, interpretation, and enforcement of legally binding agreements between parties. This area of law covers elements of a valid contract, offer and acceptance, consideration, capacity, legality, and defenses to contract formation, as well as performance, breach, remedies, and third-party rights. A solid understanding of contracts law enables attorneys to draft and negotiate agreements, resolve disputes, and advise clients on their rights and obligations.
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An offer is demonstrated by an objective promise, undertaking, or commitment, communicated by words or conduct to an identified offeree, that expresses certain and definite terms, and invites the offeree to accept the promise with the understanding that a binding contract will be formed. Under the UCC, an offer of goods must include the quantity of goods being offered. Generally, advertisements are not valid offers, unless they specify quantity and explicitly state who can accept.
Acceptance must be unambiguous and expressed through unequivocal and absolute words, agreement, or conduct. Under the mirror image rule, the offeree must accept each and every term of the offer without any deviations. Any differences are considered a rejection and counteroffer.
Under the UCC, however, a contract may still be formed even if the acceptance includes additional or different terms. If both parties are merchants, any additional or different terms in the acceptance become part of the contract unless: the offer specifically limits acceptance to its original terms, these terms materially alter the deal, or if an objection to the new terms has been made or is raised within a reasonable timeframe after they are noticed. If either party is not a merchant, additional terms are considered proposals for addition to the contract and do not become part of the contract unless expressly agreed to by the original offeror.
The Mailbox Rule is a common law rule which states that an acceptance is effective and a contract is formed when the acceptance is sent by the offeree, even if the acceptance is lost in transmission and never received by the offeror. This rule applies to bilateral contracts, where there is a promise for a promise, and not unilateral contracts, where there is a promise for an act. An exception to the Mailbox Rule is when the offer specifies that acceptance is not effective until it is received.
For a contract to be valid, it must involve consideration, which is a mutual or bargained-for exchange of value or commitment. This could be a promise, an action, or a forbearance of a right. This exchange must have legal value, cannot be a gift, and is typically required for contract enforceability. Exceptions include cases of promissory estoppel, where a promise may be binding if it induces detrimental reliance, even without consideration. Past consideration doesn't usually support current promises. The UCC allows for enforceable modifications without extra consideration, provided they're made in good faith.
The common law of contracts primarily governs contracts not for the sale of goods, including contracts for services, land, and real estate. It includes rules related to the formation, performance, and breach of contracts, as well as remedies for breach, defenses against enforcement, and other related legal concepts. Under common law, contracts may be formed through offer, acceptance, and consideration, and may be oral or written, unless specific statutory or common law requirements mandate a written agreement.
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