The Definitive Handbook to Contract Law: Free PDF Guide

Contract Law Fundamentals

Contracts are ubiquitous. From the sales contracts you sign at Home Depot, to the subscription agreements you sign to join legal edit communities and message boards on the Internet, to the retainer agreement you sign with your favorite lawyer, contracts are everywhere. However, despite their pervasiveness, few people have any formal training in contract law. That is where we can help. In this free PDF download, we will provide a basic overview of contract law that will help you in your everyday business dealings.
A contract is a legal document that lays out the terms of an agreement between at least two parties. It can be oral on written. It can be about anything, from the sale of cars to the release of a new techno song, all the way up to employment contracts for new employees. To be a valid contract, the parties to the contract must be competent, meaning they are old enough to understand the deal they are entering into and must be legally able to enter into the contract under the law. A contract must also have a reasonable basis in fact or it might be considered a gambling contract.
A contract must involve a legal purpose , so you cannot have a contract for a quick trip to Mexico after you lose your job and your wife because of your cocaine addiction. Derivative to the legal purpose requirement is the mutual consent requirement. This means that both parties must understand the terms of the contract, be willing to enter into the contract and that the contract was not entered into through fraud.
Most contracts involve a promise to do something. The parties are releasing each other from various potential future liabilities or claims. This is known as the consideration element. Both parties are required to give something up in order to be able to bring a claim for breach of a contract later on—this is the deal they made. If the contract has not been completed yet, then the damages are to be made at the time when the contract is breached or is impossible to fulfill.
After all of the elements of a contract have been met, the parties are bound by the contract. They have legally enforceable duties with legal consequences for breaches of those duties.

Key Components of a Binding Contract

To be legally binding, a contract must meet certain minimum conditions. These are:
Offer – First, there must be an offer by the party who desires a contract. By offering something to sell or purchase, the individual is indicating that they are open to negotiation. A party can withdraw a previous offer until it has been accepted. Once the offer is on the table, the other party can then choose to either accept or reject it.
Acceptance – The person who receives the offer must accept it and sign it in writing, or verbally agree. An acceptance must be made in order to form the contract. For a contract to be formed, the accepting party must make the agreement based on the terms entailed within the offer. No changes can be made for the contract to be legally binding – if changes are made, the contract becomes invalid.
Mutual Consent – A meeting of the minds describes the relationship between the two parties involved in making the contract. Each party must have the same understanding of the content of the agreement and have mutual consent to all terms proposed. Misunderstanding of the agreement can void the contract.
Consideration – In order for a contract to be valid, the parties must exchange something of value. Typically, this is money; however it can be other forms of value such as service or even objects. The amount of consideration given does not have to be equal – for example, when a car dealership trades an old car with a new one.
Consideration occurs in a contract when:

Types of Contracts and Their Applications

In addition to these, there are also contracts for the sale of goods, lease agreements, service contracts, liability waivers, and a myriad other types specific to various industries and practices. Although the types of contracts seem extensive, a person will likely enter into these types of agreements on an almost daily basis.
Employment Contracts:
In an employment agreement, a person makes a promise to provide services in exchange for compensation. An employment contract between an employer and employee becomes binding once both parties sign it. Employment contracts are often boilerplate agreements that apply to all employees of a business.
Sales Contracts:
A sales contract is a legally binding agreement between a buyer and a seller in which the buyer agrees to pay a price for the seller’s goods or services. In a sales contract, the seller is the party that transfers the goods or services in exchange for monetary compensation. The buyer of the good or service is known as the offeree, and is the party that acquires the product and pays for it. A sales contract is also called a sales "agreement," "pact," or "promise."
Lease Agreements:
A lease agreement, or lease, is a legally binding contract stipulating that a landlord allows a tenant to occupy a property for a specified period of time. In a lease agreement, the tenant receives temporary possession of the property and/or purchased goods and/or services made available by the landlord in exchange for rental payments. Leases are most commonly used for renting residential property, automobiles, and office equipment.

Creating a Contract: Do’s and Don’ts

A well-drafted contract clearly conveys the expectations of the parties involved and includes all important terms. It is also drafted with an eye on the future by considering potential hurdles, future planning and desired outcomes. Here are some practical steps and best practices.
Make it readable.
One way to get a clearer picture of what your contract is saying is to read it out loud. If you feel awkward when you are done you will have a good idea about how your reader will feel. Drafting contracts using simple, readable, and unambiguous language will promote understanding between the parties and decrease the problems that arise from misinterpretation. "Readability" is a subjective measurement, but should be kept in mind. First drafts are often created with legal terms that might or might not be necessary. You are trying to determine the legal verbiage that best represents the client’s interests. Don’t use technical terms if there are commonly used words that are understood within the industry.
Use defined terms.
It is unnecessary to keep repeating the same long phrase over and over again, so use defined terms. An easy way to do this is to capitalize the first letter of the word(s) to be defined. The definition itself can then be placed at the beginning of the contract either as a separate section or within the introductory "WHEREAS" clause. For example, an indemnification clause might refer to the "Indemnitee" defined as "the Company" and "Indemnifier" defined as "the Owner" who will indemnify the "Company" for all losses, even if the "Company" is at fault.
Include necessary clauses.
There are certain clauses that regularly appear in contracts. Although having them in a contract does not mean that they do not need to be customized for that particular agreement, here is a list of clauses often included in contracts:
•Conditions precedent: stating something needs to happen before the contract takes effect.
•Indemnity: stating a party will hold the other harmless from certain circumstances.
•No assignment: preventing a party from attempting to give his or her rights to the contract to someone else without consent from the other party.
•Amendment: establishing a procedure for making any subsequent modifications that will be binding on both parties.
•Severability and survival: stating that parts of the contract are allowed to stand if other portions are struck down or found invalid.
•No waiver: stating the failure of either party to enforce any of the provisions in the contract shall not be considered to be a waiver of the right of a party to enforce those provisions or the remainder of the contract.

Pitfalls in Contract Law To Avoid

It is very important to ensure the terms of a contract are well defined and clearly stated. The biggest pitfall people fall into is thinking that a contract is a solid agreement between parties when in fact some of the key terms have not been defined or are subject to interpretation. The last thing anyone wants to spend time and resources on is litigation to determine exactly what was meant by a contract term because the language used was vague or generalized. Be clear and specific about the terms so there is no ambiguity about the parties’ expectations and obligations. Additionally , and perhaps most importantly, it is critical that anyone who is going to sign a contract reads it over, in its entirety. Even the most well-intentioned individuals can be deceived by fine print, so it is crucial that a thorough review is done prior to signing. This includes actually reading fine print, as it will usually contain hidden costs and regulations that you might not otherwise know about. If after reading the contract you do not fully understand it, hire a qualified lawyer and have them explain what it means.

Contract Enforcement and Breach

The parties to a contract have an obligation to carry out their duties as contemplated in the agreement. The legal system makes provision where a party fails to perform in terms of the agreement, or where he performs poorly. Breach of contract may be committed in two ways: An innocent party has the right to obtain compensation from the responsible party for any loss suffered by him as a result of the breach of contract. Therefore, the party who suffers damages is entitled to claim damages from the breaching party in lieu of performance. However, he cannot claim performance in the course of specific performance – for example, he cannot claim that the breaching party must physically hand over the car to him.
In some instances the party who has suffered damages will have no choice but to claim specific performance. A party may not always claim specific performance. Where this is so, the innocent party must prove that specific performance is impossible. He may still be obliged to pay compensation. Consider the example of usuaress of a car. The seller of the car commits a breach of contract when he refuses to deliver the car to the buyer. However, if during the purchase of the car, it belonged to a third party and the seller is not the owner of the car, he is unable to deliver the car to the buyer and the buyer would lose faith in the seller. In such cases he may still only claim damages because specific performance is impossible. Specific performance may be claimed where the goods in question are unique, such as rare paintings or gold.

Contracts 101 – Free PDF Resource

In addition to our online resources, we offer access to a comprehensive guide on contract law. This Ultimate Guide to Contract Law is available as a free PDF download to our subscribers and regular blog readers. Inside the guide, you will find a range of resources to help you with your contract law needs. The Ultimate Guide includes templates, example contracts, sample clauses, and links to further reading for even more in-depth knowledge. Whether you need an employment agreement , non-disclosure or confidentiality agreement, or contracts for any other purpose, our free PDF will give you a solid foundation on which to build. Obtaining the guide is simple. There are no hidden fees, subscriptions, or renewals to contend with. To get the Ultimate Guide to Contract Law, simply enter your email address, confirm your interest, and download the guide to your device. With our guide to contract law, you can be confident that you have all the information you need, at your fingertips.