What is Contract Law? All Different Types & Examples
Are you a student who doesn’t know about the law of contract? Don’t worry. Our law essay writer is here to help you learn. In this post, we’ll thoroughly discuss contract law basics:
What is Contract Law?
Every business and organization relies on contracts to ensure trustworthy operations. To create contracts or agreements, they have to follow contract law.
So, what is contract law?
It’s a legal area that creates and lawfully binds contracts. Even if you don’t run a business, you will sign contracts and agreements multiple times, like buying assets, signing up for a service, or approving business transactions of more than $500. The company you’ll work for will also have certain terms and conditions that you’ll have to follow to avoid any legal disputes. Contracts or agreements are important to ensure that a project or deal is mutually beneficial.
Therefore, many companies hire and offer contract lawyers to work for their firms. Contract lawyers can help create and enforce agreements and contracts for high-value transactions and operations. Such attorneys ensure the contracts or agreements are legally binding, easily understandable, and fair for all parties involved. In case of a breach of contract, a contract attorney can also devise different solutions or take the matter to court for legal proceedings. Hiring a contract lawyer can protect a company from legal disputes and help them legalise their paperwork. Small companies prefer hiring private contract lawyers to get out of legal disputes and draft important business agreements and contracts.
What Are The Different Types of Contracts?
As a professional, you will encounter the following types of contract law:
1. Fixed-Price Contract
It’s a legal contract which regulates all business activities with a fixed amount. Businesses prefer these contracts when the project scope and schedule are clear and well-defined. However, once a party signs a fixed price contract, they won’t be able to get any credit back in case of an incomplete project.
2. Cost-Plus Contract
This contract covers purchases, actual project costs, and miscellaneous operational expenses. Before starting negotiations, the proposing party should include a certain expense amount in the contract.
3. Unit Price Contract
These are also known as hourly rate contracts and are very common in different types of businesses. It’s a combination of fixed-price type of contracts and reimbursable expenses. Unit pricing contracts are adjustable during the process. For example, a supermarket owner sells 1 watermelon for $9. But, for a large-scale order of 100,000 watermelons, he agreed on a total price of $500,000. Therefore, the price of each unit is $5.
4. Bilateral and Unilateral Contracts
Unilateral contracts involve a bidder and a performer. The buyer does not want a promise from the other party. Instead, they want performance and results. For example, if you pay a contractor to build your shop, you can sue them for not finishing or abandoning the project. There are no promises involved in unilateral contracts.
On the other hand, bilateral contracts involve promises from all parties to implement certain terms.
5. Implied Contract
Implied contracts are classified into two categories:
- Implied in Law Contract: Such implied contracts do not represent a genuine legal agreement. However, even though there is no contract in writing, the involved parties are obligated to follow the legal agreement and act according to the circumstances.
- Implied in Fact Contract: It’s a joint agreement between two or more parties. The promises and obligations in such contracts are not expressed in words. Implied in Fact contracts are articulated through facts and circumstances. It shows the intention of all the parties involved to achieve an agreement.
6. Adhesion Contract
Adhesion contracts are drafted and presented by parties with greater bargaining power. In such contracts, the weaker party is not in a position to negotiate. It is a “take it or leave it” situation for them. They can either accept the proposal as it is or reject it completely.
7. Express Contract
In this contract, all parties determine terms and conditions in writing or verbally. Then, they have to accept the terms of the contract wholly.
8. Unconscionable Contract
You should avoid this contract as a businessperson or professional at any cost. An unconscionable contract is an unfair legal agreement formed to favour the superior party in the negotiation. You do get the chance to negotiate terms. But, unfortunately, you’ll never have the upper hand.
9. Simple Contract
A simple contract is a written or oral agreement. To make such contracts legal, there’s no need for seals, signatures, or witnesses. Businesses normally make simple contracts for temporary agreements.
10. Time and Materials Contract
In Time and Materials contract, the owner can decide the duration of a certain project with other parties. This helps the owner to reduce the risk as much as they can. Unfortunately, most attorneys would advise you against such contracts as the seller can increase an indefinite amount of expense, which the owner will have to pay.
11. Aleatory Contract
The agreements are not triggered in these contracts unless an outside event occurs. For example, we sign aleatory contracts while applying for insurance because such firms provide financial protection in the case of an unpredicted event. In aleatory contracts, both parties have to assume risks.
What Are The Main Elements of Contract Law?
Contract law should have the following elements for a legally binding contract to enforce a certain agreement:
The contract should have an offer. It can be any type of business transaction. The contract should explain the offer in a clear and detailed manner. For example, the offer could be about the transaction of goods or services. The transaction offer can be made in writing or in person.
For example, let’s say a businessman wants to buy 1 ton of cotton for his textile factory. He will have to make a deal with a cotton production firm. He will have to present an offer in which he will be offering a certain amount of money, shares, or assets in return for 1-ton cotton. There are different types of trades that businesspeople make. However, they have to ensure their agreements comply with the contract laws of the U.K. Otherwise, the deals will be considered illegal by the government, and the involved parties will suffer severe legal consequences.
A promise can also be considered a consideration for both parties as it holds value. It is a firm agreement for an act. The promise doesn’t necessarily have to be about a certain business transaction. It can be a claim of intent where a party claims to perform or refrain from a certain activity. Remember, every promise is “consideration” for the other promise as both hold value.
For example, you sell your friend John your land because he wants to set up a manufacturing facility. However, he didn’t specify the product. Before selling the land, you told John not to build an alcohol manufacturing facility on the land you’re selling. This is a promise. If John breaks this promise and proceeds to build an alcohol manufacturing facility, he will have to pay an additional 100% of the land’s price.
After an offer or proposal letter is sent to a party, they should send back an acceptance letter if they agree with the business transaction. Two parties can only reach an agreement if there’s an acceptance letter in place. There are different ways through which two parties can reach an agreement.
Let’s say a businessperson wants to collaborate with a brand. First, they would send a proposal. Then, once the brand agrees with the offer, they will send back an acceptance letter, which will indicate that an agreement has been met.
However, most companies prefer discussing their offer with the other party, and once they reach a verbal agreement, they both sign a pact, demonstrating the acceptance of the offer. The agreement has several conditions that both parties should meet to avoid legal conflicts.
A contract can never be one-sided. The other party has to give something back in return. This element of contract law is called consideration. To form any contract, the other party should get “something of value” in return, which is referred to as consideration. It does not have to be money; it can also be a certain percentage of shares, rights, or assets.
For example, Paul runs a football team, and he needs funds to pay the salary of his players. So he contacts an investment bank that agrees to lend him a certain amount. But, in return, they ask for a certain percentage of the club’s T.V. and merchandising rights. Ultimately, both parties meet an agreement.
However, you can only offer something you legally own as a consideration.
A warranty is an assurance that safeguards a party’s interests in a contract. If there’s a breach of contract, the affected party can raise a claim for damages. Warranty can also be claimed if the facts mentioned in a contract are not reliable or true. This is among the most common types of contracts we encounter.
So, for instance, let’s say you’re buying a phone with a one-year replacement or repair warranty. The seller will fix or replace your device for free if it doesn’t provide the expected performance or has some quality issues. The warranty on the product guarantees a certain level of quality and performance, and if the device doesn’t meet your expectations, you can claim damages. However, the seller will accept no damage claims after the warranty period.
The term is one of the most fundamental parts of any type of contract. Every term in a contract presents a contractual obligation that a certain party must obey. The breach of terms may result in litigation. However, not all contractual terms are expressive. A contract is one of the most important documents within a business, and contractual terms present the technicalities and obligations of an agreement, collaboration, or transaction.
For example, if you are hiring employees for your business, you will have to make them sign a legally binding contract. The employee must follow all contract obligations, and if they breach any term, it can result in litigation. Contractual terms can be classified into two categories:
- Express terms: These terms are agreed upon by the parties themselves. Express terms can be both verbal and in writing.
- Implied terms: These terms are not agreed upon by either party. Instead, these are implied by other contractual terms.
Every contract comes with conditions, requirements, and limitations to safeguard the interests of all parties involved. These conditions can come into play in the case of an unforeseeable event in the future. Then, these conditions can destroy, expand, or create certain rights and terms in the contract. Conditions can also obligate a party to perform an action under certain circumstances or events mentioned in the contract.
For example, we provide free unlimited revisions with every contract law essay help order. However, if the required changes are irrelevant to the initial requirements, we’ll have to charge you separately. Conditions make sure that no party gets an unfair advantage in the deal.
Difference Between Contract and Agreement
Agreement vs contract, which one is better and what are the differences?
This is a question every student has in their mind. So, let’s find out what differentiates an agreement from a contract:
An agreement is a pact between two or more parties. However, it’s not a necessary requirement for the enforcement of the law. It can also be verbal and informal.
The validity of an agreement is based on the mutual acceptance of all parties involved in the deal. Therefore, it does not need to be in writing, and there’s no need for consideration.
If an agreement lacks the contract law elements mentioned above, it has no legal effect.
A contract is a formal arrangement between multiple parties. Contracts contain terms and elements which the involved parties should follow. Also, it’s enforceable by law.
Just like in agreements, mutual acceptance is necessary for the validity of a contract. However, in most cases, contracts have to be in writing. For instance, if your contract involves the sale of land or any other type of asset, then it should be in writing. Contracts also have an expiry date.
Unlike agreements, contracts do require consideration. However, it’s legally binding, and the terms of a contract can be enforced in a court of law.
Common Mistakes in Contract Law
Normally, there are three types of contract law mistakes:
1. Unilateral Law
In these types of contract law mistakes, one party is misguided by the terms of a business transaction contract. Unilateral mistakes are very common. You should observe the difference between mechanical calculations and business errors to analyse a unilateral mistake.
An agreement can be revocable under the following circumstances:
- If the error was outrageously serious and intolerable
- If the concerned error did not lead to severe negligence
- If a party stands firm on the fact that the other party was aware of the mistake.
However, unilateral mistakes can lead to an unfair advantage for the other party regarding bargaining power. Therefore, it’s better to hire a contract attorney before negotiating the terms and conditions of a contract with other parties. An attorney can draft a legally binding contract for you and review it to avoid mistakes.
2. Mutual Law
As the name suggests, when two parties suffer from misrepresentation in contract law, such errors are called mutual mistakes. In such situations, both parties are either in confusion or in conflict. But, even though it’s the fault of both the parties, they are in consent. This means the contract of the business transaction is still voidable. But, a material fact should be in place to void a mutual mistake.
3. Common Mistakes
If both parties make an error in an agreement regarding a similar material fact, it’s a common mistake. Often, parties get misguided by the terms and make such errors. While the contract can get void in such cases, it’s only possible if there’s sufficient evidence available to justify that all parties have been misguided by the same terms and conditions.
What is a Contract Breach?
A contract breach is an action in which a party goes against the agreement. In most cases, contract violations lead to legal disputes between parties. In such cases, the affected party can opt for litigation. As a law student, here are 4 types of breach of contract you should know about:
1. Minor Breach of Contract
If the party fails to meet some parts of the contractual obligations, it’s called a minor breach of contract. This can be both intentional and unintentional. However, in most cases, the affected party only goes for litigation if they suffer losses due to the breach.
2. Material Breach of Contract
In this type of breach, the affected party receives significantly fewer benefits than what they were promised in the contract. Material Breach of Contract is the failure of fulfilling all contractual obligations on time.
3. Anticipatory Breach of Contract
In this case, the breach hasn’t happened. But, one of the parties anticipates that the other party might not fulfil certain contractual terms. In such cases, the concerned party is notified of the legal consequences of a possible breach.
4. Actual Breach of Contract
In this situation, the breach of contract has already occurred. The breaching party might not be able to fulfil all contractual obligations, or they might refuse to follow the terms completely.
Contract Law Examples
Here are some contract law examples which will help you understand the technicalities of this legal practice area:
Mr Olley visited a hotel without making an advanced booking. Upon arrival, he booked a room for a night. When he signed the register, there was no mention of any terms and conditions that would affect his stay at the hotel. However, his room was robbed, and his belongings, including his fur coat, were stolen. The reason behind this theft was the hotel owner’s negligent security arrangements.
The hotel stood by the exclusion clause placed in every room of the hotel, which stated that the management wouldn’t be responsible for stolen or lost items of the customers. However, the court ruled in favour of Mr Olley, as he wasn’t told about the exclusion clause while signing in the register. Therefore, the exclusion clause was unenforceable against Olley; hence, he was paid for the damages by the hotel owner.
Mr Coward and Mr Cole were office colleagues who had an agreement to share lifts to work. Cole would drive a motorbike, and Coward would sit on the pillion. Unfortunately, Cole and Coward died in an accident. In return, Mr Coward’s wife claimed damages against Mr Cole’s estate. Unfortunately, Cole’s insurance policy didn’t cover passengers sitting on the pillion.
Despite pursuing the Motor Insurance Bureau and Court of Appeal, Mrs Coward couldn’t get any coverage as the agreement between Cole and Coward was completely informal. Coward would pay Cole a fare for every ride. There were no terms and conditions. Also, the agreement has no length nor any receipt. Therefore, it was impossible to form a contract and build a case against Mr Cole’s estate.
As a law student, your professor will ask you to write and turn in multiple contract law dissertations and assignments. However, contract law isn’t easy; it is one of the most complex types of law. You have to analyse different types of contracts and agreements with various technicalities. To provide the legal solution to the dispute, you should know about the application of contract law in different scenarios.
If you don’t have enough legal knowledge regarding business contracts, you’ll need the help of a highly qualified and experienced law essay writer. We’re the No.1 contract law essay help in the U.K. We have provided high-quality law essays to thousands of students in Britain for over 10 years. We have always valued customer satisfaction more, which is why we offer the cheapest essay help for different types of law fields.