CONTRACTS

A contract is a legally binding agreement between two or more competent persons to do, or not to do, a particular thing. The three basic elements to a contract are: an offer; an acceptance of the offer; and sufficient consideration to support the offer and acceptance. In addition, there must be a reasonable certainty as to what the parties are to do, or not to do, when they are to do it, and what the consideration is. Finally, the parties must be competent to contract, that is, they must be of sufficient age, in reasonable possession of their wits, and not under legal disability.

Basic Requirements for a Contract. The first requirement for a valid contract is that the parties have a meeting of the minds. A meeting of the minds is evidenced by an offer, and an acceptance of the offer. The second requirement is that the promise of each party is given in return for some benefit sufficient to justify the promise. This benefit is the consideration for the contract. An offer can be made by words or acts. That is, it can be made specifically (in writing or orally), or it can be implied from the conduct of the person making the offer. An offer can be made by advertisement. The time for accepting an offer may be expressly limited, and the offer expires if not accepted within that time. If no time limit is specified, the offer must be accepted within a reasonable time. The offer may be revoked or withdrawn before acceptance. “An acceptance can be express or implied, written or oral. When an offer specifies the manner in which it must be accepted, an attempt to accept it any other way may not be enough. In general, acceptance requires some affirmative act.

Under Ohio law, a person receiving unrequested merchandise may keep it without payment.

The person to whom an offer is directed may reject the offer. The person may also make a proposal of her own, that is, make a counteroffer. A counteroffer wipes out all previous offers

Classification of Contracts. Unilateral and Bilateral Contracts. In a unilateral contract, there is only one promise, and it is contained in the offer. The offer is accepted by performance of the thing called for in the offer.

In a bilateral contract, the parties make mutual promises which are sufficient consideration for each other. Offer, acceptance, and consideration are present at the outset, even though the promises have yet to be performed. Each party may have a cause of action for an attempted disavowal of the agreement by the other party, or even for an expected (anticipatory) breach of the contract. That is, if it seems clear that a party is not going to perform its part of the bargain, even though the time for performance has not arrived, the other party may seek a remedy in court.

Express and Implied Contracts. The terms of an enforceable contract are usually specific enough that it is an express contract. Sometimes, neither party really specifies what the terms are, but their actions are such that the conditions of the contract can be inferred. In such a situation, there may be an implied contract. More often, the contract and some of its terms will be express, but other terms must be implied. For example, a continuing contract for certain kinds of supplies may be somewhat vague as to the price for each delivery. Assume that a printer regularly buys a specific kind and quantity of paper, but the price of the paper fluctuates with supply. Because the contract is express in most respects and regularly performed, there is no doubt that it exists. In a dispute, however, a court may have to decide whether an implied condition was to continue to deliver the supplies at the original price, or to make each delivery at the current price without notice.

Written and Oral Contracts. With some important exceptions, it does not matter whether a contract is written or oral. If the basic elements are present, an oral agreement is just as valid as a written agreement and enforceable in the same ways.

There are some instances where a contract must be in writing. First, a contract should be written where the parties have come to an understanding in negotiations that the final agreement will be in writing. (In this situation the contract should be reduced to writing even if it is a type of contract which would be valid and enforceable even if it was an oral contract.)

Second, the law requires that certain types of contracts be in writing. These are: (1) contracts to answer for someone else’s debt, default, or wrongful act or omission; (2) contracts by the executor or administrator of an estate to use his (the executor’s or administrator’s) own estate to pay for damages attributable to the estate in which he is a fiduciary; (3) prenuptial agreements or contracts between engaged couples settling various questions of property and rights in consideration of marriage; (4) contracts for the sale of land or any interest in land; and (5) contracts which will not be fully performed (by at least one party) within one year.

There are some other types of contracts which must be in writing. One of the most important of these is a commercial contract for the purchase and sale of goods involving $ 500 or more. Further, most loan agreements must be in writing and signed by the debtor.

The requirement that a contract be written does not mean that the contract must be formal. The contract can be plain or fancy. It might be many pages long, and printed or it might be just a few sketchy notes on the back of an old envelope.

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