Let’s Make a Deal!
They’re everywhere—when you sign up for phone service, when you rent a room at a hotel, when you subscribe to a newsletter or buy something online. You may have even written something down when you lent your kid brother $100 that one time.
While there’s obviously some kind of agreement, how can you tell if that deal’s enforceable in court? Can your kid brother get away with not paying you back? Are you really stuck with that $500 charge to get out of that phone contract?
Over the next ten lessons, we’ll look under the hood and see what makes up a contract and how courts deal with contractual obligations. Today, we’ll begin by explaining the purpose of contracts.
Contracts have existed pretty much since humans traded from inside caves. There are examples of contracts dating from Mesopotamia in 2300 BCE (4,300 years ago!).
We have contracts because they provide predictability. Both sides are clear about what they are getting out of an agreement. Enforceable contracts are agreements that provide accountability before the law. If something goes wrong, a third party—the court—can look at the deal and figure out what’s at stake and how to fix it.
While contracts do involve multiple parties, we’ll keep things simple by talking about two-party contracts. Multiple party contracts can get really complicated, but underneath it all, they can still be analyzed as a series of two-party contracts. That’s why we’ll talk about all contracts as if they involved just two parties.
Is Every Deal a Contract?
No. Not every deal is an enforceable contract. Nor should they be. “Hey, son, give me a hug and you can have this Snickers bar” is not—and should not—be an enforceable contract. That hug and Snickers bar are obviously mutual gifts. Your son would be happy to hug you, regardless of the candy. And you’d give your kid the candy even without a hug. So, no court would enforce that kind of agreement as a contract.
But how do you know if there’s a contract? Basically, when there’s a “meeting of the minds.” Where two sides reach some agreed exchange, the courts will generally do their best to find a contract. This becomes more certain if one of the parties does something (like gives up money) that detrimentally changes its position. We’ll cover more of this in further lessons.
This course will go over the requirements that make up a contract that you can take to court. You’ll learn what to expect if there’s a problem and get information about where to find help.
The Common Law
One more thing you should know before we move forward is that US contract law is derived from English common law. This is a summary of all the cases and statutes that came to us from England up until the mid-1800s. This means that our laws tend to look like laws in other common law countries like Canada, Australia, and India, particularly in real estate and personal injury cases.
While most of the basic principles remain unchanged from British law, beginning with the Industrial Revolution and with the advent railroads in the 1850s, US business laws were written to handle cases (such as contracts) that dealt with uniquely American situations. These US laws are summarized in two academic legal codes called the Restatement of Contracts and the Uniform Commercial Code (UCC).
Now that you know why we have contracts, tomorrow, we’ll go over some of the types of contracts you’re likely to encounter.
Bear in mind that this course is educational. It’s not meant to be legal advice. If you need legal advice, please consult a lawyer.
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