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It has been shown how a contract is the result of an agreement, or a meeting of minds, between
two or more parties. Such a meeting of minds cannot take place spontaneously or by accident. In
the making of every contract one party must take the initiative and make a certain proposal to the
other. This proposal or offer is the first step in the making of a contract. In this proposal A offers to
do a certain thing for B, or to give a certain thing to B, on condition (or on consideration) that B
will do a certain thing for him (A), or give a certain thing to him. If B accepts the proposal or offer
of A, the contract is at once completed and becomes binding upon the parties. (Except in a few
cases which will be explained in other parts of this book). B, however, although he may desire to
enter into a contract with A of the general character proposed may not be satisfied with the terms
offered by A. He may, therefore, instead of accepting A's offer make a counter proposition. B's
proposal now becomes the offer and must be accepted by A in order to result in the making of a
contract. These negotiations and counter propositions will go on until either the parties drop the
matter without coming to any agreement, or until an offer made by one party, is accepted in its
entirety. To make a contract there must be a mutual consent to all the terms of such contract.
Before discussing this question of mutual consent, however, it is necessary to go back and
consider how the offer may be made, and in what manner it may be accepted.
Contract Basics
Just as a businessperson scans the corporate environment for potential
legal pitfalls within the organization, so too, he or she must similarly
judge the potential liability of decisions involving outside individuals
or businesses. While a written contract is not necessary for every
action
and decision taken by a businessperson, it can prove invaluable when:
CONTRACT OVERVIEW
For a contract to be valid, both parties must give their assent. They
must act in such a way that the other people involved believe their
intention is to make a contract. Thus a person who is clearly not
sincere
in saying that he or she accepts an offer usually is not held to a
contract by the courts.
Consideration
A contract results from a bargain. This implies that each party to the
contract gives up something, or promises to, in exchange for something
given up or promised by the other party. This is called consideration.
In
the example given above, the consideration on one side is the promise to
pay $1,000, and on the other, the promise to deliver a car.
Competence
Legality
In the event of a breach of contract, the injured party usually sues for
money damages (the award of a sum of money designed to compensate for
losses stemming from the breach). Damages are measured by what may
reasonably be foreseen as financial losses; unforeseeable losses may not
be collected. If an award of money is not compensatory because something
about the promised performance was unique, the party who breaks a
contract
may be ordered by the court to perform as agreed. This is called
specific
performance. For example, real estate is always considered unique.
Therefore, when a party has contracted to sell real estate but changes
his
or her mind, the court may grant specific performance and order that the
deed for the real estate be delivered to the agreed buyer.