Contracts are part of our daily lives, and we all have a need for them. The thing is, Contract Law is complex.

What is Contract Law?

If you’re employed, you will no doubt have a contract. When you buy life insurance, or buy a house, there will be a contract. Even buying a bottle of milk, or a newspaper from the local shop will be governed by the Law of Contract.

In essence, any agreement that is enforceable in a court of law is a contract. English Contract Law attempts to adhere to a simple principle: that you can only be bound to a contract when you have been given all of the correct information pertaining to the contract and have given your consent.

The main areas under Contract Law include:

  • Formation of contract (offer, acceptance, consideration, intention)
  • Capacity to form contract
  • Contents (terms, exclusions, privity)
  • Vitiating factors (misrepresentation, mistake, duress, illegality, etc.)
  • Discharge (performance agreement, breach, frustration); and
  • Remedies (damages, performance, injunction, etc).

As you can see, it’s quite a detailed area of law. And because of its complexity, it is usually dealt with by qualified solicitors, specialist lawyers (in every law you can possibly imagine), or by legal executives.

How is a Contract Formed?

Formation and Capacity

The usual way a contract is formed is when one party makes an offer, which is accepted by another party by performing the offer’s terms or communicating their approval. Furthermore, if the terms are certain, and the two parties can be presumed from their behaviour and actions to have intended that the terms are binding, then the agreement is (generally) enforceable.

Some contracts, for example, the sale of land, or other particularly large transactions, also require the formalities of signatures and witnesses (sometimes in the form of a deed). English Contract Law requires all people, known as ‘parties’, to bring something of value, known as ‘consideration’, to a bargain as a precondition to enforce it.

The Content of Contract

The terms in a contractual agreement are incorporated through definitive promises by reference to other terms or through a course of dealing between two people. English Contract Law allows lots of freedom for people to agree the terms and content of a deal.

A good example of contract law at its best is a shareholder agreement as in this case an agreement is performed and resorting to the courts is never needed because each party knows their rights and duties.

Vitiation Factors, Discharge and Remedy

If an event occurs which was unforeseen and could make an agreement impossible to perform (or the agreement can be considered ‘very hard’) the courts might decide that the parties involved would have wanted to release themselves from their agreement obligations. Sometimes, it may be fairly straightforward in that one party breaches a contract’s terms.

If you are the innocent party of a contract that has not been substantially performed, then you would be entitled to cease your own performance….that is to stop doing whatever your side of the contract says you should be doing! In addition to this you would also be able to sue for damages so that you may put yourself in the position that you would have been in as if the contract had been performed fully.

However, as the innocent party, you are under a duty to reduce the severity of your losses (this is known as ‘mitigating your losses’) and you cannot claim for harm that was a remote consequence of the contractual breach.

Regardless, remedies in English Contract Law are such that full compensation for all losses (whether money-related or not) should be realised. For example, in exceptional circumstances, if your wrongdoer breaches the terms of the contract, the courts may demand ‘specific performance’ of the agreement by the wrongdoer rather than monetary compensation to you.

Also, depending on the specific type of your contract, it is possible that your contract is cancelled or invalidated if one of you failed to make adequate disclosure, or if either of you made misrepresentations during your negotiations.

You can get out of unreasonable agreements if:

  • You were under duress
  • You were under undue influence
  • Your vulnerability was being exploited at the time when you agreed to a deal
  • The transactions in relation to the agreement are considered illegal