Anatomy of a Contract

Anatomy of a Contract

The formation of contracts has been an age old act in which one party makes a deal with another party in hopes of mutual benefit. As time elapsed, contracts evolved from oral to written and oral as well as in their complexity. Later, we take a closer look into the elements that make up common law and the Uniform Commercial Code (UCC). We will also gain a deeper understanding of the remedies for breach of contract. And lastly, we will bask in the knowledge of void and voidable contracts. So sit back, kick off your shoes, put your feet up, and enjoy a nice cup of coffee as you are emerged into the anatomy of a contract.

Elements of Common Law and UCC Contracts

Under common law a contract has a few elements. The contract elements under common law are the offer and acceptance by competent persons through consideration and mutuality of obligation. Offer is where one person or party makes an offer to another person or party. Acceptance is the acceptance of the offer by all parties involved. Competent persons refers to individuals that are of legal age or standing, understand and are coherent of both the offer and acceptance responsibilities. In consideration of the parties involved, the contracts are created with mutuality of obligation in mind. That is to say that all parties involved have an obligation to complete and is done so mutually with the other parties.

A contract under common law or Uniform Commercial Code (UCC) elements are basically the same. The Biggest difference between the two is in the acceptance of the contract. Under common law, the contract follows the mirror image rule which entails the acceptance of the terms of the offer unwavering as a mirror image. The terms of acceptance under common law are spelled out and focus on all aspects of the contract including the price, quantity, nature of the work, performance time, and other issues. Under the UCC the terms are mainly based on the materiality of the contract. Only material changes affect the contract under the UCC. Minor changes that have little or no effect on the materiality of the contract are irrelevant where in a common law contract could be grounds for a breach.

Remedies for Breach of Contract

Legal remedies for breach of contract include compensatory damages, consequential damages, restitution, and liquidated damages. Compensatory damages are actual damages suffered as a consequence of another party's breach of duty. Compensatory damages are an attempt to put the wronged party in the same position they would have been in if the offending party had performed their duties as originally agreed upon (Melvin, 2011). In unique circumstances where the breach of contract causes more losses for the injured party beyond the scope of the contract, consequential damages may be sought by the aggrieved party. Consequential damages cover the injured party for "foreseeable indirect" losses that are not covered by compensatory damages (Melvin, 2011). In a situation where a contract is breached partially through the completion of work by the person paying for the work, the person completing the work is entitled to payment for the amount of work they have completed; this process is called restitution (Melvin, 2011). Restitution helps reimburse the plaintiff (worker) for their efforts at fair market value. Liquidated damages are realistic estimates of the actual damages resulting if a contract is breached (Melvin, 2011). These must be agreed upon ahead of time, with the consent of both parties.

Equitable remedies available for breach of contract include: specific performance, injunctive relief, and reformation. The court may order specific performance as a remedy when monetary damages are insufficient. In these "unique" instances, the breaching party is ordered to render the promised performance specified in the contract (Melvin, 2011). Many times real estate contract breaches are resolved by the utilization of the specific performance remedy, given each property's unique features due to the location, grandeur, or other characteristics specifically held by that property. Contrastingly, injunctive relief is a remedy where the court orders that a party abstain from performing a particular act (Melvin, 2011). This act is many times the sale of an item, property, or other asset that is still