Enforceable Contract

A system of creating, interpreting, and enforcing commercial obligations between parties. (Often referred to as the “Commercial Law” or “Law on Obligations” in Civil Code legal systems.)

Contract Law provides legal remedies for the breach of any of the promises or duties outlined in a contract. The central remedy of contract law is compensatory damages for actual injury or economic loss. Remedies may also include an order of specific performance of the obligation or payment of additional penalties. The ability to enforce contracts is generally considered a prerequisite for economic growth. There is a vital correlation between the quality of contract enforcement and the quality of the business and investment environment. Slow, unpredictable enforcement of judgments leads to higher interest rates, lower availability of credit, lower investment, higher prices for goods and services, higher rates of business default and bankruptcy, and lower rates of successful bankruptcy reorganizations.

The effectiveness of Contract Law turns on far more than the substance of the law itself: the commitment of implementing and supporting institutions is key. Institutions charged with implementing and enforcing Contract Law will typically be government entities, including ministries, courts, and administrative agencies. Important supporting institutions include alternative dispute resolution mechanisms; the private sector; law faculties and law professors; and trade, business, and professional associations. In the absence of a viable legal and institutional framework that provides for meaningful enforcements of contracts, economic development will falter.

Fundamentally, for a contract to be valid and subject to enforcement, the following conditions must be met:

• All parties to the contract must indicate that they agree to its terms, as demonstrated through an offer and an acceptance.
• The contract does not serve an illegal purpose, or a purpose that plainly interferes with public policy.
• Neither party has entered into the contract through illegal coercion.
• In common law countries, with limited exceptions, promises made in a contract must be made in exchange for consideration, that is, payment, some action, or another promise.
• The contract may be made only by parties with the capacity to reach an understanding, thus exceeding such groups as the mentally incompetent, and in some cases, minors.

In most instances concerning business affairs, particularly in civil law countries, the contract must be in writing. In common law countries, although certain oral contracts can be legal and enforceable, contracts establishing obligations lasing longer than one year must generally be in writing to be enforceable.

Elements of an Enforceable Contract: Main Elements

The coverage of Elements of an Enforceable Contract includes the following main elements:

Offer

For detailed information on this issue, please read the corresponding entry.

Acceptance

Please, refer to the appropiate entry related to the issue.

Silence as Acceptance

Find out an overview of this issue following this link (topic).

Battle of the Forms

There is information on this basic subject matter in this legal reference.

Defects in Mutual Acceptance

Find out an overview of this topic in the legal Ecyclopedia.

Consideration

There is information on this basic subject matter in this legal reference.

References

See Also

• Contracts (in international or comparative law)