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Contract law is the law that governs
contracts. A contract can take several forms - it can be
written on a piece of paper (or napkin, even) or it can be
just a verbal agreement if it satisfies the Statute of
Frauds.
A contract is basically an agreement between two or more
people which creates an obligation to do, or not do,
something. The agreement creates a legal relationship of
rights and duties. If the agreement is broken, then the law
provides certain remedies.
For a contract to be legally enforceable, not only do all
the parties to the contract have to get something in return,
but they must also suffer a detriment. In other words, one
cannot contract to give someone else $500 unless the other
person gives up something in return.
Contract law covers the legal implications of a contract.
For instance, contract law determines what is and is not
consideration, whether a contract was actually intended, if
the parties making the contract were legally competent,
whether there was fraud or duress involved, or how a
contract is terminated.
Certain contracts are not legally valid, for instance, if
the contract goes against public policy (such as a contract
to satisfy a gambling debt). In most instances, people who
are not of the age of majority are not allowed to make
contracts.
When writing a contract, it is important to remember a
central principle to contract law - terms of a contract will
be construed against the drafter of the contract. Thus, any
ambiguities or uncertainties will be resolved against the
writer. For instance, if someone drafts a contract where
there is uncertainty as to whether the drafter has to pay
$500 or $800 for a good or service, the contract will be
interpreted against the drafter - i.e. he or she will have
to pay the $800 amount.
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