The Law on Obligations & Contracts

We all have legal obligations that we must perform. Some individuals have obligations that arise from contracts that they've entered into. For these individuals, it is important to know whether their contracts are enforceable, identify its terms, and know whether they have an obligation to perform any of those terms.

Obligations

The laws on obligations, other than those arising from contracts, can be found in almost every single category of the law. All persons are obligated to follow the laws of the government, except for those that are prohibited by the United States Constitution, which is the supreme law of the United States.

UCC or Common Law

The laws of contracts are governed by two separate bodies of law. The first, the Uniform Commercial Code (UCC), governs contracts for the sale of movable items such as goods. The second, the common law, governs all other forms of contracts.

Contract Formation

There are three elements necessary to form a contract. The first is called "mutual assent" or agreement between the parties to the transaction. The second is called "consideration," which is where parties on both sides of the transaction agree to do something they have a legal right not to do or refrain from doing something that they have a legal right to do. The third is that there must be no legal defenses to contract formation. In other words there must be no lying, force or threats involved in creating the contract.

Contract Terms

Certain legal doctrines decide what terms the contract must have. The doctrine of mistake permits the court to exclude some terms that the parties mistakenly included in the contract. The doctrine called the "parol evidence rule" excludes evidence of any terms that contradict a written contract.

Third Parties

Sometimes other parties besides those that originally entered into the contract may have rights that arise from that contract. The contracting parties may have intended that a third party or parties benefit from the contract. In such cases, these third parties may enforce the promise if it is not performed. In other cases, the original parties may either assign their rights or delegate their duties under the contract to others.

Contract Performance

If a party has not performed his obligations under a contract, then it may be excused or result in breach. A contract obligation is excused if the contract is impossible to perform, is extremely impracticable, or if a situation arises where the purpose for which the contract was formed is frustrated. If there is no excuse, then the contract has been breached and the other party can sue and collect damages.

Remedies

If a contract has been breached, then the other party may collect money or otherwise make the breacher perform his obligation. The non-breaching party may collect "compensatory damages," which is the value of the contract had it been performed. If this is not enough, then the non-breaching party may seek what is called "specific performance," which forces the other party to perform her contractual obligation.

References

• California In-Class Workbook; Barbri ; 2008

Resources

• Contract Law: An Introduction