1、The Importance of Contract LawThe Importance of Contract LawContract law deals with, among other things, the formation and keeping of promises. The law encourages competent parties to form contracts for lawful objectives. No aspect of modern life is entirely free of contractual relationships. Indeed
2、, even the ordinary consumer in his daily activities acquires rights and obligations based on contract law. You acquire rights and obligations, for example, when you borrow money to make a purchase or when you buy a house. Contract law is designed to provide stability and predictability as well as c
3、ertainty, for both buyers and sellers. The study of contract law is important because it is the basis for all commercial law. The law described in the following chapters is the basis for much of the law in more specialized areas, such as the sale of goods. In Chapter 1, you will be introduced to the
4、 nature and terminology of contracts. As you will say, there are many types of contracts. There are also basic requirements that must be met before a valid contract comes into existence. These basic requirements are discussed in detail in chapters 2 through 6. Sometimes, a third party (one who is no
5、t a direct party to the contract) acquires rights under the contract. Third party rights are covered in Chapter 7. Parties to a contract need to know when their duties under the contract have been fulfilled. The performance and discharge of contractual duties are covered in Chapter 8. Finally, you w
6、ill learn in Chapter 9 what remedies are available to the nonbreaching party when the other party breaches the contract. Chapter 1 Nature and Terminology1.1 Introduction Contract law shows what promises or commitments our society believes should be legally binding. It shows what excuses our society
7、will accept for the breaking of such promises. And it shows what kinds of promises will be considered as being against public policy and therefore legally void. A contract may be defined as a promise enforceable at law. A promise is an undertaking that something will or will not happen in the future
8、. Thus, a contract may be formed when two or more parties each promise to perform or refrain from performing some act now or in the future. The promises need not be in writing to constitute a contract, although some contracts must be in writing to be enforceable. On the contracts breach (a breach of
9、 contract occurs when a contractual promises is not fulfilled), the breaching party may be subject to sanctions. These sanctions may include a payment of money (damages) to the nonbreaching party for the failure to perform. Under such circumstances, the breaching party may be required to render the
10、performance promised in the contract.A contractual relationship involves the giving of a promise in exchange for either an act or anther promise. All contractual relationships thus involve promises. All promises, however, do not establish contractual relationships. For example, if your friend promis
11、es to go to the movies with you and then decides not to go, you cannot sue your friend for breach of contract. Although promises were exchangedto go to the movies togetherthe legal system will not expend resources to enforce these promises. In essence, contract law reflects societys determination of
12、 the kinds of promises that should be legally enforced.The use of contract principles to govern the relationships of those who make promises to one another dates back thousands of years. Early in history the importance of contracts was recognized and given legal effect. The following chapters will e
13、xplain how contracts are formed, how they are discharged, and what happens when they are not performed. The rules relating to the formation, discharge, and breach of enforceable promises are called the law of contract. Society as we know it today could not exist without the law of contracts. The fou
14、ndation for almost all commercial activity is the contract. The purchase of goods, such as automobiles, is governed by a sales contract; the hiring of people to work for us to make repairs, by service contracts; the sharing of risks on our property, by insurance contracts. In short, we could not ord
15、er our daily activities without contracts. Contract law is based on the common law and governs all contracts except when the common law of contracts has been modified or replaced by statutory law or administrative agency regulations. Contract relating to services, real estate, employment, insurance,
16、 and so on generally are governed by general contract law. All contracts for the sale of goods, however, are governed by statutory law in the United States particularly the Uniform Commercial Code (UCC)to the extent that statutory law has modified or replaced general contract law. In the discussion
17、of general contract law in this unit, we indicated the areas in which the UCC has significantly altered common law contract principles.Contracts for the international sale of goods between firms or individuals located in different countries are governed by the United Nations Convention on Contract f
18、or the International Sale of Goods (CISG,联合国国际商品买卖公约). Chinese law relating to the sale of goods are contained in Chapter 2 (Contract for Sale of Goods) of Contract Law of the Peoples Republic of China(中华任命共和国合同法,第二章,买卖合同).1.2 The Function of ContractContract law is necessary to ensure compliance wi
19、th a promise or to entitle a nonbreaching party to some form of relief when a contract is breached. By providing procedures for enforcing private agreements, contract law provides an essential condition for the existence of a market economy. Without a legal framework within which to plan, businessme
20、n would be able to rely only on the good faith of others. Duty and good faith are usually sufficient, and most contractual promises are kept simply because keeping them is in the mutual self-interest of the promiser and the promisee. But when price changes or adverse economic factors make it costly
21、for one of the parties to comply with a promise, duty or good faith alone may not be enough.Contract law provides a major part of foundation on which more specialized areas of the law have been built. A basic understanding of the principles governing contracts facilitates an understanding of the sal
22、es of goods; in the transfer of funds by check, draft, note, or electronic means; in relations between debtors and creditors; in relations among employers, employees, and agents; in the creation, operation, and termination of partnerships and corporations; in the regulation of trade and monopolies;
23、and in transfers of property other than goods or by means other than sales or between parties who are not merchants. 1.3 Freedom of Contract and Freedom from ContractAs a general rule, the law recognizes everyones ability to enter freely into contractual arrangements. This recognition is called free
24、dom of contract. But as the character of institutions and society changes, the functions of contract law and its enforcement must also change, and, in fact, the right to a person to enter into a contract in the United States is no different than the right under current Chinese law. Such changes in c
25、ontract law can be perceived today in the fact that certain types of agreements are no longer considered valid. For example, illegal bargains, between one party with a great amount of bargaining power and another with little power are generally not enforced. In addition, certain contracts with consu
26、mers, as well as certain clauses within those contracts, are not enforceable, because they have come to be considered incompatible with public policy, fairness, and justice. The law of contracts is broadening to include new controls on the manner of contracting and on the allowable terms of agreemen
27、ts. These controls are meant to provide freedom from contract for certain members of society who heretofore may even have been forced into making contracts unfavorable to themselves. 1.4 Basic Requirements of a ContractThe many topics that will be discussed in this unit on contracts require an under
28、standing of the basic requirements of a contract and the processes by which a contract is created. The following list briefly describes these requirements. They will be explained more fully in subsequent chapters.1. Agreement. An agreement includes a valid offer and a valid acceptance. One party mus
29、t voluntarily offer to enter into a legal agreement, and another party must voluntarily accept the terms of the offer.2. Consideration. Generally, consideration is the inducement (reason, cause, motive or price) to a contract. Any promises made by the parties must be supported by legally sufficient
30、and bargained for consideration.3. Contractual Capacity. Both parties entering into the contract must have the contractual capacity to do so; they must be recognized by the law as possessing characteristics that qualify them as competent parties.4. Legality. The contract must be made to accomplish s
31、ome goal that is legal and not against public policy.These four requirements constitute what are formally known as the elements of a contract. Also important are possible defenses (that is, reasons why a party should not be awarded what he seeks in an action or suit) to the formation or enforcement
32、of a contract. These including the following: 1. Genuineness of Assent. Apparent consent of both parties must be genuine.2. Form. The contract must be in whatever form the law requires such as in writingif any special form is required. 1.5 Objective Theory of ContractThe intent or apparent intent to
33、 enter into a contract is of prime importance in the formation of the contract. This intent is determined by what is called the objective theory of contracts, not by the personal or subjective intent, or belief, of a party. The theory is that a partys intention to enter into a contract is judged by outward, objective facts as they
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