Contracts – Creation, Enforcement, Breach

What is a Contract?

In Illinois, a contract requires the following elements in order to be valid:

  • Offer
  • Acceptance
  • Consideration
  • Intention to create legal relation
  • Capacity to contract

An offer and acceptance, followed by consideration often results in a valid contract, to the surprise of many people. This is true even if there is no writing in effect and the parties therefore enter into an ‘oral contract’ which is equally enforceable. In a written contract, although it is generally required that the contract be signed by all parties (or by the party seeking to be held against the contract), the parties can show that the intent to create the legal relationship was nonetheless made once certain elements are met. Similarly, if partial performance is made and accepted on a contract, a party can be held to certain obligations or requirements.

Other considerations:

  • Loopholes
  • Statutes
  • One-sided clauses
  • Ambiguities
  • Modification

 

Breach of Contract

The terms of the contract may provide a party with loopholes that give them an out. Careful review by a lawyer is highly recommended if you are dealing with breach of contract issues. State or federal statues may invalidate certain provisions or clauses as being unenforceable. Ambiguous language in a contract will be interpreted against the drafter, especially where the drafter has superior bargaining power. Oftentimes, a party may be willing to negotiate and modify the contract based on changed circumstances or both parties may mutually agree to modify the agreement. If you were forced to sign a contract against your will, you are not bound by it. This encompasses both physical and economic duress. Economic duress is defined as the unlawful use of financial or economic pressure or threats to force a person to contract. Likewise, unconscionable contracts that are extremely one-sided in favor of the party with superior bargaining power are considered unfair, especially if they exploit a poorly educated or impoverished consumer. If you entered into a contract because of a material misrepresentation of fact by the other party, the contract will not be held enforceable against you. It will, however, be enforceable against the party committing the fraud. Failure to disclose material information (omission) qualifies as fraud. Blackmail, bad faith threats of criminal prosecution or extortion all serve to show undue influence, leading to resulting contracts not being upheld.

What are some examples of Types of Legal Contracts?

There are many types of contracts made and encountered on a regular basis in your day to day life. From something as simple as placing an order at a restaurant to paying your mortgage or credit card bill, contracts affect every aspect of our lives. Common contracts that end up drawing people to court include:

  • Rental or lease agreements
  • Business to Business contracts
  • Purchase of goods
  • Purchase of Services
  • Business to consumer contracts
  • Business-Employee contracts

Remedies

The most common remedy for breaches of contract is money damages. Direct and incidental damages are two common remedies. Consequential damages are more difficult to obtain but are another remedy possible for breach of contract. Sometimes, the contract sets forth a lump sum of damages that may be obtained. Usually called liquidated damages, they are generally enforced if they are not a penalty, so long as they are a reasonable estimate by the parties of the foreseeable damages and if that estimate is difficult to make. Sometimes a contract may forbid or limit damages that can be recovered, which are enforced so long as they are reasonable. Specific performance is a type of remedy which is a court order that requires a party to perform its contractual obligations or to refrain from breaching them – most commonly in breach of a real estate contract.

Do you have a breach of contract legal matter? Contact us for a free initial consultation.

 

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