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Lesson 2 - Law of Contracts

31.7.2020, , Zdroj: Verlag Dashöfer

Lesson 2 – Law of Contracts

Mgr. Filip Hajný, Mgr. Daniel Makovický

Introduction and Objectives of the Lesson

Contracts are probably the most frequent document that a legal professional works with. Translating contracts is also a very typical occasion when Legal English comes in hand. That is why we feel that contracts deserve special attention and are covered by 3 lessons of this course.

Today, our main focus is on the fundamental contract terminology. We will go over the main elements that form a contract and preview the corresponding terms. Afterwards, we will learn how to identify natural and legal person when they are contractual parties. This is especially important, since you can use these terms in every single agreement you come in contact with.

Besides that, we have included an extensive preview of different contracts and their parties. You will understand how suffixes -or and -ee work and avoid confusion in your future Legal English practice. Since the law of contracts is our introduction into the world of real legal language, the final chapter of this lesson explores the differences between Legal English and general English. If you want to know more about contracts right after finishing this lesson, we recommend checking Lesson 5 and Lesson 9 for more in-depth information.

Contract and Its Basic Elements

A contract is generally defined as a legally binding agreement between two or more parties. It is enforced by law and creates obligations. The law of contracts is one of the pillars of a stable legal system. Contracts are governed mostly by Civil Law, Commercial Law, and Labour Law regulations. Formation of a contract requires the following basic elements:

  • Offer. Offer is a proposal by an offeror to enter into a contract addressed to one or several persons (offeree). An offer becomes effective the moment it is delivered to the offeree. It contains specific terms which are intended to be binding as soon as the offer is accepted. If the offeror decides to take the offer back, i.e. to revoke it, the offeror may do so only before the offer is accepted by the offeree.

  • Acceptance. Acceptance in principle only takes place when the offeree agrees to all the terms of the offer. In that case the parties expressed mutual assent. The agreement has to be unconditional, because modification of the terms of the offer normally constitutes a counteroffer. The offeree may express disagreement with the terms of the offer by rejecting the offer.

  • Consideration. Consideration is understood as anything of value that one party promises to another. It can be monetary (money) or non-monetary (e.g. provision of services or a forbearance) and its value does not need to be adequate. Under common law rules, no contract is valid or enforceable without consideration (such an agreement is referred to as a deed and falls under a special category). In the Czech Republic, contracts like donation agreement (or donation deed) are recognisable by law and fully enforceable.

  • Contractual Capacity. This is the legal capacity to form a binding contract. It involves the full understanding of the content of the contract and the consequences arising from concluding it. Persons lacking contractual capacity include minors, the mentally ill, or intoxicated persons.

  • Legality. The subject matter of the contract has to be legitimate and permitted by the laws of the particular country. Any contract requiring either party to perform a duty which is illegal is deemed invalid and unenforceable.

  • Intention of legal consequences. A contract requires that the parties intend to enter into a legally binding agreement. The parties have to understand the content of the contract and express their free will to be bound by the contractual terms.

Identification of Contractual Parties

Contractual parties (parties to the contract) are the two (or more) sides involved in concluding a contract. A contract may be entered into by a natural person or by a legal person (legal entity). However, a legal person may act only through a natural person, and thus legal persons are represented by representatives who act on their behalf. As it has already been mentioned, all parties need to be capable of understanding the nature of the contract and the obligations