Lesson 5 – Law of Contracts 2
Introduction and Objectives of the Lesson
We have already studied the law of contracts in Lesson 2, and the main objective of this lesson is to build on that. We are familiar with some contract types, parties, and particulars of a contract in general. Now we need to focus on the language of contracts, in particular validity and effect, termination of contract, or damages.
Besides this, we hope that legal referencing terms such as herein or hereby will become a useful tool for you after completing this lesson. Learners of English in general don't like using them and find them difficult, but we believe you will pick those most common ones and upgrade your legal language.
Last but not least, contract language is closely linked with modal verbs expressing rights and duties. We have pointed out shall and may as the most frequently used modals in Legal English.
After completing this lesson, you will finally be ready for typical contract clauses, which are the main topic of Lesson 9.
Content of Contract
We have already mentioned that contracts set forth rights and duties of the parties. Written contracts contain provisions, which are communicated in the form of contractual clauses. Clauses consist of particular terms. The terms of a contract are binding on the parties, i.e. the parties are bound by them and are obliged to adhere to the terms.
There are two main types of contractual terms:
- Express terms are such terms that the parties mutually agree to and are stipulated directly in the contract.
- Implied terms are not expressly stated in the contract but are derived (implied) from legislation or local customs. Despite not being expressly agreed by the parties, implied terms are a binding part of the contract.
As we know, valid contracts impose rights and duties on the parties. The existence of rights and duties may sometimes be subject to the fulfilment of a condition. Namely, either a condition precedent or a condition subsequent. In terms of the Civil Code:
- A condition is a condition precedent if the legal effects of the act are subject to fulfilment of the condition. This means that a condition has to be satisfied before the content of the contract may be executed. In practice, this may for example involve obtaining a permission by an authority.
- A condition is a condition subsequent if its fulfilment terminates the duty of a party. Such external events include e.g. bankruptcy of a company, divorce, etc.
Validity and Effect of Contract
In Lesson 2 we discussed contracts in general, elements of a binding contract and we took a look at some of the most typical contracts and the parties thereto. When all elements essential for a valid formation of a contract are present, the parties enter into a binding contract. Binding contracts are valid and enforceable.
When a contract contains all the contractual elements, it becomes valid as of the day it is signed by the parties. We say that the contract comes into force. On the other hand, a contract becomes effective, or comes into effect, when the rights and duties contained therein are able to be exercised. If a day of effect is absent in a contract, the contract is presumed to become effective as of the day when it is signed.
A voidable contract is considered valid but may be annulled by one of the parties because it contains certain features which are contrary to law and may be objected to. These include mistake, misrepresentation, duress and undue influence. Such factors may even constitute a contract invalid.
A mistake in contract law is an erroneous belief that certain facts…