Function

Overview of Contract Law

Contract law is about the enforcement of promises, transactions and agreements. Its rules decide which agreements are legally binding contracts, what the terms and conditions of the contract are, and what their implications are, in the context of a dispute before the court.

Contract law determines whether there is a legally enforceable agreement. Its principles decide, what the terms and conditions of the agreement are. The question of whether there is a legally binding agreement (i.e. a contract) may assume critical importance, in the event that a dispute arises between the parties.

A person may allege that another party has entered a contract to sell him a particular item for a particular price, while the other may deny the allegation. A person may accept that there is a contract but may dispute its terms and conditions. Contract law asks whether there is an offer and acceptance of the terms of an agreement. It requires that there is a mutual exchange so that each gives or agrees to give something to the other at the other’s request.


Nature of Contractual Obligations

Generally, contractual obligations are unconditional, unless (in the unusual event) that it is specified that the obligation is otherwise.  The party to the contract must do what he has promised to do. It is not enough to use best endeavour to do so.  It is not usually an excuse that he does his best or that it is impossible to do what has been promised to do or deliver.

It is only in the most exceptional cases when some unexpectable supervening event occurs that contractual obligations may be frustrated and thereby released. Otherwise, parties carry the obligation to perform what they promise. This can be seen as risk apportionment.

If a buyer agrees to buy a house for a particular price at a future date, it is no defence that he cannot get a loan because of a credit crisis. The buyer takes the risk that he will have the funds unless he has specifically agreed that his obligation is conditional on getting a loan. Of course, the seller, in a rising market would not have agreed to such a condition.

Generally speaking, the law does not deal with the content of contracts. If a person makes a foolish contract, then generally he must perform it, no matter how unfair and ruinous. There may be exceptional circumstances, where for example, one party is vulnerable and has been deliberately taken advantage of. however.

In business to consumer contracts, there is legislation which limits wholly unfair standard form terms and conditions.


Variety of Contracts

The variety and types of contract are infinite, subject only to the constraints of what the law makes unlawful and illegal. There are some types of contract that the law will not enforce on policy grounds.

Many everyday arrangements and transactions, such as employment relationships, transport, club membership and the sale, purchase repair of goods are governed by contract law. In some cases, legislation, for example, employment or consumer protection law, override particular contract terms.

Contracts may be verbal and informal. They may be written. They may be basic with few express terms or they may be complex. In the case, for example of complex plant and equipment or a commercial building, a detailed contract with written terms and conditions may be negotiated at length.

In the case of routine contracts, such as those for the sale of goods, the basic terms (e.g. the goods, the price, the delivery obligation etc.)  are fleshed out by implied legal terms. Sometimes statutorily implied terms are optional and can be overridden. In other cases, particularly in employment and consumer cases, the contract cannot override minimum protection terms.


Everyday Examples

Contract law covers a broad range of agreements and transactions from the purchase of groceries to a complex and detailed agreement for the construction of an industrial building. The same broad rules apply to all contracts. There are special consumer protection rules that apply to “business to consumer”, contracts that do not apply to other contracts.

Contracts arise continuously in everyday life and business without the parties involved being necessarily conscious, that legal consequences are involved. For example, the purchase of goods involves a contract by which money is exchanged for the commodity. In this case, there is an immediate agreement with contemporaneous delivery and payment.

Most everyday contracts are not of practical relevance unless, for example, the goods purchased turn out to be faulty or do not conform to their description.  If this happens, then the rights and obligations of the buyer and seller depend on the terms and the contract as determined by contract law rules. If the goods are faulty, contract law provides that there has been a breach of the seller’s obligations.  Under contract law, the seller must replace the goods and/or compensate the buyer.


Sale and Purchase of Goods

Contract law upholds bargains and requires each party to comply with his promise. If either fails to do so, he may be compelled to do so or more likely, ordered to pay compensation for the loss incurred by the innocent party. If the seller reneges on his promise to deliver, the buyer has a right to compensation under contract law for his loss.

A simple purchase from a retailer involves the simultaneous agreement, delivery and payment. A contract can also involve an exchange of promises to do or omit to do something in the future. For example, a buyer may agree to purchase a piece of furniture, with delivery and payment to be made at a future date. In this case, there is an immediate legally binding contract to buy and sell on the agreed date.


Civil Enforcement

If the buyer refuses to accept the goods purchased, then the seller can claim compensation for his loss. This will generally be his loss of profit, where the goods are standard in nature and can be sold to another. If they are unique and cannot be sold into a market, then that he will be entitled to compensation for the loss he suffers in selling them for whatever price he can get for them together with reimbursement of expenses. If he cannot sell it at all, then he may be compensated for the expenses and legal costs incurred.

Conversely, if the buyer refuses to pay when payment is due, the seller has a right to cancel or if he has delivered, a right to recover the price. If the buyer accepts the item but does not pay, the seller has the right under contract law to recover the price plus interest and costs.

There are special court procedures for debt collection cases where there is no genuine dispute about the liability to pay. In these cases, a court order for payment may issue without a court hearing.


Economic Purpose of Contract Law

Contract Law upholds promises. It allows individuals and businesses to proceed in the market with assurance and certainty that their transactions and agreements must be complied with. Contract law does not punish in the same way as the criminal law does. Contracts are not upheld for their own sake. A breach of contract of itself is not a breach of criminal law.

If a party to a contract does not fulfil his promise, but no loss or expense whatsoever is suffered in consequence, then there will generally be no right of compensation for breach of contract. Where the breach causes no loss, it is thought to be the most economically efficient solution to allow either party to undertake an alternative transaction. In this way, contract law upholds the free market.


Does Not Punish

Contract Law upholds expectations. If an item is agreed to be sold for €6, the law upholds this agreement. If the seller refuses to sell and the buyer can only buy it for €10 elsewhere, he must compensate the buyer €4 for the extra cost of purchasing and a further sum to cover interest and expenses. In this way, the law upholds the original bargain.

The innocent party is obliged to minimise his loss. If the seller has defaulted, the buyer must endeavour to buy an alternative commodity. If he must pay a higher price, he is usually entitled to compensation for the difference in price and for expenses incurred and legal costs incurred.

If the buyer, in the example, can buy an equivalent alternative for €5, then he has suffered no loss other than the expense of arranging the alternative transaction. The liability for breach of contract would be limited to, at most, this expense.

If a seller of goods can sell the same item to another person for the same or more money, he is generally entitled to the loss of profit on that particular sale. There has been one less sale.


References and Sources

Irish Textbooks and Casebooks

Clark, R. Contract Law in Ireland 8th Ed. (2016) Ch.1

Friel, R. The Law of Contract 2nd Ed, (2000)

McDermott, P.  Contract Law (2001) 2nd Ed (2017) Ch.1

Enright, M. Principles of Irish Contract Law (2007)

Clark and Clarke Contract Cases and Materials 4th Ed (2008)

English Textbooks and Casebooks

Poole, J. Casebook on contract law. (2014) 12th edition

Stone and Devenney, The Modern Law of Contract 10th Ed (2015)

McKendrick, Contract Law 10th Ed (2013)

Chen-Wishart, Contract Law 5th Ed (2015)

Anson, Reynell, Beatson, J., Burrows, Cartwright, Anson’s law of contract. 29th Ed (2010)

Atiyah and Smith, Atiyah’s introduction to the law of contract. 6th Ed.

Chen-Wishart, M. (2015) Contract law. 5th Ed.

Cheshire, Fifoot and Furmstons, Furmstons and Fifoot Cheshire, Fifoot and Furmston’s law of contract. OUP.

Duxbury, Robert (2011) Contract law. 2nd Ed.

Halson, Roger (2012) Contract law. 2nd Ed.

Koffman & Macdonald’s Law of Contract. 8th Ed. (2014)

O’Sullivan, Hilliard, The law of contract. 6th Ed. (2014)

Peel, and Treitel, The law of contract. 13th Ed. (2011).

Poole, J.Casebook on contract law. 12th Ed. (2014).

Poole, J.  Textbook on contract law. 12th Ed. (2014)

Richards, P Law of contract. 10th Ed. (2011)

Stone, R.  The Modern law of Contract. 10th Ed. (2013)

Treitel, G. H.  An outline of the law of contract. 6th Ed (2014).

Turner, C Unlocking contract law. 4th Ed. (2014).

Upex, R. V., Bennett, G Chuah, J, Davies, F. R. Davies on contract. 10th Ed. (2008).

UK Casebooks

Stone,Devenney, Text, Cases and Materials on Contract Law 3rd Ed (2014)

McKendrick, Contract Law Text, Cases and Materials 6th Ed (2014)

Stone, R, Devenney, J Cunnington, R Text, cases and materials on contract law. 3rd Ed (2014)

Burrows, A. S.  A Casebook on Contract. 4th Ed.

Beale, H. G., Bishop, W. D. and Furmston, M. P. Contract: cases and materials. 5th ed. (2008)

Blackstone’s Statutes on Contract, Tort & Restitution 2017 (Blackstone’s Statute Series)

UK Practitioners Texts

Chitty on Contracts 32nd Edition, 2 Volumes & Supplement (2016)

The above are not necessarily the latest edition.