Contracts Overview Contracts: an overview Parts Retrieved from Cornell Law - West's Paralegal Today 4\"1 addition G. Anthony Sanchez Jr. Contracts are promises that the law will enforce. Contract law deals with the keeping of promises. Contract law provides remedies if a promise is \"broken" breached or recognizes the performance of a promise as a duty. Contracts arise when a duty does or may come into existence, because of a promise made by one party to another. However, to be legally binding as a contract, the promise must be exchanged for \"adequate" \"consideration". Adequate consideration is a benefit or detriment which a party receives which reasonably and fairly induces them to make the promisefcontract. For example. promises that are purely gifts are not considered enforceable because the personal satisfaction the grantor of the promise may receive from the act of giving is normally not considered adequate consideration. Another example would be as if I offer to buy your car for $20.00 and I actually give you the $20.00. Although there are other issues at play in this example one would be the lack of adequate consideration, namely the $20.00. Unless your car is so bad it is actually only worth $20.00. Certain promises that are not considered contracts may, in limited circumstances, be enforced if one party has relied to his detriment on the assurances of the other party. An example would be the neighborhood lawn care person. They often work without a written contract yet they get paid each and every week. As in the previous short example there are other issues at playr here one would also be that the lawn care person relied on receiving payment for his work. In the business world you will see many types of contracts from services to goods to people. The good news is that there are a specic set of rules that applies to every contract. But we will touch on that just a bit later. Contracts on whole are mainly governed by state statutory laws, common law (judge-made} and private law so long as the thing contracted for is not illegal. Private lawI principally includes the terms of the agreement between the parties who are exchanging promises. This private law may override many of the rules otherwise established by state law. Statutory law may require some contracts be put in writing [over a year goods for more than $500] and executed with particularformalities. Otherwise, the parties may enterinto a binding agreement without signing a formal written document. Most of the principles of the common law of contracts are outlined in the Restatement of the Law Second, Contracts, published by the American Law Institute. The Uniform Commercial Code [UCC], whose original articles have been adopted in nearly every state, represents a body of statutory law that governs important categories of contracts. The main articles that deal with the law of contracts are Article 1 (General Provisions} and Article 2 (Sales). Sections of Article 9 {Secured Transactions) govern contracts assigning the rights to payment in security interest agreements. Contracts related to particular activities or business sectors may be highly regulated by state andfor federal law. In 1988, the United States joined the United Nations Convention on Contracts for the International Sale of Goods which now governs contracts Things to know before you contract. In your MBA business dealings, there are things you should know prior to entertaining contractual relationships with certain parties. I am not speaking of small contracts - but the larger ones that require large payables. Monitoring spending and change orders is also very important. To this end, \"60061.5" can be a good friend to you. On the ofcial side you want to check with the Secretary of State for business registration in the state you work in AND the state the company you are contacting with claims to be from. The web site is htt : www.sos.ca. ov business be name-availabili .htm. Go to Business Search and type in me name of the corporation or LLC you are dealing with. You will be able to confirm if they are active, suspended or dissolved. I recommend you do this as an audit with some frequency to ensure your company is doing business with duly formed entities in good standing. Although a company that is not in good standing cannot use legal remedies in pursuit or defense of a claim - is also hard to collect against such companies and so they should be avoided