8 - A contract involves a promise or an exchange of...

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A contract involves a promise or an exchange of promises. Although the details of contract classifications, terminology, formation, and performance make up the bulk of this and the next chapter, remember at the heart of this topic is a promise or commitment to do or not to do something. The preceding chapters and those that follow emphasize the importance of property as the foundation of our free- enterprise system. The enforcement of contracts is essential in the operation of this property- oriented system. Without contracts and the court systems to enforce contracts, buyers and sellers would not have confidence in exchanging valuable property interests. Every day millions of contracts— legally enforceable promises— are created and performed. Businesspeople and consumers make contractual agreements. No other area of the law has been as important as the law of contracts in supporting private enterprise. As you read and study this and the next chapter, keep in mind the role that property and contracts have in making business possible. Indeed, we believe these aspects of the law are the fundamental elements of today’s modern business world. There are also nonlegal business considerations in every contract. If your company tries to get out of the deal the customer believes exists, you risk losing that customer’s future business. Although your company may settle a dispute through negotiation rather than litigation, your bargaining power is enhanced when you know the rules of contract law. In this chapter, you will study such topics as: • Laws governing contracts. • What happens when a contractual promise is broken. • When communications become a contract. • What parties have to do when changes to a contract occur. • Who has the capacity to create contracts. • How third parties benefit from contracts. Basic Concepts: This is because one enters a contract when buying a meal or a snack from a vending machine. Actually, most people contract daily for a great variety of goods and services that they purchase or lease. The rules of contract law underlie the private enterprise system at every turn. 1. CONTRACT LAW IN PRIVATE ENTERPRISE 236 A contract need not be a formal, written document, and those who make a contract do not have to use the word contract or recognize that they have made a legally enforceable promise. Still, the rules of contract law apply. If the expectations of the parties to a contract are not met, these rules affect legal negotiations and may result in a lawsuit. For instance, contract law says that a restaurant “ promises” that its food is fit to eat. Should the restaurant serve a meal that gives the buyer food poisoning, it could be liable for the injury caused by breaking its promise. Contract law enables private agreements to be legally enforceable. Enforceability of agreements is desirable because it gives people the certainty they need to rely on promises contained in agreements. For instance, a shirt manufacturer in Los
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This note was uploaded on 11/30/2011 for the course LAW 322 taught by Professor Ward-vaughn during the Fall '07 term at Clemson.

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8 - A contract involves a promise or an exchange of...

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