Chapter 3: The Nature of Contracts

Executed

Both parties to the agreement have fully performed in accordance with the contract's terms. It is fully executed only after the contractor has satisfactorily completed the construction work in accordance with the contract documents, and the owner has paid the contractor for this work.

Several, Separate, or severed

Each party has a liability that is separate from any of the other parties

Litigation

If the parties cannot resolve a dispute, it is common for one of the parties to file a lawsuit against the other party. This is the beginning of a formal litigation in which court decision may ultimately have to be made that is binding on both parties.

Joint Arrangement

One in which the individuals are "joined," in a legal and liability sense, as one party in the action. They are united and undivided and will be treated as such. If one of these individuals is released from an obligation, this has the effect of releasing all the other persons as well. example of wording: "We, Thomas, Carlos, Patrick, Joan, Paris, jointly promise to pay for work to be performed by...."

Express Contract

One in which the terms of the agreement, whether verbal or written, are CLEAR, CONCISE, EXPLICIT, AND DEFINITE. Most construction contracts are are express.

Unilateral Contract

One-sided contract in that only one of the contracting parties makes a promise, while the other party exchanges something other than a promise, most commonly some stated performance. The actions of the other party may substitute for a promise. Example: A landscaping subcontractor might say to the contractor, " I will sell you 100 landscaping railroad ties for $6 each." If the contractor send the subcontractor a check for $600 for those ties, a contract was formed unilaterally. NOTICE: that the contractor was in sole control over whether a contract would be made.

Executory

When some portion of the agreement remains to be done. It may be executory on the part of both parties, or it may be executory on the part of only one party. A construction contract is still executory if the owner has not paid for the work. A contract that is entirely executory on the part of both parties is easier to cancel than is one in which both parties have performed at least a portion of their obligations.

Counteroffer

When the acceptance is unqualified, and unconditional. Once a party has made a counteroffer, the acceptance of the original offer is no longer possible without the specific approval of the person who originally made the ofer.

Unreality of Consent pg 33

cause for nullifying a contract when there is no meeting of the minds.

Assignment

refers to transfer. Assignment occurs when one party to an agreement transfers the rights or obligations of the agreement to another party who was not originally involved in the agreement, but become involved only after the assignment was made.

General Rule of contract

if a party does not comply with the terms of a contract, that party has breached the contract.

Consideration

something of value. It is the primary reason or main cause for a person to enter a contract. It is something of value received by one of the parties in exchange for another item or action that is of value. Courts have ruled that the surrender of ones rights can fulfill the requirement of consideration. Ex: an offer to pay someone not to get married can lead to a biding contract upon schedule.

Meeting of the Minds

the contracting parties agree on the basic meaning and legal implications of the contract. IF THE MEETING OF THE MINDS IS NOT ACHIEVED, THE PARTIES SIMPLY DO NO ENTER THE CONTRACT.

Sovereign Immunity

the government entity cannot be sued without consent. is a legal doctrine by which the sovereign or state cannot commit a legal wrong and is immune from civil suit or criminal prosecution.

Requirement of a contract is for them to constitute LAWFUL SUBJECT MATTER

the subject must be definite and clearly defined. It cannot violate any fundamental dictates of common law.

Offer

when one person signifies to another person a willingness to enter into a binding contract on certain specified terms. This party (offerer) confers on the 2nd party (offeree) the power to create a binding contract by accepting the stated terms. Note: Once the offer has been made, is it revocable as long as it has not been accepted IN CONSTRUCTION CONTRACTS: the offer is the bid submitted to the owner.

Bilateral Contract

Consists of an agreement created by mutual promises made by the contracting parties. In this type of contract, each party plays two roles: promisor and promisee In other words, promises are exchanged. Example: Most construction contracts are bilateral in that the contractor promises to perform the construction work as specified, and the owner promises to pay a stated amount.

Acceptance

Creates the contract! provided that it is made in the manner and at the time specified in the offer. Note: If an acceptance is send through the mail, it is considered made at the date of the postmark.

Implied Contract

An agreement created by actions of the parties involved, but it is not written or spoken. This is a contract assumed to have been drawn. In this case, there is no written record nor any actual verbal agreement. A form of an implied contract is an implied warranty provided automatically by law.

Contract

It assigns risk! An agreement, usually between two parties, that is enforceable by law. Ex: Insurance policy, particularly a life insurance policy, in which a third party is named as the beneficiary.

Estoppel

a principle by which a contract becomes binding in spite of the fact that no formal agreement was made between the parties concerned. This matter arises when there is an implied agreement. ex. you pay for a movie, and you expect to see the movie. But, the movie is not shown....a refund should be issued.