6. Contract Law
A contract is defined as an agreement between two or more parties that is enforceable by law. There are three required elements of a contract: offer, acceptance, and consideration. An offer is a proposal made to demonstrate an intent to enter into a contract. Acceptance is an agreement to be bound by the terms of the initial offer. Consideration occurs when one person promises something in order to get a promise back from another person. For example, Lily promises to give Jagmeet $50.00 in exchange for a backpack he is selling. This mutual exchange binds the parties together.
Generally speaking, contracts are a form of private law because the terms of the contract are binding on the parties to the contract and no one else. Parties may enter into contracts for whatever they wish and under any terms that they agree on. In other words, parties may assent to agreements even if those agreements represent bad bargains.
It is important to recognize that contract law performs three significant economic functions:
- It helps individuals and businesses exchange goods and services efficiently.
- It reduces the costs of economic transactions because parties do not need to negotiate a variety of rules and terms with each separate transaction.
- It alerts the parties to problems that have arisen in the past, making it easier to avoid potential pitfalls.