Legal Information for Entrepreneurs
Contract Basics
Written by Samuel Muriithi for Gaebler Ventures
Contracts are of many types with most common classifications being the formal or simple, express or implied, and the unilateral or bilateral types. What do these classifications involve and what is implied by breach of contract and assignment of contract?
In an expressed contract the agreement terms are specified either in writing or verbally.
A formal contract is prepared in a certain designated manner and it must include specified components. The only way by which it can become negotiable is if the specified requirements are met. On the other hand, a simple contract is structured in any manner and it has no specified requirements provided that all the components have been included. Going by this definition, all types of contracts are either formal or simple. Most are simple though.
The implied contract is different in that it is the party's conduct that shows the intent. Only when a certain action is performed by this party can the contract be established.
In the unilateral contract it is only upon the performance of a requested action that an offer is accepted. The onus is on a single party. The bilateral contract is established when two parties have exchanged commitments or promises.
When breach of contract occurs the non-breaching party becomes entitled to a number of rights often referred to as remedies. Such include cancellation or rescission, monetary damages suits, restitution, and the demand for specific performance.
The afflicted party in a breach of contract has a right to cancel or rescind the contract. In cancellation the agreement is voided but damages may be sought. The decision to rescind means that both parties are returned to the pre-agreement state and that no damages are claimed.
In a breach of contract settled by a suit for monetary damages, the injured party sues the non-injured party and is awarded an amount of money that is enough to restore them to the non-breach position. A breach of contract settled by a demand for specific performance sees the injured party force the opposite party to fully comply with the terms specified in the contract agreement. Restitution is whereby the injured party can enforce the return of something that was delivered as part of the contract.
Assignment of contract implies the transfer of contractual rights to a new party i.e. one that wasn't part of the initial agreement. This is usually possible unless where the contract terms specifically forbid such an assignment, where the non-assigning party's level of risk is increased, and where the contract terms are personal in nature such that they can't be equally delivered by another party.
Samuel Muriithi is a business owner in Nairobi, Kenya. He has extensive international business experience in the United States and India.
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