Definitions.—A contract is an agreement between two or more parties, containing on the one hand an offer and on the other an acceptance.

Contracts are express or implied. An express contract is one whose terms are definitely stated in words; an implied contract is one whose terms are understood from the circumstances. A written contract is express; an oral contract may be express or implied.

Fundamental Principles.—Every one able to contract is free to enter into any agreement not forbidden by law. Every such person is bound to fulfill every legal contract that he makes.

Essential to a Contract.—To be binding, however:

1. A contract must be to do a lawful act.

Most contracts are permitted by law. But a contract the carrying out of which is recognized as subversive of justice, morality, or the general welfare, is illegal, and therefore void.

2. The thing contracted to be done must be possible in its nature.

That a person finds it impossible under the circumstances to live up to his contract should not and does not release him from responsibility.

3. The parties to the agreement must be competent to contract.

Persons not able to contract are minors, lunatics, idiots and drunk people, and married women (except in some states in relation to their separate estates). The purpose of this arrangement is to protect those who cannot protect themselves. A minor may, however, enforce a contract if he chooses to do so. A contract with a minor for the necessaries of life, when they are not or cannot be furnished by a parent or guardian, is valid. And any contract ratified by a minor after coming of age is binding upon him. A person unable to contract personally cannot contract through an agent. But he may act as an agent.

4. The parties to the contract must assent to it.

The assent must be voluntary. It may be given by words, by acts, or by accepting the benefits of the offer. If acceptance is by letter, the contract is complete when the letter of acceptance is mailed. The parties must assent to the same thing. Assent imposing a new condition is no assent.

5. The promise must be for a consideration.

The law will not compel a person to give something for nothing. But the amount of the consideration is usually unimportant, so long as it is reasonable. Anything is a consideration which is of benefit to the person promising or of loss or inconvenience to the other. An illegal consideration is, however, not a consideration; nor is the performance of a moral duty, nor the doing of what would be a legal duty without the promise in question. If the consideration fails, the contract fails. One has no right to sue on a contract unless he has performed or offered to perform his part.

6. The contract must be made without fraud.

Fraud may be practiced in two ways, by making statements known to be false or by concealing facts that ought to be revealed. But if the parties meet on equal terms, with the same sources of information, and if nothing is done to conceal faults, there is no fraud in law. "Let the buyer beware," is an ancient maxim, and a buyer must exercise reasonable diligence and prudence. Fraud absolves the injured party, but the defrauding party may be held to the contract; that is, the contract is voidable at the option of the party deceived.

7. Some contracts must be in writing.

The principal classes of commercial contracts which must be in writing to be binding, are: (a) agreements for the sale of property of more than a certain value; (b) agreements of guaranty; (c) agreements not to be performed within a year.

In the famous English "Statute of Frauds," which is the basis of the American local statutes on matters referred to in this section, the value of personal property requiring written contract was ten pounds or fifty dollars. In the United States the value varies in different states from $30 to $200. But if part of the property is delivered or part of the purchase money is paid the whole contract is binding, even if not in writing.

A guaranty is an agreement by which a person warrants that a certain third person shall duly perform an engagement. Thus if A obtains goods from B upon the assurance of C that they will be paid for, C is said to guarantee the debt.

A contract which may be performed within a year does not come under the statute, even if such performance seems improbable at the time of making the contract.

The style of the writing is immaterial—it may be formal or informal, in ink or pencil. It may be made by the principal or by his agent.

Pertinent Questions.

How are the laws—legislative enactments and decisions of the Supreme
Court—made public? Why are they thus published?

Tell whether the following agreements are valid contracts or not, and why:

1. An agreement to print a libel. A lease of a house for gambling purposes. A contract executed on Sunday. A contract for work to be done for five consecutive days, beginning on Friday. How would it affect the case if the work were the removing of goods from a building in imminent danger of falling? The agreement of a tinsmith never again to work at his trade. His agreement not to work at it within a specified time or in a certain town.

2. An agreement to swim across the ocean. To pay for a horse at the rate of one kernel for the first nail in the horse's shoes, two for the second, four for the third, eight for the fourth, and so on. To deliver goods at a certain time, though the delivery at the proper time may be prevented by some accident. Is a person released from responsibility by sickness?

3. An agreement by an orphan to pay for necessaries at some future time. If the price charged is exorbitant, is he bound to pay it or only a fair market price? A man while drunk buys a horse for which he has no use, but after becoming sober continues to use the horse. If the price is excessive, how much must he pay? When a married women buys goods on credit, is she acting as the principal or as her husband's agent?

4. An order for goods to be sent to a man's house, nothing being said about payment. An offer retracted before acceptance. An offer for a certain horse; an acceptance under the impression that a different horse is meant. A service permitted though uninvited; give an example. A man in St. Paul offers by letter a certain piece of property at a certain price to a man in Chicago; an hour after mailing the letter he changes his mind; how can he prevent a contract?

5. A agrees to give B $25 for a silver dime. But if this particular dime were of a rare kind and desired by A, a wealthy coin collector, to complete a set, would the consideration be sufficient? An offer shouted from a fourth story window just as the roof is about to fall, in consequence of which offer a fireman at unusual personal risk successfully attempts the rescue. An offer and acceptance for a horse which is afterwards discovered to have been dead at time of sale. A promise made under threat of spreading an infamous report. An agreement for the purpose of securing the postponement of the payment of a debt. How many "considerations" are there in a valid contract?

6. The sale of an unfashionable "ready-made" suit of clothes, nothing being said about the style. The sale of a plated watch chain, the dealer permitting the purchaser to suppose it solid gold. The sale of a blind horse, nothing being said about its sight, no effort being made to conceal its blindness, and full opportunity for examination being given to the purchaser. The sale of a house and lot at a certain price, greater than the purchaser had at first intended to give, upon the representation of the seller that he had "been offered" such a sum. The purchase of a piece of land which unknown to the vendor contains a valuable mine, nothing being said to mislead said vendor.

7. An oral order for goods to the value of $500. How does the buyer's receiving part of the goods affect the matter? How else could the contract be made binding? What position does a person assume by endorsing a note? By orally saying that a debt of another will be paid? An oral engagement made December first to work a year beginning January first.