contract

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Contract

A term of reference describing a unit of trading for a financial or commodity future. Also, the actual bilateral agreement between the buyer and seller of a transaction as defined by an exchange.

Contract

1. A legal agreement between two parties in which each agrees to do, make, buy, or sell a good or service, or in which one party grants a right or undertakes an obligation, often in exchange for a fee. A contract is less commonly called a binding agreement. See also: Option contract, Futures contract.

2. Informal for a unit of trade in options and futures.

contract

1. In futures trading, an agreement between two parties to make and take delivery of a specified commodity on a given date at a predetermined location.
2. In options trading, an agreement by the writer either to buy (if a put) or to sell (if a call) a given asset at a predetermined price until a certain date. The holder of the option is under no obligation to act.

contract

a legally enforceable agreement between two or more parties generally relating to a TRANSACTION for the purchase or sale of inputs, goods and services. A contract involves obligations on the part of the contractors which may be expressed verbally or in writing. Formation of a contract involves one party making an offer to the other party which must then be accepted by the latter party. For example, one firm may offer to supply a product to another company at a given future date and on specified terms. In return, the latter company would agree to pay a specified sum of money as consideration for the product to be supplied. Both parties would then be legally bound to honour their agreement to sell and to buy the product. In the event of either party failing to comply with the terms of the contract the other party could seek damages for breach of contract through the courts.

A complete contract stipulates each party's responsibilities and rights for every contingency that could conceivably arise during the transaction. Such a complete contract would bind the parties to particular courses of action as the transaction unfolds, with neither party having any freedom to exploit weaknesses in the other's position. It is difficult to develop complete contracts since parties to the contract must be able to specify every possible contingency and the required responsibilities by the contracting parties; stipulate what constitutes satisfactory performance; make the contract enforceable; and have access to complete information about circumstances surrounding the contract.

In practice, most contracts are incomplete contracts in which precise terms of the contract cannot be fully specified. In such situations, one or other parties to the agreement may be tempted to take advantage of the open-endedness or ambiguity of the contract at the expense of the other party. See ASYMMETRICAL INFORMATION, MORAL HAZARD.

In addition to contractual relationships between a firm and its external suppliers/ customers, organizational theorists have paid particular attention to the role of contracts in the internal relationship between the employees (‘agents’) and owners (‘principals’) of a company in running the business. See PRINCIPAL-AGENT THEORY entry for details. See also CONTRACT OF EMPLOYMENT.

contract

a legally enforceable agreement between two or more people or firms generally relating to a TRANSACTION for the purchase or sale of goods and services. Contracts may take a standardized form, with the same conditions of exchange being applied to every one of a large number of contracts, for example, airline ticket contracts. Alternatively, contracts may be lengthy and complicated because they are carefully tailored to a specific transaction such as the contract to build an office block for a client.

A complete contract stipulates each party's responsibilities and rights for every contingency that could conceivably arise during the transaction. Such a complete contract would bind the parties to particular courses of action as the transaction unfolds, with neither party having any freedom to exploit weaknesses in the other's position. It is difficult to develop complete contracts since parties to the contract must be able to specify every possible contingency and the required responses by the contracting parties, to stipulate what constitutes satisfactory performance, to measure performance, to make the contract enforceable and to have access to complete information about circumstances surrounding the contract.

In practice, most contracts are incomplete contracts in which the precise terms of the contract relating to product specifications, supply or delivery terms cannot be fully specified. In such situations, one or other parties to the agreement may be tempted to take advantage of the open-endedness or ambiguity of the contract at the expense of the other party. See ADVERSE SELECTION, MORAL HAZARD,ASYMMETRY OF INFORMATION, ASSET SPECIFICITY.

contract

A legally enforceable agreement. Its requirements are

• Competent parties
• Subject matter
• Legal consideration
• Mutuality of agreement (also called “meeting of the minds”)
• Mutuality of obligation

As a general rule, oral contracts are enforceable unless they relate to real estate or are incapable of performance within one year, guarantee the debts of another, or are evidenced by some writing signed by the person sought to be charged (“This is to confirm our agreement…”) There are other exceptions, but they are not relevant here. It is often difficult to enforce oral contracts because the parties usually have differing recollections of the exact terms of the agreement.

References in periodicals archive ?
(10) It was only during the Middle Ages, when the natural lawyers placed particular emphasis on the value of promise-keeping, that developments took place which proved decisive for the creation of a "unitary," as opposed to a "fragmented," law of contract. As Reinhard Zimmermann stated, "[T]he modern general law of contract has essentially been developed by the natural lawyers, and our conceptual apparatus has thus been devised within the last three centuries." (11)
These influences also extended to the law of contract. The accommodation of two major legal traditions in one system created a serious need for scholarship setting out this mixture in a structured manner.
By then, the basic principles of private law, including the law of contract, had been set out in works by Sir A.F.S.
It is not possible to consider the details of the respective internal arrangements of the general principles of the law of contract in all the early South African and contemporary English works, but we may at least focus on the following significant developments.
The third main development in the structural representation of the early South African law of contract is the arrangement of the material relating to the consequences and termination of contractual obligations.
The government uses the law of contract at its own risk, binding itself to attain its benefits along with its costs.
An argument that has been advanced in favour of a public law of contract is that the government's responsibility for public policy differentiates the Crown from private contracting parties ...
1 take issue, however, with the use of public law remedies deriving from the common law and the prerogative jurisdiction of the courts as a means of avoiding the ordinary law of contract. I will return later in this comment to the subject of when it is appropriate to apply public law principles.
My recent book, Contracts, (24) explains how and why discerning the existence and meaning of that consent comprises the core of the law of contract. Whereas the duties enforced by tort law may or may not be a product of the consent of the person on whom they are imposed, every contract begins with the consent of the parties.
In effect, Fried must consider most of the actual law of contract to be noncontractual because it is not based on promise.
This would not have solved his basic problem, however, unless he conceded that there was not one, but two "promises": the promise to perform, and the promise to be bound by the default rules supplied by the law of contract. This second commitment is not really a promise; it is simply the consent to be legally bound.
According to Fried, "[t]he law is really an independent, distinct part of the structure of value." (54) According to Fried, "[t]he lofty philosophical edifice does not determine what the last twenty feet are, yet if the legal foundation is to support the whole, then ideals and values must constrain, limit, inform, and inspire the foundation--but no more." (55) On this account, if the institution of "promise" lies within the realm of philosophy, as it clearly seems to in Contract as Promise, then Fried's metaphor instructs that it is "independent" from and "does not determine" what constitutes the actual law of contract.

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