Guide to Legal Contracts = Английский язык для юристов договорное право. Учебное пособие по английскому языку для студентов юридических вузов

Genuine and Free Consent

Free consent is another essential element of a valid contract. An agreement must have been made by free consent of the parties. The contract would be void in case of mutual mistakes. When consent is obtained by unfair means, the contract would be voidable.

Lawful Object

Objectives of an agreement should be lawful. It must not be illegal or immoral or opposed to public policy. It is lawful unless it is forbidden by law. When the object of a contract is not lawful, the contract is void.

Lawful Consideration

Something in return is Consideration. In every contract, agreement must be supported by consideration. It must be lawful and real.

Certainty and Possibility of Performance

The agreements, in which the meaning is uncertain or if the agreement is not capable of being made certain, it is deemed void. T&C of the contract should always be certain and cannot be vague.

Any contract that are uncertain are considered void. The terms of the agreement must also be capable of performance and should not enforce impossible act.

Legal Formalities

Legal formalities if any required for particular agreement such as registration, writing, they must be followed. Writing is essential in order to effect a sale, lease, mortgage, gift of immovable property etc. Registration is required in such cases and legal formalities in the relevant legislation should be strictly followed.

Suggested activities

Frequently asked questions

Q: What constitutes valid acceptance of a contract?

Ans: Valid acceptance is an acceptance that is unconditional and not qualified. It also has to be communicated in a way that is clear and concise. Further, both parties must be able to understand the terms of acceptance without difficulty.

41

Q: How do you avoid ambiguity in a contract?

Ans: Parties must create a contract that truly reflects both parties’ wishes. Ultimately, a contract is a meeting of the mind. To help increasethechancesofsuccess,thereshouldbeachecklistofclausesand terms that the agreement should include.Avoiding ambiguity iscrucial as contracts are construed against the person who drafted them.

Q: Is a contract entered by an Intoxicated person valid? Ans: To be valid, a contract must be entered into by individuals

with capacity. This is because it has a significant impact on the extent to which an individual understands the terms of the contract. Whether or not such a contract is valid depends on whether the intoxication actually impaired the person's ability to make a legitimate offer or acceptance. If it did impair the person's ability, the contract will in turn become voidable. Note that voidable contracts are not the same as void contracts: the intoxicated individual will have to take action to revoke the contract to make it invalid.

VOID CONTRACTS AND VOIDABLE CONTRACTS

Definition of Void Contract

Avoid contract is a contract, which is not enforceable in the court of law. At the time of formation of the contract, the contract is valid as it fulfills all the necessary conditions required to constitute a valid contract, i.e. free consent, capacity, consideration, a lawful object, etc. But due to a subsequent change in any law or impossibility of an act, which are beyond the imagination and control of the parties to the contract, the contract cannot be performed, and hence, it becomes void. Further, no party cannot sue the other party for the non-performance of the contract.

The contract becomes void due to the change in any law or any government policy for the time being in force in India. Along with that, the contracts which are opposed to public policy also ceases its enforceability. Contracts with incompetent persons are also declared void like minor, persons of unsound mind, alien enemy or convict, etc.

42

Definition of Voidable Contract

Voidable Contract is the contract which can be enforceable only at the option of one of the two parties to the contract. In this type of contract, one party is legally authorized to make a decision to perform or not to perform his part. The aggrieved party is independent to choose the action. The right may arise because the consent of the concerned party is influenced by coercion, undue influence, fraud or misrepresentation, etc.

The contract becomes valid until the aggrieved party does not cancel it. Moreover, the party aggrieved party has the right to claim damages from the other party.

Examples of void contract

■A promises B to sell his horse after one month to B for Rs. 50,000. Before the completion of one month, the horse died. Now, the contract becomes void as the contract cannot be performed, i.e. the object on which the parties agreed is no more, so there is an impossibility of performance of the contract. This type of Contract is known as Void Contract.

■TeenaagreestomakeanartisticpaintingforJoseph,foradequate consideration. After a few days, Teena dies in a road accident. As the contract becomes impossible to perform. It becomes a void contract.

Examples of voidable contract

■X says to Y, that he should sell his new bungalow to him at a nominal price otherwise, he will damage his property andYenters into a contract due to fear. In this situation, the contract voidable as the consent of Y is not free, so he has the right to avoid the performance of his part.As well as he can claim for any damages caused to him.

■“A” threatens “B” with dire consequences unless “B” enters into a contract to sell a piece of land to “A” at Rs. 1. In this case, the contract to sell the land is voidable at the instance of “B” and “B” can choose to either sell the land to “A” at the agreed price or avoid the contract by approaching a Court of law and getting the contract to be declared void.

43

What is the difference between Void and Voidable Contract?

1)The primary distinction between a Void and Voidable Contract is that the former is illegal and invalid from its creation while the latter is a legal contract but may become invalid if one party opts to cancel or revoke the contract.

2)A Void Contract is unenforceable by law and the law does not recognize its existence at any point in time. This means that the performance of a Void Contract is impossible.

3)Further,aVoidContracttypicallyreferstocontractsthatinvolve illegal activity or the performance of some illegal act, or contracts that were entered into by persons who lacked the capacity to contract (for example, minors).

4)In contrast, a Voidable Contract is valid in law and enforceable by the parties to the contract. Thus, the performance of the contract is possible. Such a contract becomesVoidable only if one party chooses to reject or cancel the contract based on some defect within the contract. Such defects refer to instances where the contract was made on grounds of fraud, misrepresentation, duress or undue influence, or contracts that were made based on a mutual mistake of fact.

Suggested activities

Frequently asked questions

Q: What are void contracts?

Ans: Void contracts are formal agreements that are fundamentally unenforceable. This is usually because the agreement hasn't fulfilled the necessary requirements for it to be a legally-binding contract.

Q: How do you cure the defects of a voidable contract? Ans:The defects of unenforceable contracts can get cured through

the process of ratification. However, it can only happen when the parties agree to follow the new terms of the contract.

Q: What are voidable contracts in insurance?

Ans:When the policyholder fails to make premiums, holds higher risk, or represents false facts, the contract turns voidable. Also, mistakes from the insurer’s side can lead to unenforceable contracts.

44

Q: Can voidable contracts be ratified?

Ans:Yes, parties can ratify the contract. Ratification is a legal procedure where parties shed down the old terms and agree to the new ones. Contracts under breach, fraud, threat, coercion, or undue influence can get ratified.

Q: How might a voidable contract become valid?

Ans: The only way to make a voidable contract valid is when the partieswiththepoweragreenottorejectthecontractdespitethefaults.

Give answers using the previous information:

1)  I was sent a copy of the contract to review it before singing. But in the contract I don’t see the clear price for my work. Shall I sign it? If not what should I undertake?

2)  We’ve come to mutual agreement, but the other party claims the obligations are ambiguous. Can we pursue on drafting the contract?

3)  I’m 15. Can I enter into any contract? 4)  We’ve signed the contract. What next?

5)  I want to make alterations to the previous offer. Is it possible?

45

UNIT 8

T Y P E S O F C O N R A C T S

Part II

UNCONSCIONABLE CONTRACTS1

Definition Of Unconscionable Contracts

An unconscionable contract is one that is unjust or unduly one-sid- ed in favor of the party who has the superior bargaining power. The adjective unconscionable implies an affront to fairness and decency. An unconscionable contract is one that no mentally competent person would accept and that no fair and honest person would enter into. Courts find that unconscionable contracts usually result from the exploitation of consumers who are poorly educated, impoverished, and unable to shop around for the best price available in the competitive marketplace. The majority of unconscionable contracts occur in consumer transactions. Contractual provisions that indicate gross one-sid- edness in favor of the seller include limiting damages or the rights of the purchaser to seek court relief against the seller, or disclaiming a warranty (i.e., a statement of fact concerning the nature or caliber of goods sold the seller, given in order to induce the sale, and relied upon by the purchaser).

Unconscionability is ascertained by examining the circumstances of the parties when the contract was made. This doctrine is applied only where it would be an affront to the integrity of the judicial system to enforce such a contract.

1  unconscionable contract – фальшивый, кабальный, недобросовестный договор/контракт

46

Examples of unconscionable contract

  Whenonepartyisanexperienceddealerinacertaintypeofbusiness and the other party is an average customer. For instance, suppose that the business healer required the customer to sign a contract. Suppose that, in that contract, the business dealer buried very complex and technical language that most ordinary individuals would not understand or recognize. Suppose the business dealer used a very small font and inserted the clause insuch a way that it would purposefully mislead the consumer into signing a contract that contained unfair terms.

In this example, the contract may be declared unconscionable due to the unequal bargaining power between the two parties as well as the fact that one party used their knowledge and experience to take advantage of another party. If the court deems the contract unconscionable, it will be declared unenforceable and void.

Watch the video “What is an Unconscionable Contract”

https://www.youtube.com/watch?time_continue=46&v=o2HgfE1FJJ0&embeds_euri=https%3A%2F%2Fmoviecultists.com%2F&- source_ve_path=MjM4NTE&feature=emb_title

Essential Elements of an Unconscionable Contract

A contract can be unconscionable in any one of the following circumstances:

1)  Undue influence

2)  Duress

3)  Unequal bargaining power

4)  Surprise

5)  Limiting warranty

Undue influence could occur if one party puts significant pressure on the other party to sign the contract. This could involve the superior party making false promises, or trying to persuade the other party into signing the agreement.

Duress occurs when one party threatens the other party.The threat itself might be physical or verbal, and could be a threat to injure the other party, his family, or friends.

47

Unequal bargaining power, as previously noted, occurs when one party has a significant advantage over the other party, due to age, intelligence, or knowledge.

Surprise occurs when one party includes terms unknown to the other party. This could include technical jargon, small font, or even adding in terms and provisions after the other party already signed the agreement.

Alimiting warranty would cause a contract to be unconscionable if one of the parties tries to limit their liability to a breach of contract. It would also apply if the party tried to limit their liability to any damages that they may cause.

ADHESION CONTRACTS1

Adhesion contracts are those that are drafted by the party who has the greater bargaining advantage, providing the weaker party with only the opportunity to adhere to (i.e., to accept) the contract or to rejectit.(Thesetypesofcontractareoftendescribedbythesaying“Take it or leave it.”)They are frequently employed because most businesses could not transact business if it were necessary to negotiate all of the terms of every contract. Not all adhesion contracts are unconscionable, as the terms of such contracts do not necessarily exploit the party who assents to the contract. Courts, however, often refuse to enforce contracts of adhesion on the grounds that a true meeting of the minds never existed, or that there was no acceptance of the offer because the purchaser actually had no choice in the bargain.

Examples of adhesion contract

  Meghan needed to buy software to ensure that she could keep up with all of her office tasks while also coordinating with the other project personnel. However, the software included a potentially dangerous condition that allowed the employer to take a screenshot of the

1  adhesion contracts – договор на основе типовых условий; договор о присоединении; контракт присоединения; согласительный контракт

48

system whenever they wanted.As a result, control would remain in the hands of the project manager. Meghan had no choice but to accept the terms to keep working.As a result, the agreement might be considered an adhesion contract example.

Adhesion Contract Examples

Suggested activities

Frequently asked questions

Q: What is an adhesion contract?

Ans:An adhesion contract is a non-negotiable agreement between a business and its consumers, with the former having greater bargaining power to determine the terms and clauses that benefit them. There is no opportunity for negotiation between the parties. As a result, the agreement is a “take it or leave it” situation. These contracts cover insurance policies, lease and rent agreements, vehicle and software purchases, mortgages, and other services that many people utilize.

Q:Are adhesion contracts enforceable?

Ans: An adhesion contract shields businesses and their customers from legal entanglements while saving time and money. Because these agreements are not prohibited, they are frequently regarded as legally binding. However, the court retains the right to determine whether the contract’s provisions are fair and enforceable due to jurisdictional disparities, changes in the adhesion contract law over time, and unequal negotiating power. These are enforceable in the United States under the Uniform Commercial Code (UCC).

49

Q: What are the factors used for adhesion contract scrutiny? Ans: The Uniform Commercial Code (UCC) ensures that the adhesion contract terms are as per the standards followed for all commercial transactions across the country. The terms’ conscionability is also determined by their prominence, intent, and circumstances.The standard form contract is scrutinized under the UCC and scored on the

following criteria:

  Any possibility of unfair surprise  The nature of the contract

  Contract language difficult to understand for non-legal person-

nel

  Obligation imbalance in the agreement  Lack of notifications

  The exploitation of the weaker sections of the society, like the underprivileged, uneducated, etc.

  Inconsistent terms  Possibilities of fraud

ALEATORY CONTRACTS1

An aleatorycontractis amutualagreementtheeffectsof which are triggered by the occurrence of an uncertain event. In this type of contract, one or both parties assume risk.Afire insurance policy is a form of aleatory contract, as an insured will not receive the proceeds of the policy unless a fire occurs, an event that is uncertain to occur.

Examples of aleatory contract

  One example of an aleatory contract is a home insurance contract. Although both parties (the insurer and the insuree) have both

1  aleatory contract – алеаторный договор; рисковый договор (соглашение, исполнение которого зависит от наступления обстоятельств, которые неизвестны сторонам договора при его заключении. Для данных договоров характерна невозможность сторон рассчитать выгоду либо убытки на стадии подписания (например, договоры страхования, ренты, соглашения в рамках пари и азартных игр).

50