A contract is a legally enforceable agreement between two or more parties where each assumes a legal obligation that must be completed. Many aspects of daily life involve contracts, including buying property, applying for a car loan, signing employment-related paperwork, and agreeing to terms and conditions when buying products and services or using computer software.

Legal issues involving contracts arise most often when one party fails to perform the legal obligation it has agreed to do. When a party breaches a contract by failing to perform, the other party can often sue for money damages, or, in some limited cases, can ask the court to force the other party to perform as promised.

Contracts can also be the source of legal disputes when they are not written clearly. Parties who misunderstand the terms of their agreement may sue each other and have a court settle the argument. Additionally, when a company signs a contract and later goes out of business or is unable to fulfil its promises, the other party may have to pursue legal action in civil or bankruptcy court to obtain relief.

Contract – An agreement between two or more parties that creates in each party a duty to do or not do something, and the right to performance of the other party’s duty or a remedy for a breach.

Breach – Failure to perform an obligation created by a promise or contract, without justification or excuse.

Performance – The action or omission required to fulfil a promise or obligation.

Specific Performance – An equitable remedy that requires a breaching party to fulfil the exact terms of the contract; used when monetary damages are insufficient or inadequate, such as for the breach of a sale of real estate.

Offer – A proposal for an agreement that another party may accept upon receipt to form a legally binding contract.

Acceptance – An approval, often required to be in writing, of an offer that forms a legally binding contract.

Statute of Frauds – A state law that does not allow certain contracts to be enforced unless they are in writing.