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Contracts

This is a general discussion of contract law in Washington.  The focus of the discussion is on agreements between individuals.  Contracts involving businesses may have additional requirements than those described below.  Business contracts must also comply with Washington's Consumer Protection Act.

Simply stated, a contract is an enforceable promise.  The law of contracts covers what makes the promise enforceable and how a contract can be enforced.  That law has evolved over hundreds of years, primarily through case law (the common law).  Because of this, you will not find the main body of Washington's contract law codified in the Revised Code of Washington.  Instead, you will find it in the cases decided by Washington's courts.  Some major exceptions to this are codified in the provisions of the Uniform Commercial Code (RCW Title 62A, most notably 62A.2) but those statutes are mostly limited to sales of goods.  Perhaps the best source for a detailed description of Washington contract law is volume 25 of Washington Practice, titled Contract Law and Practice by DeWolf and Allen.

An enforceable contract consists of three components:  an offer, an acceptance and consideration.  There must be at least two parties to a contract and they must agree on the essential terms to the contract.  This all seems simple enough until you put it into practice.  For example, determining whether a statement is an offer or merely an inquiry about negotiations can be difficult:  "Would you sell me your car for $1,000?" may not be considered an offer while "I will buy your car for $1,000" might be.  Under Washington's objective theory of contracts, the law asks whether a party's words or actions manifest an intention to make an offer.  Under the objective theory, the party's actual intent is not relevant.  It is whether a reasonable person in that situation would have believed an offer was being made.  The same standard is true of acceptance.  And what is "consideration"?  Consideration is the legal term for something of value that is promised in the bargain.  It may be physical property such as a car.  It may also be an action such as "washing a car" or even a promise to do something such as "wash your car every month next year."  It may even be a promise not to do something.  In addition, there must be consideration on each end of the contract.  The promise "I will give you $1,000 if I win the lottery," is unenforceable because only one party is giving anything of value.  While one party is offering $1,000, the other is offering nothing.  However, if the second party contributed to the price of the lottery purchase in exchange for the promise, the contract would be enforceable.

There is no requirement that a contract be in writing.  However, there are laws (most notably the "statute of frauds") that require certain types of contracts to be in writing.  These include contracts for the conveyance of land and contracts that take longer than one year to perform.  Regardless of whether a contract must be in writing to be enforceable, it is prudent for parties to memorialize their agreements so that they (and possibly a court of law) can determine exactly what was agreed on.

Normally, both parties to a contract perform their part of the bargain and everything works out.  However if a party fails to perform, the party is said to be in "breach" of the contract.  When a party breaches a contract, the other party often has to resort to court for enforcement of it.  There are a variety of remedies that may be available to a party suing for breach of contract.  The most common form of remedy is monetary damages.  Monetary damages can be difficult to calculate at times.  Some contracts have a liquidated damages clause in the contract that specifies the amount owing in case of a certain type of breach.  More commonly, there is no such provision.  In such instances, the amount must be determined.  In some cases, it might be the amount of money that equals what the value of the contract was--the amount of improvement if the contract had been fully performed.  A party might prove this amount by having another person perform the promised action and making a claim for the extra costs incurred by having the other person perform.  In other cases, the damages claimed might be the amount of money to put the parties back to where they were at the beginning of the contract.  This remedy is known as rescission.  Monetary damages might also be measured to prevent the breaching party from being unjustly enriched by the breach.  This unjust enrichment measure is often called restitution.  Finally, in rare instances a party might be able to force the breaching party to perform the contract.  This remedy is known as specific performance.  Generally, specific performance is not favored and will only be available if the legal (monetary) remedy is inadequate.  For example, if the property that is the subject of the contract is unique, courts may enforce the transaction embodied in the contract.

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By: editor1
Last Updated: June 7, 2012 - 12:48pm

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