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Let's Shake on it: Elements of a Contract

Let's Shake on it: Elements of a Contract

Unfortunately, it seems that the day has long passed where being “a man (person) of your word” meant something. Have you ever wondered what you could do if somebody doesn’t fulfill their obligations? For me, to explain all the aspects of suing for a breach of contract would take up a lot of space. Contracts is a single class in law school, with many offshoots. However, the essential aspect of pursuing a breach of contract, is ensuring you have a contract that you can enforce. 

First, one must understand there are certain contracts that must be in writing to be enforceable. In general, some of the types of agreements that must be in writing include: those involving: the sale of an interest in real property (land and buildings), the sale of goods in excess of $500 (if it falls within the Uniform Commercial Code or UCC), leases of real property in excess of one year, residential construction and home improvement contracts and certain other specific types of agreements.

Now if the contract is in writing or is the type that need not be in writing, what must you prove to enforce the contract? In short there must be 1) an offer, 2) an acceptance and 3) exchange of consideration. By consideration we mean one side must be giving something in exchange for getting something. Thus, a gift given or a promise to do something without receiving consideration back, is not an enforceable contract. Although, depending on the circumstances a promise can be enforced, the law of the contracts includes very specific elements that must exist if you are to enforce an agreement.

The Restatement 2d of Contracts defines a contract as “a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.” Formation of a contract requires “a bargain in which there is a manifestation of mutual assent to the exchange and a consideration.” Restatement 2d of Contracts, § 17 (2nd ed. 1981). 

The elemental aspects necessary to give rise to an enforceable contract are "offer", "acceptance", "consideration" or "mutual meeting of the minds." Schreiber v. Olan Mills, 627 A.2d 806, 808 (Pa. Super. Ct. 1993). There must be a meeting of the minds on all terms in a contract. Onyx Oils & Resins Inc. v. Moss, 367 Pa. 416, 420, 80 A.2d 815, 817 (1951). A meeting of the minds requires the concurrence of both parties to an agreement, or they have failed to operate an enforceable contract. DOT v. Pa. Indus. for the Blind & Handicapped, 886 A.2d 706, 713 (Pa. Commw. Ct. 2005). 

It is important to note that the phrase ‘meeting of the minds’ does not require a literal meeting, as the two parties do not need to have identical thought processes at the time of the bargain. 1-2 Murray on Contracts § 31 (2011). The use of such a standard would be unworkable, as it would be impossible to prove the subjective intention of either party at any time. Id

Under Pennsylvania law, the test for enforceability of an agreement is “whether both parties have manifested an intention to be bound by its terms and whether the terms are sufficiently definite to be specifically enforced.”Channel Home Centers, Div. of Grace Retail Corp. v. Grossman, 795 F.2d 291, 298-99 (3d Cir. 1986). Specifically, Pennsylvania uses a three-part test to determine whether a contract is enforceable: 1) whether both parties manifested an intention to be bound by the agreement; 2) whether the terms of the agreement are sufficiently definite to be enforced; and 3) whether there was consideration. Jenkins v. City of Schuylkill, 658 A.2d 380, 384 (Pa. Super. Ct. 1995). Except for when the law requires a written contract, the lack of a written agreement would not prevent a contract from being enforced, so long as the parties agree upon essential terms and intend them to be binding, "a contract is formed even though they intend to adopt a formal document with additional terms at a later date.” Johnston v. Johnston, 499 A.2d 1074, 1076 (Pa. Super. Ct. 1985). 

Hopefully, you have more information to enforce an agreement you have entered into with a person who is not a person of their word; whether it evolve from the purchase of used car listed in the newspaper or the brother in law who backs out splitting the cost of a family vacation. Hopefully, neither of those have or will occur to you, but if they do you will have a better understanding of what you need to have in order to enforce a contract when the person is not living up to their agreement.

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