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Elements of a Contract and Remedies for Breach by Mind Map: Elements of a Contract and Remedies for Breach
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Elements of a Contract and Remedies for Breach

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Click on the circles with lines to access the Notes about the topic. See Doc Sharing for a printable version of the mindmap and notes.

Intent of the Parties to Contract

The parties must intend to form a contract by demonstrating a clear understanding and acceptance of the terms of the contract.  In other words, there must be mutual assent or a meeting of the minds. One party (offeror) will make an offer which another party (offeree) will accept.

Object of the Contract

The object of the contract must be lawful (legal).  A contract to commit an illegal act cannot be valid. Unfortunately, you cannot seek damages if someone were to breach a contract they formed with you to commit robbery.  Sorry everyone.

Capacity of the Parties to Contract

Parties must have the ability to perform the act that they have agreed to perform. If a party is not a position to fulfill his or her part of a contract, there is no contract.  If you contract to buy 100 pounds of gold from Fred today, but Fred is not in possession of 100 pounds of gold today, no contract has been formed.  Fred does not have the capacity to perform his part of the contract; therefore, no contract has been formed.

Consideration

A contract must have consideration.  Consideration is as simple as quid pro quo (this for that).  Parties must exchange something in order to form a contract.  This something is payment, and payment can come in the form money, a promise to do something, or a promise not to do something.  As long as one party is exchanging something in return for something else, you have consideration.  Each party receives a benefit from the exchange.

Appropriate Form

In order for a contract to be valid, it must be in the correct form.  Some types of contracts must be in writing, but other types can be agreed upon orally.  Before entering into a contract, be sure to find out what form is necessary in order for the contract to be legally binding.

Breach and Damages

When a contract is breached, the injured party may seek the following damages: Nominal Damages: You were not really impacted too much by the breach, and you really just want to make a point by asking for a minimal amount of money.  "I will teach you a lesson." Compensatory Damanges: You are a little more injured and have some monitary loss or out-of-pocket expenses.  "Are you going to pay me for my lost wages"? Punitive Damages: You are going to punish the breaching party for their wrongful behavior.  "I am going to make an example out of you and make sure you don't do this to anyone else." Punitve Damages = Exemplary Damages. Incidental Damages: You have incurred expenses as a result of the breach, like filing a law suit.  "I will make you reimburse me for my filing fee and court costs and any other reasonable expenses." Consequential Damage:You have lost money as a consequence of the breach.  "You know you will have to reimburse me for these lost profits." Don't forget about Specific Performance.  This is an equitable remedy only.  The court will order the breaching party to perform his or her part of the contract when damages will not compensate the injured party.