Contract Law Understanding of Terminology

Our lives are ruled and dominated by contracts, yet so few people realise this and even worse is the fact that very few people actually realise that many things they do in everyday life is done under a contract; this document is to be deemed the starting point for people looking to gain a better understanding of contracts and contract law, and looking to learn more about the subject.

In this section we shall deal with English Contract Law which applies in England and Wales, but much of it applies to Scotland and Ireland as well as many current commonwealth countries and many former UK jurisdictions run or managed by England in past times, it also applies partially to countries such as America and other countries with their own variations and adaptations. We also have to consider that the UK are also bound by European Contract Protocols which are a set of EU legislation ratified into English law by the EU and override English Contract law, even though they are broadly similar. In different jurisdictions it is essential to verify the appropriate legislation, and in this section we will see lawful terms in both English and Latin as some will be pure English and some pure Latin, and some will have variants of both languages.
English terms will be in English and Latin terms will be highlighted in Italic text to highlight the difference, and in many cases a term can have different meanings under differing jurisdictions.

Lex mercatoria is the law of the merchants and dates back centuries; it is the basis of both English Contract Law and European Contract protocols; ECL and ECP.

Offer – this is where an offer to contract is made by one party to another party or parties.

Consideration – this is where someone has to bring something defined as “of value” to the contract and this need not be a monetary value, but it can take any form as long as it is deemed as “of equal value” by the offeror of the contract, consideration is NOT to be confused with period of consideration.

Offeror – this is someone making an offer to contract with another.
Offeree – This is the person to whom the offer to contract is made.

Period of Consideration – this is a time period of a minimum of 72 hours for an offeree to consider an offer and accept or reject that offer, and this is assumed to be sufficient time for England as they have a nominal 5 day working week and allows sufficient time for an offeree to seek legal or contractual advice from solicitors or contract experts.
Period of Consideration is NOT to be confused with consideration and if both/all parties consent the period of consideration can be longer than 72 hours.

Assumpsit – means to make an assumption.

Non assumpsit – means to not make an assumption.

Misrepresentations – these are when a party or parties make a claim they know to be untrue, or ought to know to be untrue, or they should have known not to make such a representation.

Duress – this is where any threat, implied or otherwise is made to a party to force them into a contract against their free will; duress takes many forms and can be verbal or written. Many forms of duress apply and generally these are broken down into smaller groups for practical reasons.

Financial Duress – this is where a threat is made where it can financially penalise the offeree and this also includes removing something you currently have; or preventing you having something in the future that you are entitled to or expect to receive.

Economic Harm – this is a threat of not paying someone something they are owed, and this threat must have significant implications such as one business not paying another business can cause them to go out of business, or a benefit payment which is owed is not paid and someone loses their home.

Undue Influence – this differs in the fact that someone occupying a position of authority or perceived authority uses their position of perceived authority to force someone into a contract against their free will, and had it not been for that position of authority or perceived authority; the offeree would have refused the contract.

Voluntary Obligations – these are obligations you volunteer to undertake, all contracts are voluntary obligations as you must enter them with free will, free of any duress or threats, and they are known as “a meeting of the minds” in which both parties agree to their obligations.

Unconscionability – this is a form of contract in which the consensual terms of a contract cannot be enforced due to “inequality of bargaining power” where someone uses a position to force someone into a contract and an unconscionable contract is both a void contract and a voidable contract. This leads us directly to:

Capacity / Real Capacity – this is where someone has limited bargaining skills, and; or a potential problem such as a disability or has a mental issue or is of low intelligence and cannot fully comprehend the contract and its benefits and liabilities. In such a case the offeror has a lawful and contractual duty to take account of someone with a weaker bargaining skills or abilities and not take advantage of someone with a weaker bargaining position.

Void Contract – this is a contract which may be in force and when an offeree finds out it is entered into fraudulently, usually by threats, duress, financial duress, and even under various other legislation such as unfair contract conditions, consumer legislation, or other legislation; before they enter the contract. When the offeree finds out they are operating under a fraudulent contract they can “rescind” the contract by applying “rescission” using a lawful notice.

Voidable Contracts – these differ in the fact that a contract cannot come into force, and much of the above applies to a voidable contract.

Rescission – this is a method of rescinding or nullifying a contract and is done using a lawful notice served on the offeror of the contract, or the party with which you have the contract.

Specific Performance – this is the terms and conditions of a contract by which you are bound, and the duties and obligations you and all other parties have to comply with under the contract and the conditions laid down within it. Any failure to undertake a contracted condition means you have breached your specific performance, similarly, if another party fails to deliver a specified contractual condition then they are in breach of the specified performance of the contract.

Pecuniary – this is specific to monetary and anything which can be converted into a monetary value.

Fiduciary Duty – this is a duty of trust defined as a position of “utmost trust” and applies to everyone holding a position of trust.

By Action – this is where someone does something such as entering a contract by agreeing with it and enters it by their actions such as signing the contract.

By Inaction – this differs from By Action as you can enter a contract by inaction where you do not do something, one example would be a company writing to you and giving you 28 days to agree to their changes, by doing nothing you are deemed to have agreed or consented to their changes.

Retrospectively – this is where someone tries to change a contract or its conditions after a contract is signed, or a party tries to enforce conditions from a later contract upon a party with an earlier contract which does not contain those conditions. If you are in a contract then only the terms and conditions contained within the contract “at the time of signing the contract” can apply.

Unilateral – this is a form of contract in which a party agrees to make a payment or offer something of equal value, but until the other party undertakes the task, the party is under no obligation to pay, and there is actually no obligation on a party to undertake the task. One example would be that someone loses their dog and offers a reward for its return, a reward is offered and anyone could find the dog and return it for the reward, and until someone finds the dog and returns it the offeror is under no obligation to pay as the task is not undertaken.

Privity – this is known as Privity of Contract under contract law and is a common law principle which states that no rights can be conferred upon someone who is not a party to a contract, it does not exclude rights where someone acts for a party or group as any of the group still retain their rights as a party to the contract, even though it is signed by, or agreed to by one individual acting for them or the group.

Gains – these are defined as something you have, or would have had at a future time under a contract.

Losses – these are defined as something you had, but lost; and something you would have had at some time in the future, and have lost; losses are not confined only to monetary issues, but also tangible property or even a right which would be conferred upon you.

Damages – these come in various different types and with different intentions, so they will be listed individually. This also covers remedies as any damages require a remedy.

Compensation – these are monetary damages resulting from the “breach” and are intended to make the party suffering the monetary losses “whole again” in financial terms.
Expectation Damages – these are estimated damages where a final figure cannot be accurately worked out, and they are an estimate of current and future losses.
Consequential Damages – these are a form of damages where a breach of contract has occurred and the injured party loses future contracts or other work as a direct result of the breach of contract and are “indirect damages” and reasonably foreseeable by both parties.
Liquidation Damages – these are damages specifically listed within the contract, and are a reasonable estimate by both parties of unforeseeable losses they may lose in the event of a contractual breach.
Punitive Damages – these are not intended as damages. Per se; but are a form of damages solely designed to punish a party who breaches a contract.
Nominal Damages – these are not normally awarded in contract cases as they are not a monetary loss, but are generally awarded in cases where tort cases overlap with contract cases and are used where a judge can clearly show that the injured party was in the right.
Restitution – this is where a losing party is prevented by becoming unjustly enriched by their breach of contract.

It must be noted that several of these forms of damages can be used individually or in any combination of them together, and this can be for several reasons.

quid pro quo – this generally means “of all things being equal” in contract law as within any contract each party must bring something of being of equal value, but this does also mean that the parties have to determine the value of anything to the contract themselves and determine that they are of equal value to the individual party.  

nunc pro tunc – this means “now and then” and is generally applied as back to the beginning and is often used by a court which corrects an earlier mistake in a ruling or judgement, of by an injured party to recover compensation or take other restorative action, or actions, from previous dates within a specified time, or for an action still continuing.

It must be noted that these terms, phrases, and definitions are only being used within English Contract Law and European Contract Protocols only; and that they will have different meanings within different areas of legislation. It is therefore essential to use them in the correct manner and context, and not to be confused by their context where there is an overlap of differing legislation and their meanings can chage.

Thanks very much, good to have these headings and words explained so clearly.