Definition of a Contract

Fundamental, if you understand the definition of a contract you can come out of any negotiation knowing your obligations and the counterparty's obligations.

| February/March 1994

Which of he following five transactions are contracts: buying a newspaper, getting married, using your credit card, making a phone call, or sharing a car pool?

If you answered yes to all five, you were right. That's because each of those transactions falls within the definition of a contract, which is "an agreement upon sufficient consideration to do or not do a particular thing."

Here's how that definition works out in a sampling of those types of transactions:

When you buy a newspaper, the sufficient consideration is the price of the paper. For it, the newspaper boy agrees to do a particular service—namely, hand over today's copy of the Daily Planet (or whatever paper it is that you are buying). If you shortchange him or if he hands over a copy of yesterday's Tribune, that's a breach of the contract.

When you get married, the sufficient considerations are your emotional, physical, and financial services. For it, your spouse agrees to do a particular thing: provide equivalent services for you.

When you make a phone call, the sufficient consideration is the number of coins you put in the slot. For it, the telephone company agrees to do a particular thing: put you through clearly for three minutes to the local number called. If you use a slug, or the phone company connects you to a wrong number or a line heavy with static, that's a breach of the contract.

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