Contracts Are Complex, Common

One of the important unrestricted freedoms in our legal system is the right and opportunity to make contracts. You usually don’t need government permission to make “an agreement to do or not to do a certain thing,” as the California law defines a contract.

Not every agreement you might make is legally binding. On the other hand, a legally enforceable contract need not be in writing, and it certainly need not be written by a lawyer or call itself a contract to be valid. An informal agreement you might think is a casual promise could stand up in court.

Under California law, there are four basic requirements for a contract. The California Civil Code (Section 1550) puts it this way: “It is essential to the existence of a contract there there should be: 1. parties capable of contracting; 2. their consent; 3. a lawful object; and 4. a sufficient cause or consideration.”

Let’s take these one at a time. The first three are relatively simple. There must be parties capable of contracting. That means that an “incompetent” person, perhaps someone with a severe mental illness or, as defined by law, someone under age 18, cannot be legally bound by a contract that he or she seems to enter into.

Next, the parties must consent to the contract, meaning that they enter a contract voluntarily, not under duress.

The object of the contract must be lawful. Contracts to do an unlawful act are not enforceable, so an agreement in which a person hires another to kill someone or to perform a gambling transaction is not legally enforceable. Bookies don’t have the right to collect gambling debts--at least those incurred in California--by filing a lawsuit.

Consideration is a fascinating legal concept. It is needed for a contract to be enforceable, and first-year law students spend weeks being drilled by their law professors about what it really is. Suffice it to say here that in practical terms, it is ordinarily the payment of money or a promise to pay money that lawyers call the consideration.

Take a simple example. A gardener comes to your house, talks to you about your lawn and promises to come once a week to cut it. You promise to pay $60 a month. Your promise to pay is the consideration, making it a legally enforceable contract, even though there is nothing in writing and no money has changed hands.

How many contracts are entered into every day? More than you might imagine. Law students study contracts that went sour, so they might guess that there are a few thousand contracts entered into every day in Los Angeles. Actually, there are millions, because all sorts of daily transactions--purchases at retail establishments, dining in restaurants, writing checks, getting your car serviced--are all actually contracts, some of them legally complicated ones.

Of course, there are many agreements that are not legally enforceable contracts, or at least haven’t been tested in court. A promise to arrive for dinner at 7 p.m.--with the implicit promise that dinner will be ready soon thereafter--is unlikely to wind up in court.

And many promises within a family household--”I’ll do the dishes and you take out the trash”--generally stay out of court, although they sometimes take on seeming significance in divorce court.

Remember, the courts don’t make agreements. We make them. The courts just enforce them.