Contracts

• Negotiation
• Formation
• Interpretation
• Breach
• Enforcement
• Modification
• Rescission

A ``contract'' is a promise or set of promises with legal consequences. Usually, this means that contractual promises are enforceable in a court of law. The law gives official recognition to the consensual promises of the parties and provides remedies when promises are not fulfilled.

The Texas Supreme Court has noted that every contract includes an element of confidence and trust that the parties will faithfully perform their obligations under the contract. However, the element of trust and confidence that is contemplated by ordinary contracts does not create a confidential relationship between the parties giving rise to fiduciary obligations, nor does the breach of an ordinary contractual relationship form the basis for an action in tort.

A basic element of any contract is a promise. A ``contractual promise'' is an express or implied declaration made by one person, the promisor, for the purpose of assuring another person, the promisee, that a particular action or restraint from action will occur. A contractual promise is what is objectively determinable from the parties' words or actions. It is different from either party's subjective intentions. ``Intentions'' are the purposes formed in one person's mind, which may begin and end with that person. Similarly, a party's subjective ``expectations'' that the other party will act or refrain from acting are also irrelevant to objectively determinable, contractual promises.

Contracts may be either ``unilateral'' or ``bilateral,'' depending on whether one or both parties make contractual promises. A unilateral contract arises when only one of the parties makes a promise, to which the other party responds not by making a reciprocal promise, but by performing the act called for by the promisor. No binding contract comes into existence until the promisee has performed, or at least partly performed, his or her duties as specified by the promisor]. Prior to performance by the promisee, the promisor may withdraw his or her promise, revoking the offer to make a unilateral contract.

An option agreement is a common type of unilateral contract. An option is a promise, or offer, by the optionor that does not bind the optionee and that the optionee may accept or reject. Until the option is exercised in accordance with the requirements of the offer, the contract is unilateral. The contract becomes a binding contract only when the option is properly exercised.

A bilateral contract is one in which there are mutual or bilateral promises between the parties, making each party both a promisor and promisee. A common example of a bilateral contract is one in which one party promises to deliver goods to the other, and the other party promises to pay the specified purchase price.