Business Law Obligation and Contract: What You Need to Know

Business law obligation and contract requires parties involved in a legal and contractual
agreement to to uphold their end of the contract.3 min read

Business law obligation and contract refers to what is legally required of each of the parties
involved in a contractual agreement. The law requires individuals who enter into legal
agreements to uphold their end of the contract. In business contracts and other types of
contracts, one party has the right to pursue legal action against the other if he or she breaches
the agreement.

What Are Contract Obligations?

When contractors enter into a legal agreement, they must fulfill the promises they make in the
agreement. Anyone unable to perform the duties required of them in a contract should not sign
or enter into an agreement.

All contracts have a few basic elements, including:

Offer

Acceptance

Consideration

Capacity.

One party must first offer something to another. Then, the other party has to accept that offer.
The consideration of a contract refers to what is exchanged, and this is where obligation comes
into play. Contract capacity is the ability of either side of the contract to understand the
seriousness of the agreement and to carry out his or her obligations.
The consideration, or exchange of value, in a contract is basically the reason for the agreement.
For instance, take the sale of a car. The car and the money paid for the car are the consideration
of the contract. Each party has an obligation to follow through with the sale covered in the
contract. The seller is obligated to transfer the title of the car to the buyer, and the buyer is
obligated to give the seller a certain amount of money for it.

Contracts should not only cover the basics of what is being exchanged but also the where and
the how. The terms and conditions of a contract are an important part of the legal agreement
that shouldn't be overlooked. Contract terms control how the obligations will be fulfilled, such
as:

Where and when the transfer will take place

How much money is owed in exchange for the car.

When a party doesn't follow through on his or her obligations in the contract, this is called
breach of contract. If a breach of contract takes place, the injured party (or the party that didn't
breach) has a right to pursue suit and may have a right to collect damages.

Contract Obligation Examples

The obligations of a contract depend on the type of contract formed and what is being
exchanged. Contracts such as lease agreements are going to have very different obligations from
sales contracts. Although, almost all agreement types have these basic contractual obligations:

Payment

Delivery

Quality.

Usually, one side of the consideration in a contract is money. Whether leasing an apartment,
buying a car, or hiring an employee, one of the parties involved in the contract is agreeing to an
obligation to pay money. In sales contracts, the buyer is agreeing to pay a certain amount for
goods. As a part of the payment obligation, the contract should specify the amount and the
payment schedule or deadline.

When a good is being exchanged for payment in a contract, that good must be delivered to the
buyer. This can be as simple as a delivery to the buyer's home address or a specified place to
meet. Such information should also be included in the contract in detail, along with a delivery
date or deadline. The delivery method should also be spelled out.

If a buyer is making a purchase of a product or service, it is wise to make sure the contract covers
the quality of the goods or the service being purchased. This can prevent the seller from making
an unfair profit for something less valuable than what was originally promised.

There are several obligations that are assumed for all contracts under general contract law.
These include:

The obligation to be fair and honest

The obligation to avoid using coercion or force.

Is It Possible to Transfer Contract Obligations?

In certain situations, the obligations of a party under contract may be transferred to another.
When one party outsources its contract obligations, this is called contract delegation.

For example, if a homeowner enters into a contract with a construction company to have an
addition put on his or her house, the construction company may bring in other companies to
handle certain pieces of the project, such as plumbing or painting. The construction company is
still keeping its obligations according to the original agreement, but it is not performing every
action itself.

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