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General Contract Law Principles
A contract is a legally binding agreement. A contract represents the meeting of the minds of the parties. Employment contracts are subject to the follow principles of contract formation.
There six elements that are necessary to a binding and enforceable contract:
Most sports contracts are express contracts. An express contract is a contract in which the agreement of the parties is evidenced by their words, whether spoken or written. There are virtually no more implied contracts in the sports industry. An implied contract is a contract in which the agreement is not evidenced by written or spoken words, but by the acts and conduct of the parties.
It is essential to a contract that there be an offer and, while the offer is still in existence, it must be accepted without qualification. Once an offer is made, the person to whom it is made can respond in four ways:
- Reject (this automatically terminates the offer);
- Counteroffer (again, the offer is automatically terminated).;
- Nothing (the offer then terminates after a reasonable time).
Offers may be terminated in any one of the following ways:
- Revocation of the offer by the person making it (the offeree);
- Counteroffer by offeree;
- Rejection of offer by offeree;
- Lapse of time;
- Death or disability of either party; or
- Performance of the contract becomes illegal after the offer is made.
An issue can arise with regard to the legal “capacity” aspect of a minor signing a contract. Sports such as gymnastics, swimming, and tennis often involve contractual issues regarding minors. Satisfying this element may require the signature of a parent or guardian. Even though minors may enter into contractual arrangements, minors hold the ability to void such contracts at their option. However, if the contract is voided, the other party generally must be placed in the same position as prior to entering into the agreement, or at least at no worse position.
Assent or Consent
The consent or assent of a party to an agreement must be genuine and voluntary. This assent will not be genuine or voluntary in certain cases of mistake, deception or undue pressure or duress. The agreement of parties may be affected by the fact that one or both of them made a mistake. A unilateral mistake is a mistake made by one party to the agreement. A mistake that is unknown to the other party usually does not affect the enforceability of the agreement.
A unilateral mistake of one party that the other party knows about may make the contract voidable by the party that is adversely affected by the mistake. A unilateral mistake regarding a fact does not affect the contract. For example, if a coach orders water-resistant parkas for his football team thinking that this means waterproof, he cannot get out of the contract unless the sale was made with some sort of misrepresentation as to the meaning of those words.
If both parties to an agreement make the same mistake regarding a key factual matter, the agreement is void. For example, a contract is void if both parties mistakenly believe that the contract can be performed when, in fact, it is impossible to perform it.
A person who has the ability and the opportunity to read a document before signing it is contractually bound by the terms of the document even if the person signed it without reading it. The signer cannot avoid liability based on the argument that no explanation was given to him of the terms of the contract. Even if a person is unable to read or understand the terms of the agreement, he is still bound by the terms of the agreement since he should have tried to obtain an explanation of the agreement. The exception to this rule is that if the other party knows, or has reason to know, that the signer cannot read or has a limited education, some Courts would hold that the other contracting party should have read the document to the other party or explained the terms.
If a party relies on the explanation of another party as to the contents of the agreement, the contract may be voided under two circumstances: (i) the party was justified in relying on the explanation of the other party; and (ii) the explanation was fraudulent. The party making the explanatory statements does not have to be a lawyer, but can be any person who handles the agreement on a regular basis and therefore has a greater knowledge of the content than the other person.
Supported by Consideration
Consideration is what the promisor (person making promise) demands and receives as the price for the promise. The promisor is the person making the promise, and the promisee is the person to whom the promise is made. Consideration consists of something to which the promisor is not otherwise entitled. It is not necessary to use the word consideration in a contract. Consideration is the price paid for the promise. When thinking of consideration, think in terms of legal value as opposed to economic value. While economic value (e.g., money) is the most common form of consideration, consideration does not have to involve money.
Made for a Lawful Objective
The fourth element of a contract is that it must be made for a lawful objective. Courts will not enforce contracts that are illegal or violate public policy. Such contracts are considered void. For example, a gambling contract would be illegal in many states. If the illegal agreement has not been performed, neither party can recover damages fro the other or require performance of the agreement. If the agreement has been performed, neither party can sue the other for damages or have the agreement set aside.
In the Form Required by Law
As a general rule, contracts may be either oral or written. However, the law requires a written agreement in specific situations.. Most states have statutes that require the following types of contracts to be in writing or they will be unenforceable:
- An agreement that cannot be performed within one year after the agreement is made;
- Contracts involving the sale of land;
- The promise to answer for the debt of another person;
- A promise by the executor or administrator of an estate of a deceased person to use personal funds to pay a debt of the estate;
- A promise made in consideration of marriage must be in writing (e.g., a prenuptial agreement); and
- A contract provides for the sale of goods with a price of $500.00 or more.
Interpretation of a Contract
If there is a dispute as to the interpretation of a contract, Courts seek to enforce the intent of the parties to the contract. The intent which will be enforced is what a reasonable person would believe that the parties intended. Sometimes the provisions of a contract are contradictory. In such a situation, a Court will try to reconcile the provisions and eliminate the conflict. However, if this cannot be done, the Court will declare that there is no contract. For example, John makes a contract to sell 100 acres of land to Joe. One paragraph of the contract states that the purchase price is $100,000.00. Another paragraph states that the purchase price is $1,100.00 per acre, which would produce a total price of $110,000.00. Which amount would be binding? Neither amount would be binding if the conflict in the terms could not be reconciled by parol evidence.
In some cases, a conflict can be solved by considering the form of the conflicting terms. If a contract is partly printed or typewritten and partly handwritten, the handwritten part would prevail if it conflicted with the typewritten or printed part. If there is a conflict between the printed part and a typewritten part, the typewritten part would prevail. If there is a conflict between an amount or quantity expressed both in words and figures, as on a check, the amount or quantity expressed in words prevails. For example, if a check is written for $1,000.00, yet the check states it is for One Hundred and 00/100 Dollars, the words would prevail over the figures.
A contract is ambiguous when it is uncertain what the intent of the parties was and the contract is capable of more than one reasonable interpretation. Sometimes ambiguous terms can be explained by the admission of parol evidence. Also, Courts abide by the rule that an ambiguous contract is interpreted against the party who drafted it. In other words, the party who did not draft the contract will be given the benefit of the doubt so to speak.