Cecily Zamora
Contracts are governed by state statutory and common law, and private law (the private agreement between the parties). While state laws regarding contracts are typically default rules, meaning that if the contract does not mention something, it is handled by the default rules, private law may override many of the rules established by state law. However, there are some rules that contracts cannot override, such as those that go against public policy, or those that are vastly unfair or illegal.
| Characteristics | Values |
|---|---|
| Can a contract override state law? | Yes, contracts can supersede the law. |
| What is a contract? | An agreement between parties, creating mutual obligations that are enforceable by law. |
| Basic elements of a contract | Mutual assent, expressed by a valid offer and acceptance; adequate consideration; capacity; and legality. |
| What is the law regarding contracts? | Contract law is generally governed by state common law. |
| Can a contract require a breach of law? | No, any such contract is invalid. |
| Can a contract be invalidated? | Yes, if the contract is found to be unconscionable or against public policy. |
| Can a contract be modified or changed? | Yes, a state may modify or change existing remedies or prescribe new modes of procedure, as long as the essential rights of the parties under the contract are not impaired. |
| Can a contract be formed without a written document? | Yes, as long as there is mutual assent and consideration. |
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Contracts cannot require a breach of law
Contracts are mainly governed by state statutory and common law, and private law (the private agreement between the parties). Private law may override many of the rules otherwise established by state law. However, it is important to note that a contract cannot require a breach of law. Any such contract is invalid.
For a contract to be legally enforceable, it must include the basic elements of mutual assent, expressed by a valid offer and acceptance; adequate consideration; capacity; and legality. A breach of contract occurs when a party fails to perform their promised obligations, and this is not considered a crime or a tort. The punishment for breaching a contract may be outlined in the contract itself, or a resolution may need to be found, which could involve forcing the breacher to abide by their original commitment.
While contracts generally cannot require a breach of law, it is important to note that there may be exceptions or special circumstances. For example, the Uniform Commercial Code, which has been adopted in nearly every state, represents a body of statutory law that governs important categories of contracts. Additionally, in some cases, the freedom to contract may allow parties to choose the law applicable to the contract, potentially deviating from the state law that would otherwise apply.
In summary, while the general principle is that contracts cannot require a breach of law, there may be specific situations where the complexity of the legal framework gives rise to exceptions or special circumstances.
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Contracts cannot override public policy
Contracts are mainly governed by state statutory and common (judge-made) law and private law (i.e. the private agreement). Private law principally includes the terms of the agreement between the parties who are exchanging promises. While this private law may override many of the rules otherwise established by state law, a contract cannot require a breach of law. Any such contract is invalid.
A contract is a legally binding agreement. As a result, once a contract is entered into with another person or business, both parties are expected to fulfill the terms of the contract. However, a contract will be deemed void or unenforceable if the terms are too shocking to obligate or are illegal or against public policy. "Unconscionability" means that a term in the contract or something inherent in or about the agreement was so shockingly unfair that the contract simply can't be allowed to stand as is.
Public policy can be hard for many people to understand, as it has no set legal definition. What is considered public policy can change depending on the time and the needs of the people. Many courts hold a conservative view of public policy, believing that public policy is determined by judicial decisions and laws and not the opinions of people. A contract or an act is thought to be contrary to public policy if it results in a breach of law, harms citizens, or causes injury to the state. For example, a court will never enforce a contract promoting something already against state or federal law (you can never enforce a contract for an illegal marijuana sale) or an agreement that offends the "public sensibilities" (contracts involving some sort of sexual immorality, for example).
Some general agreements could be considered against public policy, such as:
- Contracts that would cause injury to public services.
- An agreement involving public matters that would corrupt a private citizen.
- Contracts that will obstruct or pervert justice.
- Contracts that would promote litigation.
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Contract law is governed by state common law
In the United States, contract law is governed by state law, with a few exceptions. The law of contracts varies from state to state, and while general contract law is common throughout the country, specific court interpretations of particular elements of a contract may differ between states.
Contract law regulates the obligations established by agreement, whether express or implied, between private parties. The basic elements required for an agreement to be a legally enforceable contract are mutual assent, expressed by a valid offer and acceptance; adequate consideration; capacity; and legality. Mutual consent, or ratification, is typically established through the process of offer and acceptance, though contracts can also be implied in fact. An offer is a display of willingness by a promisor to be legally bound by the terms they specify, made in a way that would lead a reasonable person to understand that an acceptance is being sought. An offeror is usually permitted to revoke their offer at any time before a valid acceptance.
The Uniform Commercial Code (UCC), which has been adopted in nearly every state, represents a body of statutory law that governs important categories of contracts. The UCC has helped to standardise the law governing transactions involving the sale of goods across the nation. Sections of Article 9 of the UCC govern contracts assigning the right to payment in security interest agreements. Contracts related to particular activities or business sectors may be highly regulated by state and/or federal law.
A "choice of law" or "governing law" provision in a contract allows the parties to agree that a particular state's laws will be used to interpret the agreement, even if they live in or the agreement is signed in a different state. For example, the parties to a contract may agree that a sale contract is governed by French law, and a US court would have to apply this law if the case was brought in the US and the court had jurisdiction. However, the foreign law would not be applied if it would contravene a fundamental policy or public order of the law of the forum.
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Private law may override rules established by state law
Private law, or the terms of a private agreement, may override rules established by state law. Contracts are mainly governed by state statutory and common law, as well as private law. Private law includes the terms of the agreement between the parties who are exchanging promises. For example, a law may provide for a rule where the buyer under a sales contract bears the risk that the property is destroyed en route from the seller to the buyer. In this case, the buyer and seller are free to agree on their own terms, which may deviate from the rule imposed by law.
However, it is important to note that a contract cannot require a breach of law. Any such contract is invalid, but a clause may limit the extent to which it is invalidated. For instance, people cannot be considered property and cannot be gifted or traded. While the freedom to contract allows parties to choose the law applicable to the contract, this choice is subject to the court's approval and will not be applied if it goes against the fundamental policy or public order of the law of the forum.
Additionally, federal law takes precedence over any conflicting state law, as per the Supremacy Clause of the Constitution of the United States. This clause establishes that the Constitution, federal laws, and treaties made under its authority take priority over conflicting state laws. The Supremacy Clause also allows the federal government to make treaties that supersede state law, even if they abrogate states' rights.
Furthermore, while state law generally takes precedence over HOA rules and local laws, it is still subject to federal preemption. This means that a state government can nullify a local law that conflicts with or deviates from state law. Similarly, courts have the power to strike down laws that violate a state's constitution, and federal law displaces state law when there is a conflict between the two.
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Contracts of adhesion are subject to special scrutiny
Courts scrutinize adhesion contracts to ensure they are not unconscionable or unfair. This scrutiny often takes the form of the "reasonable expectations" test, which examines whether the terms of the contract are what the weaker party would have reasonably expected. The test considers the prominence and clarity of the terms, the purpose of the terms, and the circumstances surrounding the acceptance of the contract. Courts also consider the bargaining power of the parties and the benefits and obligations imposed by the contract.
The Uniform Commercial Code (UCC), which has been adopted in almost every state, provides specific provisions for adhesion contracts for the sale or lease of goods. The UCC helps ensure that commercial transactions are governed by a consistent set of laws across the country. While the specifics of the legality and enforceability of adhesion contracts may vary from state to state, they are generally considered an efficient way to handle standardized transactions.
To be enforceable, adhesion contracts must not be unreasonably one-sided or hide important terms. Courts ultimately decide what is reasonable within an adhesion contract, and a contract deemed unconscionable may be invalidated. The doctrine of unconscionability focuses on the motive of the supplier and the content of the contract, including factors such as inflated prices, unfair disclaimers, immoral clauses, and contravention of public policy.
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Frequently asked questions
Yes, contracts can supersede state law. However, it cannot go against "public policy", which means that the law will not allow contracts that are unfair or illegal.
A contract is an agreement between parties that creates mutual obligations that are enforceable by law.
The basic elements are mutual assent, expressed by a valid offer and acceptance; adequate consideration; capacity; and legality.
Private law includes the terms of the agreement between the parties exchanging promises. Statutory law, such as the Statute of Fraud, may require some kinds of contracts to be put in writing and executed with particular formalities for the contract to be enforceable.
No, a contract cannot require a breach of law. Any such contract is invalid.
