How to Make a Contract, Including Explanation of Obligations in Contract Law


There are 5 stages of making contract:

  1. Offer;
  2. Acceptance;
  3. Considerations;
  4. Drafting Activity;
  5. Sign the contract.

On this article, I will explain you all.

  1. OFFER

An offer is an invitation to make a contract. There are 2 parties when offering prosess in making contract:

  • Offeror – The party who makes an offer to enter into a contract
  • Offeree – The party to whom an offer to enter into a contract is made. Offeree has the power to accept the offer and create a contract

 

Examples of offer:

  • Displaying a take it or leave in online contract
  • Putting a price tag on an item in a store

Rules of offer:

  • Does not have to be in writing
  • Offers can be made by words, by actions, or any combination of both
  • Promissory: Promise to do something or to refrain from doing a certain act
  • Intention: To be legally binding
  • Communication: To Promisee
  • Certainty: Terms must be clear & certain

Termination of an offer

An offer can be terminated through the following ways:

  • (1) Revocation
  • (2) Rejection By Offeree
  • (3) Implied rejection : counter offer

Ex – A offers to sell his car to B for $1000.  B     says to   A,

“I will give you $500″.  B statement amounts to a   counter offer which terminates the original offer by A

2. ACCEPTANCE

Acceptance is the point at which one party agrees to the other parties offer

Examples of acceptance:

  • Clicking that you accept the online contract
  • Buying the item from the store

3. CONSIDERATION

Consideration is an essential element in every simple contract.  The doctrine of consideration requires that:

  • (1) there must be an exchange between the parties, involving either a promise for promise, or promise for performance; and
  • (2) the promise or performance given in exchange must have value.

Generally, courts will only enforce a contract if both sides are getting something.

What each side gives the other is called consideration.

The basic reason for a contract; a person gives up something of value in exchange for receiving something of value through the contract.

Consideration in contract filled on Rights and Obligations article. Below I will explain you about obligations in contract.

a. RIGHTS

What is the meaning of Rights: ????

Example of rights:

  • a right to life,
  • a right to choose;
  • a right to vote,
  • a right to work,
  • a right to asylum,
  • a right to equal treatment before the law,

Elements of RIGHTS:

1.SUBJECT: rights exist in form of persons. Every right includes two persons: the active subject, who may demand its performance or enforcement and the passive subject who must obey or comply with such enforcement; the former has a right and the later owes a duty.

2.OBJECT: rights are exercised ever things or services for the satisfaction of human wants. Physycal or spiritual, things and services constitue the object of rights;

3.EFFICIENT CAUSE: this is the tie which binds the subject and object together. It produces all legal relations. It springs mainly from acts of volition.

b. OBLIGATIONS

An obligation is a juridical relation whereby a person (called creditor) may demand from another (called debtor) to observance of a determinative conduct (the giving, doing or not doing) and in case of breach, may demand satisfaction from assets of the latter.

Elements of OBLIGATIONS:

  • A juridical or legal tie — which binds the parties to the obligation;
  • An active subject, the obligee or creditor – one who has the right and power to demand performance on the obligation;
  • A passive subject, the obligor or debtor – one who is obliged to perform the obligation;
  • Object of the obligation which consists of a prestation to give, to do or not to do. The object of contract are things, rights or service.

Examples of OBLIGATIONS:

Obligation to give: A and B signed a contract whereby A obliged himself to give B a car;

Obligation to do: A and B entered into a contract whereby A obliged himself to paint the car of B

Obligation not to do: A insured himself with the Insurance company. The parties agreed that A will not ride in an airplane during the exixtence of the life insurance policy.

Concept of Obligations:

a. CIVIL OBLIGATION:

one which has a binding operation in law, and which gives to the creditor the right of enforcing it in a court of justice

b.NATURAL OBLIGATION:

one which cannot be enforced by action, but which is binding on the party who makes it conscience and according to natural justice.

ENFORCEABLE EXAMPLE
CIVIL OBLIGATIONS Can be enforced by court action On January 16, 2015 D borrowed from  C 1000 $ payable on January 16, 2016. Here, D is obliged to pay  1000 $ on Ja. 16, 2016. Otherwise if no payment is made on that date, C is entitled to file an action in court against D for the payment of 1000 $
NATURAL OBLIGATIONS Are not enforceable in court D obliges himself in writing to pay  C 1000 $ payable on May 6 2015. If no action for payment is filed in court within 10 years from May 6, 2015, the action to enforce it shall prescribe. If however, in spite on the prescription of the action, D pays C, he cannot later on recover what he has voluntarily paid to C.

Classification of Obligations:

  • PURE OBLIGATION:Every obligation whose performance does not depend upon a future or uncertain event, or upon a past unknown to the parties, is demandable at once.

    Example: I promise to give you a car

  • CONDITIONAL OOBLIGATION:Conditional obligation is one which is subject to a condition.

    Example: I promise to give you a car if you marry Miss Taylor

  • WITH a PERIODE OBLIGATION:Obligations for whose fulfillment a day certain has been fixed, shall be demandable only when that day comes. Obligations with a resolutory period take effect at once, but terminate upon arrival of the day certain

    PERIOD : SPACE OF TIME

    Example: I will pay you 200 $ on April 1th 2016

  • ALTERNATIVE OBLIGATION:Alternative Obligation is obligation wherein various things are due, but the payment of one of them is sufficient, determined by choice as a general rule belongs to the debtor.

    Example: On March 1st 2016, Brenda obliged herself to give Cindy on April 1st, 2016 a radio or a refrigerator.

  • JOIN OBLIGATION:Joint Obligation — each of the debtors is liable only for a proportionate part of the debt and each creditor is entitled only to a proportionate part of the credit.

    Example: Hendy, Michele, Nicholas jointly executed a promissory note worded as follows: “We promise to pay to the order of Raynaldi 5000 $  (Sg.) Hendy, Michele and Nicholas”

  • DIVISIBLE and INDIVISIBLE OBLIGATION:Divisible Obligation – an obligation which is susceptible of partial performance

    Indivisible obligation – an obligation which is not susceptible of partial performance

    Example:

    Wincent obliged himself to pay  Michele 8000$ is to be paid on May 10, 2016, the obligation is indivisible.

    But if 8000 $ is payable in five equal monthly installments beginning May 10, 2016, the obligation is divisible.

  • OBLIGATION WITH A PENAL CLAUSE:In obligations with a penal clause, the penalty shall substitute the indemnity for damages and the payment of interest in case of non-comliance, if there is no stipulation to the contrary. Nevertheless, damages shall be paid if the pbligor refuses to pay the penalty or is guilty of fraud in the fulfillment of the obligation. The penalty may be enforced only when it is demandable in accordance with the provisions of this Code.

    Example: Abigail obliged herself to give Durga a diamond ring on June 20, 2016 and if Abigail fails to do so, Abigail will pay Durga 1000 $. If Abigail is unable to give the ring on June 20, 2016, Durga is entitled to ask payment of the penalty of 1000 $ but she cannot ask for the ring and the penalty at the same time

 

4. NEGOTIATION AND DRAFTING ACTIVITY

We are going to negotiate and draft a contract. Negotiating and drafting contracts is something that a lot of lawyers do. The goal is to come to an agreement. This requires each side to compromise, so that they can get what they really want—to make a deal.

The freedom to determine the content and form of agreement

The  power  to  enter  contracts  and  to  formulate  the  terms  of  contractual  relationships can  be  regarded  as  an  integral  part  of  personal  liberty.  In  the  United States,  the  power  of  contracting  is  understood  to  be  one  of  the  innate  rights originating  in  the  people  and  guaranteed  by  the  Constitution also in Indonesia (Article 1338 KUHPerdata).

Liberty  of  contract also  enforces  individual  rights  to  hold  and  deal  with  property. Like  other  liberties, freedom  of  contract  is  limited  by  corresponding  rights  held  by  other  persons  and  by the  state’s  legitimate  interest  in  appropriate  regulation.    Such  regulation  may  be directed,  for  example,  at  protecting  weaker  parties  from  the  free  exercise  of overwhelming contractual power by stronger dominant parties.

Before  writing,  make  sure  you  are  clear  about  what  parts  the  contract  must  include and  what  situations  the  contract  must  cover.      Know  what  the  parties  in  fact  want.

Precisely  because  this  is  an  obvious  point,  it  is  often  overlooked.    Try  outlining  the contract  to  make  sure  that  all  the  needed  pieces  are  included  and  are  organized logically.

The following guidelines may be helpful to you in beginning to draft a contract::

  • Reconcile yourself  to writing many drafts of the contract to get it right.   If you try  to  get  all  the  details  right  in  the  first  draft,  you  are  likely  to  miss  some important larger points.
  • Use  clear,  simple,  business like  language. Use  only  the  technical  terms  you  need and define them if necessary.
  • Make Outlines! Outlines can help you here by breaking down the whole contract into a series of small points
  • When revising, check for ambiguities:Check  to  make  sure  that  you  have  used  only  one  term  for  one  item  or person.    Referring  to  the  same  person,  item  or  concept  by  two  different terms  creates  an  ambiguity  that  invites  misunderstandings  later.    If needed,  include  a  definition  section  to  define  all  your  key  terms,  so  that the reader understands any unusual terms.

    Check  also  to  be  sure  that  you  have  not  used  one  term  for  several different items or persons.  This can create unwanted ambiguities.

     

 

 

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