1. A contract is generally defined as a legally enforceable promise (or agreement).
2. Contract law addresses itself to the following questions arising in the life of a contract:
- Formation—did the parties bind themselves into a contract?
- Privity—who can acquire rights or be subjected to liabilities by the contract?
- Vitiation—can a party be excused from (get out of) the contract?
- Content—what are each party’s respective rights and liabilities under the contract?
- Remedies—what remedies are available for breach of contract?
3. The sources of contract law are common law (which includes judge-made law both at law and in equity) and legislation. The upshot of common law rules, equitable qualifications and statutory regulations is a contract law characterised by complexity, contradictions and the weighing of competing values. In addition, European law, international commercial law and human rights law also affect the size and shape of English contract law.
4. The impact of contract law is mediated by the process of judicial application; this contains considerable elements of overt and covert discretion.
5. Thus, it is important to have a sense of the policy tensions which influence the way that courts apply the law. Contract law is the product of the legal system’s uneasy balancing of the classical values of freedom of contract with the more recent emphasis on regulation and restraint of that freedom. In particular, the following tensions are discernible:
- the desirability of autonomy vs restraint of autonomy;
- the desirability of minimal legal intervention vs more active regulation and channelling of contracting;
- formal equality vs actual inequality;
- the ideal of negotiated contracts vs the reality of standard form contracts;
- the assumed fairness of voluntary exchanges vs the reality of serious unfairness in some exchanges;
- the paradigm of discrete and self-interested contracts vs the reality of relational contracts embedded in social norms;
- the relative merits of literal meaning vs contextual meaning;
- the merits of clear and certain rules vs flexible discretionary standards; and
- the value of a unified general law of contract vs specialised laws tailored to different types of contracts.
6. Many contract theories seek to explain the basis of contract law. Among them:
- Promissory and will theories: ‘to enforce promises or agreements’;
- Reliance theory: ‘to protect contract parties from harm’;
- Welfare maximisation or efficiency theory: ‘to maximise welfare’;
- Promoting distributive justice: ‘to redistribute wealth’;
- Transfer theory: ‘to enforce the transfer of ownership of contractual rights’;
- Promoting autonomy consistent with social justice: ‘to increase worthwhile choices’; and
- Mixed theory: ‘all or a combination of the above’.
7. Contract law’s reach or impact is reduced by:
- its reluctance to intervene in family or social arrangements;
- specialist regimes that have replaced general contract law in many important areas; and
- empirical studies which indicate the limited relevance of contract law in ‘real-life’.
8. Contract law is a branch of private law, specifically a branch of the law of obligations. The focus of contract law (to enforce voluntary exchanges) is illuminated by its contrast to the laws of tort (to prevent harm), unjust enrichment (to reverse unjust enrichment) and property (to protect property rights). However, contractual problems may sometimes attract the application of tort, unjust enrichment and property rules.