CHAPTER III

CONTRACTS

Contracts. It is the purpose of the law to secure to every man justice and as great a measure of freedom and liberty as is consistent with the rights of others. In a community the rights of one man cannot be secured except by placing upon others certain obligations and duties towards him, and from him also are demanded like concessions in order to secure and protect the rights of others. The law therefore has formulated many duties and obligations. For instance, the law expects a man to do what he has seriously agreed to do if another will suffer by his failure to do it. We have thus the Law of Contracts.

Torts. In a similar fashion the law demands that a man shall refrain from many actions which will interfere with the rights of others. A man shall not unwarrantably deprive another of liberty; he shall not be negligent and careless of others to the extent of injuring them; he shall not trespass upon the property of another; he shall not maintain a nuisance to the disadvantage of his neighbors. We have thus the Law of Torts. Contracts and Torts constitute the best known, the most important branches of law, and the present chapter is devoted to the Law of Contracts.

Definition. A contract is a voluntary agreement, between two or more competent parties, for a valid consideration, to do or abstain from doing some lawful act. A contract may or may not be in writing. Many contracts are oral.

Essentials. There are four essentials to a contract:

1. Mutual assent to the terms of the agreement.

2. Competent parties.

3. A valid consideration, actual or presumed.

4. Definite and lawful subject matter to be acted upon. If any of these four essentials is lacking there is no contract.

AGREEMENT

Agreement. The parties to a contract must agree; there must be an agreement to the same definite thing which creates the obligation. When the contract is in writing, the agreement is to the thing written, and when

this is signed by both parties the evidence of the agreement is definite if intelligently expressed. But an oral agreement is no less completely a contract in fact. Memory of the terms may fail or there may be a wilful denial of these terms by one of the parties; the enforcement of the contract may thus be difficult or impossible because the evidence is insufficient or inharmonious. In important matters a written contract, signed by both parties, is clearly desirable. In certain cases, to appear later, writing is required by the Statute of Frauds.

Proof. Adequate proof of any contract should be secured in those cases where a single writing signed by both parties is burdensome or out of the question. If a dealer offers to sell me 4000 bricks at $5 per thousand, and I accept his offer, the contract is made. No writing is necessary, but one is desirable. A letter or order from me to him fixes the terms, and his delivery shows his acceptance. The evidence is sufficient if there are witnesses to the delivery.

Offer and Acceptance. An offer made must be accepted without qualification or there is no contract. Acceptance must be absolute and identical with the terms of the offer; the offer and acceptance must be definite and certain. If a man offers to sell me a steam pump and I agree to take it provided it is as good a pump as the one furnished Smith, there is no contract and I cannot enforce the sale. If, however, he delivers the pump on the strength of my letter of acceptance, by that act he has accepted my qualifications and the original offer, as qualified, has become a contract.

An offer generally holds good for a reasonable time, but may be revoked at any time before acceptance. The reasonable time for which an offer holds good will differ for different contracts. Where an offer is sent by mail or telegram, the contract is made when the letter of acceptance is mailed in the post office or post box, or the telegram sent, even though a letter of revocation in the meantime has been mailed but has not reached its destination. The letter of offer and the letter of acceptance together constitute a valid contract. A copy of the letter of offer or acceptance should be retained, in case the other party fails or refuses to produce the original letter at the trial, if there should be one. As has been suggested, the acceptance may be by conduct, by acts, as well as by words (oral or written). Performance constitutes acceptance of an offer and its terms.

Implied Contract. When a person orders an article sent him and no price is specified, although he does not specifically agree to pay, the law cures this lack, and supplies the presumption that he agreed to pay. The sum to be paid will be a reasonable price. The careful man, except in minor transactions, will take care to have and preserve proper evidence of the contract or transaction, and to have the terms clear and direct.

Mistake. The agreement must be by both parties to the same thing. A mistake may prevent such an agreement. A mistake as to fact will make a contract null; a mistake as to the law will not because every one is assumed to know the law.

Mistakes of fact may be of several kinds :

Mistake as to Contract. Mistake as to the nature of the contract. As an example: If a blind or illiterate man has a paper incorrectly read to him, it purporting to be a mortgage, while it is in reality a warranty deed, he has not agreed to the paper which he signed, and this is void as a contract. It is important that the mistake shall not be the result of his own carelessness or negligence.

Mistake as to Person. Mistake as to the person contracted with. Mr. Potter became dissatisfied with the Boston Ice Company and terminated his contract with it, and contracted with the Citizens' Ice Company; this company later sold out to the Boston Ice Company, which continued the delivery of ice to Potter, who afterwards learned the facts and refused to pay for the ice. The courts sustained Potter. There was a mistake as to the party, and no contract. When a person receives goods and it is clear that he cares not who furnishes them, he may be required to pay on an implied promise for goods received, but certainly not where he relies on his contract with one party rather than another.

Mistake as to Existence. Mistake as to the existence of the thing contracted for. In one case a lumber dealer agreed to buy a tract of timber land and both parties assumed that the timber was standing. The standing timber was evidently the essence of the contract. It was later found that the timber had already been cut off. There existed a mistake of fact and the contract was void.

Mistake as to Identity. Mistake as to the identity of the thing contracted for. If I lay my hand on a barrel and say to the dealer: "Send me this barrel of cement and I will pay you $1.50," and the barrel is in fact a barrel of lime, there is no contract; he can not force me to accept the barrel. He agreed to sell me that particular barrel; I agreed to buy a barrel of cement; there has been no agreement to the same thing, no contract because there is a mistake as to the matter of the contract.

Mistake in Expression. Where there has been a clear mistake in expression in a contract, the courts will find some means to correct the contract so as to cover the evident intent. This may be done in a court of Equity to be described later.

Effect of Fraud. Fraud will render a contract voidable at the election of the defrauded party. It is essential to fraud that there should be a misstatement of fact, an intent to deceive, and that the innocent party was misled to his injury. The law imposes an obligation not to practice fraud

or deceit and will not assist one who violates his obligations in this way; therefore a contract procured by fraud will not be enforced for the benefit of the party perpetrating the fraud. Fraud will receive special attention in the next chapter, on torts.

Misrepresentation. With relation to misrepresentation made unwittingly, the textbooks on law show some divergence of opinion. In accorddance with principle it is commonly stated to be the law that misrepresentations (without fraud) if made in negotiations preliminary to the contract, perhaps as inducement to it, will not suffice to upset a completed contract. A misrepresentation that enters into and becomes a part of the contract, if material, may render it void, possibly on the ground of mistake; more probably it will create a liability for damages. If a plan, which is made a part of a contract, innocently misrepresents facts and the price bid is based on the plan, this misrepresentation, if material and serious, may render the party at fault liable for damages.

Exceptions. There are several apparent exceptions with relation to representations not a part of the contract: 1. In marine and life assurance, the company must rely upon the statements of the insured and is protected not only against misrepresentations but against failure to reveal all essential facts. 2. Similarly, a wrong description of lands or the terms or conditions to which they are subject will vitiate the contract, and this is of interest to engineers. 3. Contracts for the sale of shares in corporations are in the same class. 4. In cases where fiduciary relations exist between the parties, good faith is so strongly insisted on that misrepresentation or failure to reveal all essential facts is fatal to the contract.

Engineer's Misrepresentation. Contracts for engineering construction commonly contain a provision that "the decision of the engineer shall be final" and clothe him with great powers, part of his duties being essentially those of an arbitrator. The courts are likely to hold that his position gives him a fiduciary character such that misrepresentations on his part take on the character of constructive fraud, and impose liability upon his client because the engineer is his agent.

Voluntary Agreement. The agreement must also be voluntary; if made under compulsion or duress, there can be no binding agreement. Imprisonment of a party to the contract made either unlawfully or through abuse of legal process constitutes duress and renders the agreement voidable by the party under duress. There are other forms of duress such as the imprisonment of husband, wife, or child, or any near relative; bodily harm to the party or a relative; an unlawful seizure or destruction of the property of the party to the contract; and threats may be sufficient to make the contract voidable on the score of duress. These cases may not be of great interest to engineers, but set out an important principle.

Undue Influence.

Undue influence will also vitiate a contract if it be exercised by a parent or anyone having special fiduciary or confidential relations, and the same is true where the party unduly influenced is mentally weak. Guardian and ward, attorney and client, principal and agent, physician and patient have been considered to hold such relations. Such undue influence prevents the agreement from being voluntary.

PARTIES

Parties. There must be at least two parties to a contract. A man may not contract with himself, even in a case where he is acting on one side for himself, and on the other side as the agent for some one else.

Competency. The parties must be legally capable of making a contract. Persons of unsound mind are incapable of making an agreement, and so incompetent to enter into a contract; similarly, a minor, or person under twenty-one years of age, is held to be incapable, no matter how intelligent. Persons suffering from the infirmities of age or sickness sometimes have their affairs managed by a conservator appointed by the court, so that contracts in their interest may be made. A drunken person, depending somewhat upon how drunk, may be sufficiently wanting in understanding to be incapable, but, in general, ordinary drunkenness will not suffice to vitiate a contract.

Married Women. Formerly, married women could not contract, but in most States this has been changed by statute. When a contract of importance is to be made with a married woman, it is the part of wisdom to consult a lawyer so that the contract may be effective under the laws of the State where the contract is made. The fact that women transacting business have oftentimes had little training in business principles, renders a contract with a woman more liable to misunderstanding, and for that reason more care should be used in making it.

Minors. A minor may contract for necessaries, and there are other cases where a contract clearly in his favor will be enforced. A contract with a minor has the disadvantage that the minor is not bound but may hold the other party if he so desires. Contracts are sometimes void, that is enforceable against neither party; sometimes they are only voidable, that is enforceable at the option of one of the parties and not of the other. The contract with the minor is voidable, rather than void; in the case of some contracts the minor may act when he becomes of age, and ratify the contract if he sees fit. The case of the minor is abnormal since one party is held to the contract while the other is not.

Minor's Services. The father is entitled to the services of a minor, and the engineer who employs him should in strictness make a contract with the father, and make payments to the latter. This is often burdensome;