Complete the text with the right form of the missing words. If necessary, consult the GLOSSARY

Have you read all your contracts thoroughly? Are you familiar with the famous formula? The formula says the following: ‘OFFER + ACCEPTANCE + CONSIDERATION = CONTRACT.’ In other words, if party A offers to do something for party B, and if party B accepts party A’s offer, and if party B has given (or promised to do so) something valuable in return (consideration), they have an enforceable (legally valid and binding) contract. The legal term consideration is often money, but it can be anything else of value to either one or both parties. Both parties provide consideration for the other party. For example, party A may agree to sell a villa on the Adriatic coast (= consideration) in exchange for party B’s million euros (= consideration). Party C may agree to provide maintenance work (= consideration) in exchange for food and accommodation from party D (= consideration). The consideration for a promise must be given in return for that promise.

Consider the maxim – past consideration is no consideration. Let’s take a look at the following example: A window cleaner cleans John’s windows without being asked to do so. John agrees to pay him the next day. When the window cleaner returns to collect the money, John refuses to pay. Was there a contract between John and the window cleaner? The answer is ‘no’. An important difference between contracts in civil law (developed from Roman codified law and practiced in most European countries) and common law (based on the custom and practiced in English-speaking countries) is that in civil-law jurisdictions, a promise does not need consideration in order to be enforceable. For a promise to become an enforceable contract, the parties must agree on essential terms of the contract, such as price and subject matter.

The term contract covers much more than formal legal documents headed by the word ‘contract’. A contract can be in the form of a written agreement or even conversation, provided that three essential elements are present (express contracts). A contract may exist where the three elements are implied by the actions of the parties even if no documents change hands and no conversation takes place (implied contracts). For instance, a person who parks their car on a private property has entered into an implied contract with the owner to pay fees for trespassing. However, certain contracts must be written and signed in order to be enforceable, e.g. those involving the sale and transfer of real property (Am Eng. ‘real estate’). Contracts are notoriously difficult for non-lawyers to understand.

It is important to note that they usually contain a number of standard clauses covering generic topics such as confidentiality, payment of costs and the circumstances under which the contract may be terminated (termination clause). Some others include Force Majeure (failure to perform obligations in the events of natural disasters or wars), Entire Agreement (a clause stating that prior verbal agreements have been consolidated into the written document), etc. In the case of a breach of contract, the injured party may go to court to sue for financial compensation or damages. The Liquidated Damages clause states the total amount of compensation a non-breaching party should receive if the other party breaches the contract.