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An express contract is a legally binding agreement between two parties, where all the essential terms of the contract are explicitly stated, either orally or in writing. Under traditional principles of Anglo-American contract law, in order for a valid contract to be formed, there must be an offer by one of the parties, an acceptance of the offer by the other party, and consideration exchanged for their mutual promises. In order to determine if a binding, legally-enforceable contract has been formed, courts typically examine the nature of the communications between the parties and the context in which they were made during the formation phase.
In order for a communication to constitute an offer, it must convey, with sufficient certainty, the essential terms of the agreement. These terms usually include the contract price, the quantity of the goods delivered or a description of the specific services rendered, as well as the time for performance. A communication that fails to state a material term of the contract will not suffice as an offer for purposes of contract formation.
Under common law rules, an acceptance must be unequivocal. That is, it must conform exactly to the terms of the offer. A party who indicates his assent, but responds by seeking to add additional terms and conditions not stated in the original offer, has not accepted but has made a counter-offer. Since a counter-offer constitutes an indefinite, or ambiguous, acceptance of the terms of the original offer conveyed, no express contract is formed.
The legal requirement that an express contract must be supported by consideration requires that the parties exchange something of value, or suffer a detriment, for their promised performance under the agreement. The element of consideration is most frequently satisfied by the payment of money in exchange for goods delivered or services rendered to the other party. An agreement in which one party offers to paint another’s house in exchange for the payment of $1,000 US Dollars (USD) satisfies the requirement for consideration, because neither party was legally obligated previously to do the acts that the contract requires.
In order to avoid injustice, in certain circumstances, courts will imply the existence of a contract even though no express contract was formed. For example, a person may perform work for another, though there was no explicit agreement as to the price for the services. In this situation, many courts will find that there was an expectation on the part of the person performing the services that he would be paid. In these situations, the implied contract can allow the worker to recover the fair value for the services he has rendered.
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