Contracts

Without being aware of it, most people enter into and fulfill any number of contracts on a daily basis. This will become more apparent as we continue through the chapter, but examples of contracts you encounter often include: grocery purchases, fuel purchases, buying a home, renting an apartment, using the toll road, buying a car, purchasing a textbook and (yes) taking this course.

I should note that there are actually two separate laws governing contracts in Indiana (and in most states). For sales of goods, a law called the Uniform Commercial Code (or “UCC”) controls. That is located at Indiana Code § 26-1-1-0.2, et. seq. For service contracts (including rental agreements), the common law of contract controls. For contracts under either UCC or common law, however, the specific terms and conditions of the contract control. Therefore, contracts are often called “private law,” as the parties choose to be bound to the terms and conditions upon which they agree. For purposes of this chapter, we will be using the common law, as that will give you the general vocabulary you need for contracts. If you do happen to go into a field dealing with sales of goods, you should be able to use your knowledge of common law contracts to deal with the UCC.

Being ancient, contracts are subject to many definitions and qualifications, but to look at some Indiana definitions:

A contract is an agreement between two or more parties creating obligations that are enforceable or otherwise recognizable at law.^[1]

An offer, acceptance, plus consideration make up the basis for a contract.^[2]

Three rudimentary elements must be present before an agreement may be considered a contract: offer, acceptance of the offer and consideration. If these components are present, a legal obligation results from the bargaining of the parties as found in their language or by implication from other circumstances, as affected by the rules of law.^[3]

Also essential to the formation of a contract is a “meeting of minds” of the contracting parties: the parties must have the same intent. Thus, a “meeting of minds” must occur, and an offer must be made; once it is accepted, a contract is formed.^[4]

[1] W. Am. Ins. Co. v. Cates, 865 N.E.2d 1016, 1021 (Ind. App. 2007).

[2] Zimmerman v. McColley, 826 N.E.2d 71, 76 (Ind. App. 2005).

[3] Straub v. B.M.T. by Todd, 645 N.E.2d 597, 598 (Ind. 1994).

[4] Bain v. Bd. of Trustees of Starke Meml. Hosp., 550 N.E.2d 106, 110 (Ind. App. 3d Dist. 1990).