Gale Encyclopedia Of American Law 3Rd Edition Volume 3 P19 ppsx

contingent remainder, the contingency being
the daughter’s MARRIAGE.
CONTINGENT FEE
Payment to an attorney for legal services that
depends, or is contingent, upon there being some
recovery or award in the case. The payment is then
a percentage of the amount recovered—such as
25 percent if the matter is settled, or 30 percent if
it proceeds to trial.
Contingent-fee agreements are valid only in
civil cases and are frequently use d in
PERSONAL
INJURY
cases. Court rules and statutes often
regulate these fees in relation to the type of
action and amount of recovery. Such an
arrangement is generally used when the party
seeking recovery cannot afford to retain an
attorney and therefore would not have any
effective means of prosecuting a claim.
An attorney is not entitled to a contingent
fee in the absence of an express contract.
Contingent-fee agreements, although inten-
sively scrutinized by the courts, are valid if
equitable and reasonable to the client. The
purpose of a contingent fee is to reward
attorneys for proficiency and diligence in
prosecuting disputed and litigated claims, as
opposed to rendering minor services that any
inexperienced attorney might perform.
Contingent fees are never permitted in

criminal cases, as there is no possibility of a
financial recovery that would be the source of
the contingent fee. These arrangements are
emphatically discouraged in
DIVORCE proceed-
ings due to public policy considerations. An
attorney may discourage a reconciliation if a fee
depends upon the granting of a divorce. Public
policy favors the continuation of
MARRIAGE,
which is traditionally viewed as a stabilizing
force in society. A contingent-fee contract that
prohibits a client from settling a case is also
void as against public policy because society
views the avoidance of unnecessary litigation as
desirable.
When an attorney who was retained on a
contingent-fee basis dies, his or her estate will
not be entitled to any fee unless the attorney had
completely performed the contract prior to
death. In some states, the estate cannot recover
unless the jury had returned a monetary award in
favor of the client before the attorney’s death.
However, the attorney’s personal representatives
may collect payment for the reasonable services
that were rendered.
An attorney might be entitled to recover his
or her share of the proceeds of an action if the
contingent-fee contract was substantially per-
formed prior to the death of the client. If the

case had been subm itted to the jury before
the client died, and the jury found in favor of
the client, the attorney is entitled to his or her
fee from the proceeds. If the suit is dismissed or
settled by the client’s personal representatives,
the attorney might have no right to a fee unless
the contract so provided. However, the death of
a client does not deprive an attorney of the right
to recover the reasonable value of his or her
services rendered until the time of the client’s
death.
Jurisdictions are not unanimous as to the
question of whether an attorney’s contingent fee
should be calculated based on the net amount of
the recovery that a client actually receives or the
gross amount of recovery before any successful
counterclaims are factored in. For example,
suppose that a personal-injury lawyer agrees to
represent the
PLAINTIFF for a one-third contin-
gent fee and recovers a $100,000 jury
VERDICT.
However, the jury also returned a verdict on the
defendant’s counterclaim for $10,000. Should
the plaintiff’s lawyer receive a $33,000 contin-
gent fee or a $30,000 contingent fee?
Section 35 of the Restatement (Third) of the
Law Governing Lawyers provides that “when a
lawyer has contracted for a contingent fee, the
lawyer is entitled to receive the specified fee only

when and to the extent the client receives
payment.” Comment d to section 35 provides
that “[i]n the absence of [a] prior agreement to
the contrary, the amount of the client’s recovery
is computed net of any offset, such as a recovery
by an opposing party on a counterclaim.” To
date, Section 35 has been adopted only in Texas.
Other states calculate the fee based on the
client’s full award, regardless of whether the
client ever actually recovers the full amount
awarded, reasoning that such a calculation
better reflects the comprehensive value of the
attorney’s services and the economic value
received by the client.
CONTINUANCE
The adjournment or postponement of an action
pending in a cour t to a later date of the same or
another session of the court, granted by a court in
GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION
168 CONTINGENT FEE
CONTINGENT FEE 169
Contingent Fee Agreement
NEW HAMPSHIRE
Contingent Fee Agreement
I, ________________________________________, hereby employ and appoint _______________________ of ___________________
________________________ my attorney(s) to represent me in my possible cause of action against _____________________________
__________________________________________________________ and other possible defendants, which cause of action arises out
of ____________________________________, which occurred on or about ___________________________ in ___________________
__________________.
I agree to pay my attorneys a contingency fee of _______________________________ percent (______%) of any sums obtained or

recovered by suit, settlement, or otherwise in this matter. This contingent fee shall be calculated on the gross amount of any recovery—
that is, prior to any reduction for costs, expenses, liens, medical bills, and other claims.
I further authorize ________________________________________ to incur reasonable expenses in connection with the prosecution or
settlement of said case and agree to reimburse __________________________________________ in the amount of the actual expenses
so incurred to the extent that any recovery is had by way of settlement, verdict, or judgment. To the extent that no recovery is had, the
expenses advanced shall be reimbursed to ________________________.
I agree to pay for costs incurred and out-of-pocket disbursements made by the attorney, including, but not limited to, filing fees, witness
fees, travel (at a rate of ______________), sheriff’s fees, expenses of depositions, investigative expenses, expert witness fees, charges for
photocopies (at a rate of ___________________), charges for facsimiles (at a rate of ________________________), and telephone, and
other incidental expenses. The attorney agrees to obtain the client’s approval before incurring any single cost or disbursement in excess
of $_______________, and incurring total costs in excess of $_______________.
In the event that a “structured settlement” is reached, the attorneys’ fees shall be computed on the basis of the present value of the
structured settlement at the time of settlement. The attorneys’ fees, computed on the basis of “present value,” shall be paid at the time of
any settlement. Attorneys will make no compromise or settlement in this matter without client’s approval. Client will be notified whenever
an offer of settlement or compromise is received, along with the attorney’s recommendation. Likewise, client agrees to make no
compromise or settlement in this matter without first notifying the attorney. Client understands that a consent to settlement orally given by
the client to the attorney, and which the attorney orally communicates to the opposing side, will bind the client to the settlement even
though formal settlement documents have not been signed by the client.
Attorney(s) may terminate representation of the client for any just reason as permitted or required under the Rules of Professional Conduct
or as permitted by the Rules of Court of the State of New Hampshire.
In the event of termination of representation, the attorneys shall be paid a fee equal to the reasonable value of the attorneys’ services prior
to such termination of attorneys, which shall be determined as follows:
1. If the parties had reached an agreed-to settlement, then the contingent fee agreed to herein;
2. If the opposing parties have offered settlement in amounts not yet accepted by the client, then the contingent fee on the offered
settlement, even if the final settlement or verdict amount is less;
3. If no settlement offer has been made, the attorneys will bill the client for all services rendered at hourly rates described herein.
The Client agrees that, if termination occurs and this matter ultimately results in recovery, the attorney shall have a lien on the recovery to
secure payment at the time of disbursement of the proceeds. In the event of a dispute, client agrees to escrow funds sufficient to satisfy
the attorneys’ claim.
I agreed to this Contingent Fee Agreement after having been advised by ___________________________ of my right under RSA 508:12

to retain them under an agreement whereby my attorneys would be compensated on an hourly basis computed at the rate of ___________
_____________________________ ($________) dollars per hour for services provided by ____________________________________
attorney(s), and ________ ($________) dollars per hour for the services provided by paralegals.

I have read the above Agreement with inserted provisions before signing it.

Signed this _______________ day of _______________________, 20___.
_______________________________________ _______________________________________________
Witness Client
I/We hereby agree to assume professional responsibility in the above action entrusted to us and to make no settlement without the
consent of our client(s).
_______________________________________________

_______________________________________________
Attorney(s)
A sample contingent
fee agreement between
an attorney and a
client.
ILLUSTRATION BY GGS
CREATIVE RESOURCES.
REPRODUCED BY
PERMISSION OF GALE,
A PART OF CENGAGE
LEARNING.
GALE ENCYCLOPEDIA OF AMERICAN LAW, 3
RD E DITION
response to a motion made by a party to a
lawsuit. The entry into the trial record of the
adjournment of a case for the purpose of formally

evidencing it.
Courts, by virtue of their authority to hear
and determine cases, have inherent discretion-
ary power to grant or deny continuances,
subject to restrictions imposed by statute.
Continuances are granted when necessary to
avert a
MISCARRIAGE OF JUSTICE but will be denied
if sought merely for the purpose of delay.
Criminal defendants are entitled to a
SPEEDY
TRIAL
unless GOOD CAUSE justifies a continuance
of the action.
In
RULING on a motion for a continuance, a
court examines all the facts and circumstances
of a case—in particular, the applicant’s
GOOD
FAITH
, the purpose and necessity for the
postponement, the probable advantage that
could result from the continuance, and the
possibility of prejudice to the rights of other
parties. If there are multiple defendants in a
case, a continuance granted to one of them
postpones the trial of the case against all of
them. A continuance is usually granted if
requested by a
DEFENDANT, since the PLAINTIFF

should have ade quately prepared his or her case
before commencing the action.
Acourtcan,
SUA SPONTE (on its own motion),
order a continuance in certain instances, such as
when none of the parties appears on the date of
the hearing.
A continuance can occur by
OPERATION OF
LAW
when a case has not been tried or otherwise
disposed of during a particular term because of
unanticipated problems, such as the death of
the presiding judge. The case is automatically
postponed until the following term.
Parties in a lawsuit file pleadings (written
statements presenting each side of the case
before trial to elucidate the issues to be
resolved). A plaintiff whose complaint fails
to state a
CAUSE OF ACTION is not entitled to a
continuance to correct this failure, but a
defendant can make a motion for a dismissal
of the actio n. Nor can a defendant whose
answer to the plaintiff’s complaint does not
allege a meritorious defense cure this deficiency
by seeking a continuance, but the plaintiff might
make a motion for a
SUMMARY JUDGMENT in his
or her favor. A continuance may be granted,

however, in a case that was scheduled for
trial before the issues were joined or clearly
established.
After a trial has begun or while motions are
made pending the decision, a court can grant
a continuance provided adequate grounds exist.
The trial of a case that has been remanded
(sent back) by an appellate court to a lower
court for a new trial may be continued at a later
date if there is not enough time to prepare for
the new trial.
When the parties consent to or stipulate a
postponement of a case, a court will grant a
continuance only if their agreement meets its
approval.
Grounds
Continuances are granted only if valid grounds
exist that justify the postponement of the action.
For example, a court will continue a case in
which all the interested parties have not
appeared in order to bring them into the action
so that they may present their side of the case.
If
SERVICE OF PROCESS has not been properly
made upon a defendant, a court may grant a
continuance to perfect service so that a plaintiff
will not be deprived of an opportunity to have
the action tried. A delay in filing pleadings,
which surprises the opposing party and affects
the issues in an action, ordinarily entitles the

adverse party to a continuance, because that
party must be given time to prepare a respo nse
before the trial in order to prevent prejudice to
his or her rights. A continuance may be granted
for the accidental loss or destruction of papers
in an action provided they cannot be readily
replaced and the applicant for the continuance
was not responsible for their loss.
Lack of Preparation Where the party making
the motion is guilty of inexcusable ignorance,
delay, or
NEGLIGENCE in preparing the case, the
court will deny a motion for a continuance. An
applicant who can, however, demonstrate some
legal or equitable reason or exercise of diligence
in trying to prepare for the case may win a
continuance.
Change of Counsel Withdrawal of legal coun-
sel or employment of new counsel immediately
preceding or during a trial does not necessarily
warrant a continuance of the action. For
example, if it is clear that a party has changed
attorneys a number of times solely as a dilatory
tactic for the purpose of delay, that party will be
denied a continuance. Only where the circum-
stances of the case demonstrate that a miscar-
riage of justice will ensue from a denial of a
GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION
170 CONTINUANCE
continuance will a court seriously consider

postponing the action.
Pendency of Action A continuance is granted
when it is in the interests of justice to await the
outcome of another proceeding affecting the
same parties or where the interests of the parties
are closely related, such as in cases dealing with
VICARIOUS LIABILITY.
Illness The illness of a party to a lawsuit
justifies a continuance only if injustice would
result from proceeding with the case . If an
illness is feigned or alleged merely for the
purpose of delay, the applicant’s motion will be
denied and the applicant might be held in
CONTEMPT. A party who becomes ill before trial
should notify the court and the other parties,
as soon as it is reasonably practicable to
provide such notice, that his or her condition
may jeopardize his or her participation in the
proceedings. An
AFFIDAVIT or certificate of a
physician that a party’s illness precludes his or
her presence at trial should be filed with the
court.
The illness of the judge presiding over the
trial operates as a continuance of the action.
Determination
A motion for a continuance is heard by the
court which rules upon it after an evaluation of
the evidence before it. If a continuance is
granted, the trial court will set its duration with

regard to the rights of both parties and impose
any necessary restrictions. During the time of
the adjournment the court may modify or
revoke its order if reasonable cause is shown or
if the court is satisfied that no injustice will
result.
Successive continuances sought by a party
are scrutinized closely by a court because there
is a likelihood that they are sought for dilatory
purposes. Unless the applicant clearly estab-
lishes that a postponement is essential to the
integrity of the judicial process and a preserva-
tion of the rights of the parties, it will be denied.
A motion based upon newly discovered evi-
dence will be denied if the applicant could have
discovered the evidence sooner by the use of
reasonable efforts.
A continuance expires on the date specified
in the court order. If the basis for the
continuance ceases to exist prior to that date,
the court may revoke its order and require that
the case proceed to trial.
Waiver
A party relinquishes or waives the right to
obtain a continuance if he or she (1) fails to
request one; (2) proceeds with the case after the
motion for a continuance has been denie d
without making an exception to the ruling; or
(3) voluntarily discontinues the action.
FURTHER READINGS

Chapter 19, Continuance NTE (Nature of Action 750).
Available online at />gppa19.pdf; website home page:
(accessed September 1, 2009).
Saltzbury, Stephen A., and Daniel J. Capra. 2008. American
Criminal Procedure: Cases and Commentary. Eagan,
Minn.: West.
Yeazell, Stephen C. 1998. Federal Rules of Civil Procedures:
With Selected Statutes and Cases. Frederick, Md.: Aspen.
CROSS REFERENCES
Miscarriage of Justice; Motion; Pleading; Speedy Trial.
CONTINUING LEGAL EDUCATION
The purpose of continuing legal education is to
maintain or sharpen the skills of licensed
attorneys and judges. Accredited courses exam-
ine new areas of the law or review basic practice
and trial principles. Programs for continuing
LEGAL EDUCATION are sponsored by state, local,
and federal bar associations, law firms, law
schools, and groups such as the
AMERICAN BAR
ASSOCIATION
(ABA) and the American Law
Institute.
Continuing legal education is mandatory in
40 states; voluntary programs are offered in the
remaining 10. Courses are approved by state
boards that oversee continuing education. In
states with mandatory continuing legal educa-
tion, attorneys receive credits for attending
lectures and seminars taught by respected

attorneys, judges, and scholars. The courses
cover a variety of topics involving virtually all
areas of practice. Written program materials are
usually included as part of the tuition fee.
A 1974 informal poll conducted by state and
local bar associations revealed widespread
support for compulsory continuing legal educa-
tion. The measure was favored to ensure
professional competence and to improve the
public image of lawyers. Supporters believed
that continuing legal education would reduce
the number of
LEGAL MALPRACTICE suits, keep
lawyers updated on important changes in the
law, and improve the representation of clients.
A year later, in 1975, Minnesota became the first
GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION
CONTINUING LEGAL EDUCATION 171
state to adopt mandatory continuing legal
education. The Minnesota Legislature appeared
ready to take over the administration of
continuing legal education; the Minnesota
Supreme Court, however, preferred judicially
mandated education, and took appropriate
steps to institute it. The court ordered all
Minnesota lawyers and judges to complete 45
hours of post-admission legal education every
three years.
The Code of
PROFESSIONAL RESPONSIBILITY

adopted by every state maintains that lawyers
must remain proficient in their work. Continu-
ing leg al education is one way to achieve
professional competence. Other professions
such as medicine, education, and accounting
also require continuing education. Beginnin g in
the 1990s, states added specific content require-
ments. For example, Minnesota requires that in
each reporting cycle attorneys must take three
hours of ethics-related coursework and two
hours of coursework related to the elimination
of bias in the legal profession. The state of
California requires attorneys to take one hour
per reporting cycle of coursework on the
prevention and detection of substance abuse.
The delivery of continuing legal education
has changed over time. Although most pro-
grams are presented at the local level, many
providers now videotape sessions and replay
them at a variety of sites around a state. This
allows attorneys in rural areas and more remote
locations to earn their credits locally. In
addition, national providers such as the ABA
produce seminars that are delivered through
satellite transmissions to cities around the
United States.
In most states where continuing legal
education is required, nonpracticing lawyers
may elect to be on restricted status. This means
they can maintain their law

LICENSE but do not
have to fulfill continuing education require-
ments. Sometimes hardship or
MITIGATING
CIRCUMSTANCES
exempt practicing attorneys from
a continuing education requirement.
FURTHER READINGS
MacCrate, Robert, ed. 1992. Legal Education and Professional
Development: An Educational Continuum. Eagan: West.
Sheran, Robert J., and Laurence C. Harmon. 1976.
Minnesota Plan: Mandatory Continuing Legal Education
for Lawyers and Judges as a Condition for the Maintain-
ing of Professional Licensing. Reprinted in Fordham Law
Review (May).
Tamayo-Calabrese, Macarena, Annette Cook, and Shirley
Meyer. August 2002. “Continuing Legal Education in
the United States.” Issues of Democracy 7:2.
CROSS REFERENCE
Legal Education.
CONTRA
Against; conflicting; opposite.
A contra-balance is the amount in an
account of a creditor that is the opposite of
the usual balance of such an account. It is an
ACCOUNT RECEIVABLE (a debt owed to the creditor)
but with a credit balance (an amount owed to
the debtor greater than what is owed to the
creditor). The creditor therefore owes the
debtor money, the opposite of the normal

debtor-creditor relationship.
CONTRABAND
Any property that it is illegal to produce or possess.
Smuggled goods that are imported into or exported
from a country in violation of its laws.
Contraband confiscated by law enforcement
authorities upon the arrest of a person for the
crimes of production or possession of such
goods will not be returned, regardless of the
outcome of the prosecution.
CONTRACT WITH AMERICA
In the historic 1994 midterm elections, Repub-
licans won a majority in Congress for the first
time in 40 years, partly on the appeal of a
platform called the Contract with America. Put
forward by House Republicans, this sweeping
ten-point plan prom ised to reshape govern-
ment. Its main theme was the decentralization
Marijuana plants,
such as these seized
by a Miami police
officer, are considered
contraband because
it is illegal to produce
or possess them.
AP IMAGES
GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION
172 CONTRA
of federal authority: deregulation, tax cuts,
reform of social programs, increased power

for states, and a balanced
FEDERAL BUDGET were
its chief ambitions. With unusual speed, all
ten items came to a vote in the House of
Representatives within 100 days, and the House
passed nine of the ten measures. Yet, even as
House Speaker Newt Gingrich (R-Ga.) com-
pared the plan to the most important political
reforms of the twentieth century, progress on
the contract stalled. Senate Republicans were
slow to embrace it, Democrats in both cham-
bers denounced it, and President
BILL CLINTON
threatened to veto its most radical provisions.
Only three of the least controversial measures
had become law by the end of 1995 as Congress
and the White House battled bitterly over the
federal budget.
On the surface, the contract differed little
from other modern Republican platforms. It
began with a statement of three “core” princi-
ples in the form of an argument: the federal
government is too big and unresponsive (ac-
countability), and big government programs sap
individual and family willpower (responsibility)—
and thus an overtaxed and overregulated
citizenry cannot pursue the American Dream
(opportunity). Republicans had been saying as
much for at least two decades. Although
Democrats had controlled Congress for more

than 40 years with an almost opposite view of
government’s duty to its people, Republicans had
held the White House from 1980 to 1992. The
election of President Clinton in 1992 was a
striking setback for
REPUBLICAN PARTY strategists.
Yet, they took encouragement from voter
discontent with the pace of Clinton’s legislative
plans, two key provisions of which—an
economic stimulus package and health care
reform—failed to pass even with a Democratic
majority in Congress. For the mid-1994 congres-
sional elections, they intended to capitalize on
this discontent with a platform that promised
quick and dramatic change.
Toward this end, the Contrac t with America
made two promises “to restore the bonds of
trust between the people and their elected
representatives.” First, it promised to change
the way Congress works by requiring that
lawmakers follow the same workplace laws as
the rest of the country—notably,
SEXUAL HARASS-
MENT
laws—and by strictly reforming the
sluggish committee process in the House of
Representatives. Second, it promised that the
House would vote on the ten key planks of the
contract within the first one hundred days of
the new Congress. The contract gave these ten

planks names such as the Fiscal Responsibility
Act, the Taking Back Our Streets Act, and
the Personal Responsibility Act. The contract
promised action on the followin g issues: the
federal deficit, crime, welfare reform, family
values, middle-class tax cuts, national defense,
SOCIAL SECURITY, federal deregulation and capital
gains tax cuts, legal reform,
CIVIL LAW and
PRODUCT LIABILITY, and term limits for federal
lawmakers.
The actua l proposals repr esented a mixture
of old and new ideas. Republicans had long
supported deregulation of industry, tort re-
form, and middle-class tax cuts. As a d eficit
reduction solution, the line-item veto was an
old idea: Ever since the 1980s, Republicans had
called for a presidential power to veto specific
parts of federal sp ending bills (rathe r than the
entire bills). More revolutionary was the
contract’s related proposal: a
CONSTITUTIONAL
AMENDMENT
requiring a balanced budget. In the
same sense, the welfare reform proposals
reflected a long-running debate and yet offere d
ambitiously strict limits on spending, el igibility,
and administration, and even sought to transfer
authority over traditionally federal programs to
the states. Other proposals grew out of more

recent concerns. The crime reform measure
was a Republican effort to scale back social
spending and increase law enforcement spend-
ing, in reaction to the Clinton crime bill of
1994; and proposals to curb U.S. military
In September 1994,
Newt Gingrich and a
group of Republican
congressional
candidates
announced their
plans for a platform
called Contract with
America. The ten-
point plan helped the
Republican Party win
a majority in
Congress.
AP IMAGES
GALE ENCYCLOPEDIA OF AMERICAN LAW, 3
RD E DITION
CONTRACT WITH AMERICA 173
involvement in the United Nations’ peacekeep-
ing missions reflected Republican criticism of
Clinton’s decisio ns to send tro ops to Somalia
and Ha iti.
The contract met with mixed results in
1995. The House Republican leadership did
indeed put each item to a vote within the first
100 days. It divided each item into one or

more bills, and 31 of the resulting 32 measures
passed—only one, for congression al term limits,
failed. The Sen ate moved much more slowly. In
part, this was because the Senate, as a debating
body, customarily proceeds more cautiously.
Another reason was that the senators, unlike
their first-year counterparts in the House, were
far less eager to pass sweeping reforms: The
Senate killed the proposal for a constitutional
amendment o n the budget, for example, and
simply delayed action on several other b ills.
President Clinton’s promise to veto any far-
ranging welfare and budgetary proposals also
crimped Republican plans, and by November
1995 this threat had produced a bitter standoff
that resulted in the temporary closing of the
federal government.
Three contract proposals becam e law: the
Congressional Accountability Act of 1995 (Pub.
L. No. 104-1, 109 Stat. 3), which requires
Congress to follow eleven workplace laws;
the Unfunded Mandates Reform Act of 1995
(Pub. L. No. 104-4, 109 Stat. 48), which restricts
Congress from imposing mandates on states
that are not adequa tely funded; and the
Paperwork Reduction Act of 1995 (Pub. L.
No. 104-13, 109 Stat. 163), which reduces
federal paperwork requirements.
CONTRACTS
Agreements between two entities, creating an

enforceable obligation to do, or to refrain from
doing, a particular thing.
Nature and Contractual Obligation
The purpose of a contract is to establish the
agreement that the parties have made and to fix
their rights and duties in accordance with that
agreement. The courts must enforce a valid
contract as it is made, unless there are grounds
that bar its enforcement.
Statutes prescribe and restrict the terms of a
contract where the general public is affected.
The terms of an insurance contract that protect
a
COMMON CARRIER are controlled by statute in
order to safeguard the public by guaranteeing
that there will be financial resources available in
the event of an accident.
The courts may not create a contract for
the parties. When the parties have no express
or implied agreement on the essential terms of
a contract, there is no contract. Courts are only
empowered to enforce contracts, not to write
them, for the parties. A contract, in order to
be enforceable, must be a valid. The function
of the court is to enforce agreements only if
they exist and not to create them through the
imposition of such terms as the court considers
reasonable.
It is the policy of the law to encourage the
formation of contracts between competent

parties for lawful objectives. As a general rule,
contracts by competen t persons, equitably
made, are valid and enforceable. Parties to a
contract are bound by the terms to which they
have agreed, usually even if the contract appears
to be improvident or a bad bargain, as long as it
did not result from
FRAUD, duress, or UNDUE
INFLUENCE
.
The binding force of a contract is based on
the fact that it evinces a meeting of minds of
two parties in
GOOD FAITH. A contract, once
formed, does not contemplate a right of a party
to reject it. Contracts that were mutually
entered into between parties with the capacity
to contract are binding obligations and may not
be set aside due to the caprice of one party or
the other unless a statute provides to the
contrary.
Types of Contracts
Contracts under Seal Traditionally, a contract
was an enforceable legal document only if it was
stamped with a seal. The seal represented that
the parties intended the agreement to entail
legal consequences. No legal benefit or detri-
ment to any party was required, as the seal was a
symbol of the solemn acceptance of the legal
effect and consequences of the agreement. In

the past, all contracts were required to be under
seal in order to be valid, but the seal has los t
some or all of its effect by statute in many
jurisdictions. Recognition by the courts of
informal contracts, such as implied contracts,
has also diminished the importance and em-
ployment of formal contracts under seal.
GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION
174 CONTRACTS
Express Contracts In an express contract, the
parties state the terms, either orally or in
writing, at the time of its formation. There is
a definite written or oral offer that is accepted
by the offeree (i.e., the person to whom the
offer is made) in a manner that explicitly
demonstrates consent to its term s.
Implied Contracts Although contracts that are
implied in fact and contracts implied in law are
both called implied contracts, a true implied
contract consists of obligations arising from a
mutual agreement and intent to promise, which
have not been expressed in words. It is
misleading to label as an implied contract one
that is implied in law because a contract implied
in law lacks the requisites of a true contract. The
term quasi-contract is a more accurate desig-
nation of contracts implied in law. Implied
contracts are as binding as express contracts. An
implied contract depends on
SUBSTANCE for its

existence; therefore, for an implied contract to
arise, there must be some act or conduct of a
party, in order for them to be bound.
A contract implied in fact is not expressed by
the parties but, rather, suggested from facts and
circumstances that indicate a mutual intention
to contract. Circumstances exist that, according
to the ordinary
COURSE OF DEALING and common
understanding, demonstrate such an intent that
is sufficient to support a finding of an implied
contract. Contracts implied in fact do not
arise contrary to either the law or the express
declaration of the parties. Contracts implied in
law (quasi-contracts) are distinguishable in that
they are not predicated on the assent of the
parties, but, rather, exist regardless of assent.
The implication of a mutual agreement
must be a reasonable deduction from all of the
circumstances and relations that contemplate
parties when they enter into the contract or
which are necessary to effectuate their intention.
No implied promise will exist where the relations
between the parties prevent the inference of a
contract.
A contract will not be implied where it
would result in inequity or harm. Where doubt
and divergence exist in the minds of the parties,
the court may not infer a contractual relation-
ship. If, after an agreement expi res, the parties

continue to perform according to its terms, an
implication arises that they have mutually
assented to a new contract that contains the
same provisions as the old agreement.
A co ntract implied in fact, which is inferred
from the circumstances, is a true contract,
whereas a contract implied in law is actually an
obligation imposed by law and treated as a
contract only for the purposes of a remedy.
With respect to contracts implied in fact, t he
contract defines the duty; in the case of quasi-
contracts, the duty defines and imposes the
agreement upon the parties.
Executed and Executory Contracts An exe-
cuted contract is one in which nothing remains
to be done by either party. The phrase is, to a
certain extent, a misn omer because the comple-
tion of performances by the parties signifies
that a contract no longer exists. An executory
contract is one in which some future act or
obligation remains to be performed according
to its terms.
Bilateral and Unilateral Contracts The ex-
change of mutual, reciprocal promises between
entities that entails the performance of an act,
or forbearance from the performance of an
act, with respect to each party, is a
BILATERAL
CONTRACT
. A bilateral contract is sometimes called

a two-sided contract because of the two promises
that constitute it. The promise that one party
makes constitutes sufficient consideration (see
discussion below) for the promise made by
the other.
A
UNILATERAL CONTRACT involves a promise
that is made by only one party. The offeror (i.e.,
a person who makes a proposal) promises to do
a certain thing if the offeree performs a requested
act that he or she knows is the basis of a legally
enforceable contract. The performance constitu-
tes an acceptance of the offer, and the contract
then becomes executed. Acceptance of the offer
may be revoked, however, until the performance
has been completed. This is a one-sided type of
contract because only the offeror, who makes the
promise, will be legally bound. The offeree may
act as requested, or may refrain from acting, but
may not be sued for failing to perform, or even
for abandoning performance once it has begun,
because he or she did not make any promises.
Unconscionable Contracts An unconsciona-
ble contract is one that is unjust or unduly one-
sided in favor of the party who has the superior
bargaining power. The adjective unconscionable
implies an affront to fairness and decency. An
unconscionable contract is one that no mentally
competent person would accept and that no fair
GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION

CONTRACTS 175
and honest person would enter into. Courts
find that unconscionable contracts usually
result from the exploitation of consumers who
are poorly educated, impoverished, and unable
to shop around for the best price available in the
competitive marketplace.
The majority of unconscionable contracts
occur in consumer transactions. Contractual
provisions that indicate gross one-sidedness in
favor of the seller include limiting damages or the
rights of the purchaser to seek court relief against
the seller, or disclaiming a warranty (i.e., a
statement of fact concerning the nature or caliber
of goods sold the seller, given in order to induce
the sale, and relied upon by the purchaser).
Unconscionability is ascertained by examin-
ing the circumstances of the parties when the
contract was made. This doctrine is applied only
where it would be an affront to the integrity of
the judicial system to enforce such a contract.
Adhesion Contracts Adhesion contracts are
those that are drafted by the party who has
the greater bargaining advantage, providing the
weaker party with only the opportunity to
adhere to (i.e., to accept) the contract or to
reject it. (These types of contract are often
described by the saying “Take it or leave it.”)
They are frequently employed because most
businesses could not transact business if it were

necessary to negotiate all of the terms of every
contract. Not all adhesion contracts are uncon-
scionable, as the terms of such contracts do not
necessarily exploit the party who assents to the
contract. Courts, however, often refuse to
enforce contracts of adhesion on the grounds
that a true meeting of the minds never existed,
or that there was no acceptance of the offer
because the purchaser actually had no choice in
the bargain.
Aleatory Contracts An
ALEATORY CONTRACT is a
mutual agreement the effects of which are
triggered by the occurrence of an uncertain
event. In this type of contract, one or both
parties assume risk. A fire insurance policy is a
form of aleatory contract, as an insured will not
receive the proceeds of the policy unless a fire
occurs, an event that is uncertain to occur.
Void and V oidable Contracts Contracts can
be either void or
VOIDABLE. A void contract
imposes no legal rights or obligations upon the
parties and is not enforceable by a court. It is, in
effect, no contract at all.
A voidable contract is a legally enforceable
agreement, but it may be treated as never having
been binding on a party who was suf fering from
some legal disability or who was a victim of
fraud at the time of its execution. The contract

is not void unless or until the party chooses to
treat it as such by opposing its enforcement.
A voidable contract may be ratified eithe r
expressly or impliedly by the party who has
the right to avoid it. An express ratification
occurs when that party who has become legally
competent to act declares that he or she accepts
the term s and obligations of the contract. An
implied ratification oc curs when the party, by
his or her conduct, manifests an intent to ratify
a contract, such as by performing according to
its terms. Ratification of a contract entails the
same elements as formation of a new contract.
There must be intent and complete knowledge
of all material facts and circumstances. Oral
ACKNOWLEDGMENT of a contract and a promise to
perform constitute sufficient ratification. The
party who was legally competent at the time that
a voidable contract was sign ed may not,
however, assert its voidable nature to escape
the enforcement of its terms.
Which Law Governs
Although a general body of contract law exists,
some aspects of it, such as construction (i.e., the
process of ascertaining the proper explanation of
equivocal terms), vary among the different
jurisdictions. When courts must select the law
to be applied with respect to a contract, they
consider what the parties intended as to which
law should govern; the place where the contract

was entered into; and the place of performance
of the contract. Many courts apply the modern
doctrine of the “grouping of contracts” or the
“center of gravity,” in which the law of the
jurisdiction that has the closest or most signifi-
cant relationship with the matter in issue applies.
Courts generally apply the law t hat the
parties expressly or impliedly intend to govern
the contract, provided that it bears a reason able
relation to the transaction and the parties acted
in good faith. Some jurisdictions follow the law
of the place where the contract was performed,
unless the intent of the parties is to the co ntrary.
Where foreign law governs, contracts may be
recognized and enforced under the doctrine of
COMITY (i.e., the acknowledgment that one
nation gives within its territo ry to the legislative,
executive, or judicial acts of another nation).
GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION
176 CONTRACTS
Elements of a Contract
The requisites for formation of a legal contract
are an offer, an acceptance, competent parties
who have the legal capacity to contract, lawful
subject matter, mutuality of agreement, consid-
eration,
MUTUALITY OF OBLIGATION, and, if re-
quired under the
STATUTE OF FRAUDS, a writing.
Offer An offer is a promise that is, by its terms,

conditional upon an act, forbearance, or return
promise being given in exchange for the
promise or its performance. It is a demonstra-
tion of willingness to enter into a bargain, made
so that another party is justified in understand-
ing that his or her assent to the bargain is
invited and will conclude it. Any offer must
consist of a statement of present intent to enter
a contract; a definite proposal that is certain in
its terms; and communication of the offer to the
identified, prospective offeree. If any of these
elements are missing, there is no offer to form
the basis of a contract.
Preliminary Negotiations, Advertisements,
Invitations to Bid Preliminary negotiations are
clearly distinguished from offers because they
contain no demonstration of present intent to
form contractual relations. No contract is
formed when prospective purchasers respond
to such terms, as they are merely invitations or
requests for an offer. Unless this interpretation
is emplo yed, any person in a position similar to
a seller who advertises goods in any medium
would be liable for numerous contracts when
there is usually a limited quantity of merchan-
dise for sale.
An advertisement, price quotation, or cata-
logue is customarily viewed as only an invitation
to a customer to make an offer and not as an
offer itself. The courts reason that an establish-

ment might not have sufficient stock to satisfy
potential demand and that it would not be
reasonable for a customer to expect to form a
binding contract by responding to advertise-
ments that are intended to make consumers
aware of a product for sale. In addition, the
courts have held that an advertisement is an
offer for a unilateral contract that can be
revoked at the will of the offeror, the business
enterprise, prior to perfo rmance of its terms.
An exception exists, however, to the general
rule on advertisements. When the quantity
offered for sale is specified and contains words
of promise, such as “first come, first served,”
courts enforce the contract where the store
refuses to sell the product when the price is
tendered. Where the offer is clear, definite, and
explicit, and no matters remain open for
negotiation, acceptance of it completes the
contract. New conditions may not be imposed
on the offer after it has been accepted by the
performance of its terms.
An advertisement or request for bids for the
sale of particular property or the erection or
construction of a particular structure is merely
an invitation for offers that cannot be accepted
by any particular bid. A submitted bid is,
however, an offer, which upon acceptance by
the offeree becomes a valid contract.
Mistake in Sending Offer If an intermediary,

such as a telegraph company, errs in the
transmission of an offer, most courts hold that
the party who selected that method of commu-
nication is bound by the terms of the erroneous
message. The same rule applies to acceptances.
In reaching this result, courts regard the
telegraph company as the agent of the party
who selected it. Other courts justify the rule on
business convenience. A few courts rule that if
there is an error in transmission, there is no
contract, on the grounds that either the
telegraph company is an
INDEPENDENT CONTRAC-
TOR
and not the sender’s agent, or there has
been no meeting of the minds of the parties.
However, an offeree who knows, or should
know, of the mistake in the transmission of an
offer may not take advantage of the known
mistake by accepting the offer; he or she will be
bound by the original terms of the offer.
Termination of an Offer An offer remains
open until the expiration of its specified time
period or, if there is no time limit, until a
reasonable time has elapsed. A reasonable time
is determined according to what a reasonable
person would consider sufficient time to accept
the offer.
The death or insanity of either party, before
an acceptance is communicated, causes an offer

to expire. If the offer has been accepted, the
contract is binding, even if one of the parties
dies thereafter. The destruction of the subject
matter of the contract, conditions that render
the contract impossible to perform, or the
SUPERVENING illegality of the proposed contract
results in the termination of the offer.
When the offeror, either verbally or by
conduct, clearly demonstrates that the offer is
no longer open, the offer is considered revoked
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CONTRACTS 177