Contracts Cases and Theory of Contractual Obligation

Contracts Cases and Theory of Contractual Obligation: Understanding the Basics

Contracts are an essential part of any business transaction, and they are legally binding agreements between two parties. In the case of any dispute, it is important to understand the basics of contracts cases and the theory of contractual obligation.

What is a Contract?

A contract is an agreement between two or more parties that is legally binding. It can be a written or verbal agreement and must include certain elements to be enforceable. These elements include an offer, acceptance, and consideration.

Offer: An offer is a proposal made by one party to another, expressing an intent to enter into a contract.

Acceptance: Acceptance is the agreement by the other party to the proposal made in the offer.

Consideration: Consideration is the exchange of something of value between the parties. This can include money, services, or goods.

Once these elements are present, a contract is formed. Contracts can be simple or complex, and can involve a wide variety of terms and conditions.

Contracts Cases

When disputes arise between parties in a contract, they may end up in court. In court, judges look to contracts cases to help determine the outcome of the dispute. These cases provide legal precedent for how courts have interpreted and applied contract law in the past.

One example of a contract case is the case of Lucy v. Zehmer. In this case, two men were drinking in a bar, and one of them offered to sell his farm to the other for $50,000. The offer was written on the back of a bar napkin, but both parties signed it. The seller later claimed that he did not intend for the offer to be taken seriously, but the court found that it was a valid contract and the sale of the farm had to go through.

Another example is the case of Carlill v. Carbolic Smoke Ball Co. In this case, a company claimed that their product, a smoke ball, could prevent people from getting the flu. They offered a reward to anyone who got sick after using the ball. When a woman got sick after using the ball, she claimed the reward, but the company refused to pay. The court found that the advertisement was a valid contract and that the woman was entitled to the reward.

Theory of Contractual Obligation

The theory of contractual obligation refers to the idea that when two parties enter into a contract, they are obligated to fulfill their part of the agreement. This means that if one party fails to meet their obligations, the other party can seek legal remedies such as damages or specific performance.

One important aspect of the theory of contractual obligation is the idea of good faith. This means that both parties are expected to act honestly and fairly in their dealings with each other. If one party acts in bad faith, they may be found to have breached the contract and could be held liable for damages.


Contracts cases and the theory of contractual obligation are important concepts to understand for anyone involved in business transactions. By understanding the basics of contracts and the legal precedent set by contract cases, parties can better protect their interests and avoid disputes. Additionally, by understanding the theory of contractual obligation, parties can ensure that they are meeting their obligations and acting in good faith in their dealings with others.