Contract (Lat. contrahere, to draw together). As its derivation denotes, a contract is a concurrence of the minds of two or more parties in reference to something to be done by one or both, and imports mutuality; that is to say, each of the contracting parties may undertake the performance of something for the benefit of the other, or one may promise to do a certain thing in consideration of what is done by the other at the time of the making of such promise, or has been previously done. Contracts may be either in express terms or implied from the acts of the parties; they may also be verbal or in writing, and at common law both forms are equally obligatory; but by statute in England and in the United States it is required that a promise shall be in writing, and signed by the party to be charged - 1, when it is not to be performed within one year from the making thereof; 2, when it ia to answer for the debt or default of another person; 3, when it is made in consideration of marriage, except mutual promises to marry; 4, in cases of sales of goods beyond a certain amount or value (in this country usually $50), unless there was delivery of part, or payment in part; 5, when the contract is for the sale of lands or some interest in lands, or leasing for a longer period than one year.
In all these cases it is also required that the consideration shall be expressed in the writing containing the contract. An instrument under seal was at common law subject to certain legal incidents, essentially differing from those belonging to other contracts. The promise in such case is called a covenant; no consideration was required to be expressed, nor in an action brought upon such an instrument could the want of a consideration be set up as a defence, the seal being deemed of such weighty import that a consideration was presumed. The doctrine of the common law in relation to sealed instruments is peculiar, indeed may be called sui generis. Originally the seal was used in place of the signature, many being unable to write their names. Usually the seal had something to distinguish it, so that to some extent it could be identified; coats of arms were introduced as the devices of seals during the crusades, when it was the custom to put such devices upon the shields of knights. At that time the sealing of a deed was a sufficient execution, and the form of attestation, viz., "sealed and delivered," without mentioning the signing, has continued even to the present time, notwithstanding the statute above mentioned requiring deeds to be signed (which statute was passed in the reign of Charles II.). But after the signature became necessary, and which, as we should have supposed, would have superseded the use of the seal, the old custom of sealing still continued, and, what was more singular, had the same legal consequence as a formality.
There might have been some reason for this as respected those who maintained the use of their own individual devices upon their seals; but as to the great mass of the people, the supposition of each man having his private seal was an absurd fiction, and accordingly a common stamp, without any device at all, could be used for making an impression. It was required at common law that there should be an impression upon some soft substance, usually wax, which was affixed to the deed which it authenticated. The definition of a seal by Coke was: Sigillum est cera impressa; the wax alone without an impression would not be a seal, but it mattered not what was impressed. It became usual, especially in this country, to substitute small slips of paper for seals, which were attached by wax or wafers to the deed. While the paper was moist, an impression could be made that would be perceptible, but, as before remarked, the impression itself had nothing distinctive; hence in some of the states it has been altogether dispensed with, and a mere scroll or flourish with the pen substituted in place thereof. This would seem to be, in fact, abolishing the use of a seal as a distinct formality; yet, in all the modes of sealing, whether by wax, paper, or scroll, the legal effect has remained the same.
In some states it has been provided by statute that the want of consideration may be proved in avoidance of a sealed instrument; but other incidents of sealed instruments are still in force, the most important of which is, that a longer time is allowed for bringing an action thereon, usually 20 or 10 years instead of 6, which is allowed in case of simple contracts. - The essential rules in respect to contracts are: 1, that the parties must be legally competent to make a contract; 2, there must be a sufficient consideration; 3, the contract itself, or what is agreed to be done, must be lawful; 4, in determining the legal effect of some contracts, it sometimes becomes necessary to refer to the laws of other countries, as if the contract was made or to be executed abroad, and this involves the application of rules derived from the lex loci, or law of the domicile, on the one hand, and the lex fori or rei sitce, the law of the place where the subject of the contract is situated, or with reference to which the contract is supposed to have been made, on the other. 1. As to the competency of the contracting parties, it is a universal rule that there must be sufficient age, understanding, and freedom of will. The age at which contracts may be made is different in different countries.
By the English and American law the age of 21 years is the time fixed for full legal ability to contract. All persons under that age are called infants, and are under disability to bind themselves except in certain specified cases. Among these is the right to make a contract of marriage, which by common law is allowed to males at the age of 14, and to females at the age of 12; by this is to be understood a contract in praesenti, for a promise of marriage to take effect in future is subject to the same rule as other contracts. In France the age of consent to marriage was made by the Napoleon code 18 for males and 15 for females. Another of the excepted cases is a contract by an infant for necessaries, such as clothing, food, medical aid, etc.; but he is bound only for what these necessaries are really worth, and not by any agreement he may make for a price beyond that. If, however, the infant is living with a father or guardian who provides for him, he cannot bind himself even for necessaries. So he may bind himself as an apprentice; may make a testament of chattels, if a male, at the age of 14, if a female, at the age of 12; and may be an executor at the age of 17; but these subjects are now covered by statutes.
A married woman is by the common law incompetent to make contracts; but by statute in several of the states she may convey or devise her real and personal estate, being her separate property, in the same manner as if she were unmarried. Sanity of mind is also requisite to the validity of a contract. A person who is, according to legal phraseology, non compos mentis, is incapable of making a binding contract. Intoxication was formerly held not to constitute an exemption from liability upon a contract made while in that state; but the rule is now otherwise, and it is held that a contract is void in all cases where the person at the time of making it was without sufficient understanding to know the nature and consequences of the contract, whatever may have been the cause of such disability. Mere imbecility or weakness of understanding, when it does not amount to an entire want of reason, is not sufficient to avoid a contract, but will have great weight in inducing courts to set aside a contract if there should appear to have been unfair practice or imposition by the other party.
What is called in law duress, that is to say, any improper restraint forcibly exercised over the will, is a sufficient ground for avoiding a contract made under such influence. 2. In respect to the consideration of a contract, it is a general rule that there must be something mutual. A promise made without any consideration is a nudum pactum, and without any legal effect. To this, however, there are two exceptions, viz.: instruments under seal, and bills of exchange or promissory notes which have passed into the hands of an innocent holder who has given value. The consideration sufficient to sustain a contract may be what is called a good consideration, as natural affection between near relations, or a valuable consideration, as money or some other reciprocal benefit. The former is sufficient as between the parties, but is not allowed to prevail against the just rights of creditors or other third persons; as if a parent should give money or other property to a child when he was unable to pay his debts, the gift could be avoided by creditors or others having an equitable lien. A valuable consideration may be either a benefit to the party promising, or some prejudice to the party to whom the promise is made.
Mutual promises furnish a sufficient consideration, each to sustain the other, provided they are made at the same time. If the consideration be wholly past and executed, it will be insufficient to support a promise founded thereon, unless the prior consideration was something done at the request of the party making the promise. An existing moral obligation is not in general a sufficient consideration for a promise. If a debt has been barred by the statute of limitations, or if a debtor has been discharged from payment of his debts by an insolvent law, the original indebtedment is a sufficient consideration for a new promise; but in a case where there had been merely a prior moral and not legal obligation, the weight of authority seems to be that it is an insufficient consideration. 3. The subject of the contract, or what is agreed to be done, must be lawful. A contract is not binding by which anything is agreed to be done which the law prohibits; so certain contracts are by statute avoided as being contrary to public policy. Instances of this class of cases are contracts of loan where the borrower agrees to pay more than a certain rate of interest, wager contracts, betting upon races, and the like. Money paid or deposited upon a wager or gaming contract can be recovered back.
Upon a usurious contract the lender cannot recover even the principal sum; but the borrower cannot get back what he has paid, except the excess beyond legal interest. On this subject, however, statutes have made great changes. (See Usury.) 4. As to the application of the lex loci and fori to the construction of contracts and the determination of their legal effect, and the mode and extent of expressing the same, the subject is exceedingly complicated, and will be more appropriately discussed under the proper head. We can advert here but to some few leading principles. A contract, valid at the place where it is made, is in general valid in all other places, and is to be construed according to the law of the place where made; but if the contract is made in one country and intended to be performed in another, then the general rule is that the contract is to be construed and have effect according to the law of the place where it is to be executed. As if a contract be made in England for the loan of money to be paid in the United States, interest may be taken at the rate allowed in the latter country.
But if the money should be advanced and security taken in England, although the security should be a mortgage of property in the United States, then the transaction would be governed by the law of England, and only the English rate of interest could be taken. If, however, the money was to be repaid in this country, our courts would hold the contract as having reference to our laws. - As to the remedies upon contracts, they are subject to the law of the place where the action is instituted. A foreign statute of limitations can have no effect here; but a discharge under an act of bankruptcy is recognized, though in the disposition of effects of the bankrupt in this country, claims of our own citizens are preferred.