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Contract Law

Contract Law Tutorial for Judges in New Mexico

How to Approach Contract Law

Contract law follows the dictates of common sense and fairness. After looking at all the facts and circumstances, you should answer the following questions:

1. Was there an agreement?
2. What did each party commit to do?
3. Did either party – or both – fail to do what he or she promised?
4. If yes, how do you measure the cost to the nonbreaching party?

The usual objective of remedying contract claims is to put the parties in the position they would have occupied if the contract had not been breached.

What is a Contract?

Contracts are agreements that the law will enforce. Contracts are individual, or private, rights and duties created by oral or written agreement and consent of the parties. Contracts may include obligations imposed by law even if the parties are not aware of those obligations.

Chapter 8 of the New Mexico Uniform Jury Instructions provides a useful overview of the basic principles of contract law. See UJI 13-801 through 13-861.

What are the Different Types of Contracts?

Express Contract: The promises are communicated by language, either oral or written. Example: John promises to paint Dan’s car in return for Dan’s promise to pay him $100.

Implied Contract: The conduct of the parties indicates that they consented to be bound. Example: Toni fills her car with gas at Tina’s gas station. There is a contract for the purchase and sale of gas.

Unilateral Contract: A person accepts an offer by performing a requested act. The terms of the offer must clearly indicate that an act is required for acceptance. Example: John tells Dan that he will pay Dan $100 if Dan paints his car, and that Dan should show acceptance of the offer by the act of painting the car. Dan accepts by painting the car.

Bilateral Contract: A person accepts an offer by promising to do the requested act. Example: Red Company offers to buy 100 widgets from Green Company for $100. Green Company promises to deliver the 100 widgets to Red Company.

Who Can Enter into a Contract?

Minors (individuals under age 18) and people who are mentally incompetent do not have the legal capacity to enter into contracts. All other people are considered to have the legal capacity to enter into contracts. In New Mexico and most states, the legal age for entering into contracts is 18 (see NMSA §28-6-1). A contract between a minor and an adult may be cancelled upon request of the minor, but is binding on the adult. The test for mental capacity to enter into a contract is whether the person had the ability to understand the nature and consequences of the agreement.

Corporations have the power to enter into contracts through the acts of their agents, officers and authorized employees. Generally, individuals associated with the corporation are not held personally responsible for the corporation’s debts and liabilities, including liability for breach of contract, although there are some exceptions.