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contract, in law, a promise, enforceable by law, to perform or to refrain from performing some specified act. In a general sense, all civil obligations fall under tort or contract law. Torts are usually characterized as violations of duties that are imposed on all persons and that have been established entirely by law. In contracts, on the other hand, the parties determine, at least in part, what their obligations to one another will be. Special types of contracts are given separate articles, e.g., negotiable instrument, insurance, and deed.

Criteria for Enforcement

For a contract to be valid, both parties must indicate that they agree to its terms. This is accomplished when one party submits an offer that the other accepts within a reasonable time or a stipulated period. If the terms of the acceptance vary from those of the offer, that “acceptance” legally constitutes a counteroffer; the original offering party may then accept it or reject it. At any time prior to acceptance, the offer may be rescinded on notice unless the offering party is bound by a separate option contract not to withdraw. Only those terms expressed in the contract can be enforced; secret intentions are not recognized. For a contract to be binding, it must not have an immoral or a criminal purpose or be against public policy.

Other criteria for the enforcement of contracts have varied. In the earliest type of enforceable promises, it was the form of the contract (e.g., a sealed instrument) or the ceremony accompanying its execution that marked the essence of the transaction; contracts not sealed or not dignified by ceremonies held a lesser status, and were therefore not always enforceable. The importance of promises in commercial and industrial society produced a new criterion, and generally a promise is now enforceable only if it is made in exchange for consideration, i.e., a payment, for some action, or for another promise. In some jurisdictions, statutes have made certain promises enforceable without consideration, e.g., promises to pay debts barred by the statute of limitations. To be enforceable, most contracts must be in writing, to comply with the Statute of Frauds (see Frauds, Statute of).

Since a contract is an agreement, it may be made only by parties with the capacity to reach an understanding. Therefore, individuals suffering from severe mental illness are unable to make binding contracts. Until the late 19th cent., married women were also without contractual capacity, because at common law they were considered the creatures of their husbands and without wills of their own (see husband and wife); this disability has been removed by statute universally. Minors are not bound by their contracts, but they are responsible for the value of goods received in contracts made for necessities of life. Otherwise, a minor may denounce his contracts at any time and on attaining majority may elect whether to affirm or repudiate them (see age of consent).

A contract must also be the uncoerced agreement of the parties; thus, if it is procured by duress or fraud it is void. A contract can be unenforceable if it is so one-sided as to be found unconscionable, where the terms are unreasonably favorable to one party; often the material that constitutes unconscionability is buried in fine print or expressed in obfuscatory jargon. Adhesion contracts, which afford no occasion for the weaker party to bargain over their terms, are often offered to purchasers of consumer goods and services, but are not necessarily unconscionable.

Termination of Contracts

While a contract is still wholly or partly unperformed it is termed executory; contracts may terminate, however, in ways other than by being fully executed. If the object of the contract becomes impossible or unlawful, if the parties make a novation (a new superseding agreement), or if the death of one party prevents that party from rendering personal services he or she had agreed to perform, the contract is terminated. The injured party may also treat the contract as a nullity if the other party refuses to perform. The law provides several remedies for breach of contract. The most usual is money damages for the loss incurred. In cases where some action other than the payment of money was contracted for, a court may grant the plaintiff an injunction ordering specific performance. If one party is unjustly enriched by a contract that he or she then repudiates legally, restitution may be required. A typical example of this is ordering a minor who revokes a contract to restore the things of value that were obtained.


See studies by E. J. Murphy and R. E. Speidel (1984); H. Collins (1986); R. B. Summers and R. A. Hillman (1987); P. S. Atiyah (1988).

The Columbia Electronic Encyclopedia™ Copyright © 2022, Columbia University Press. Licensed from Columbia University Press. All rights reserved.


Collins Dictionary of Sociology, 3rd ed. © HarperCollins Publishers 2000
The following article is from The Great Soviet Encyclopedia (1979). It might be outdated or ideologically biased.



in civil law, an agreement between two or more persons (citizens or legal persons) to establish, change, or curtail civil rights and obligations. The word “contract” also often refers to the compulsory legal relationship arising from the contract and to the document in which the relationship is expressed. Depending on the number of parties to a contract, it is classified as bilateral or multilateral. If a contract grants nothing but rights for one party and nothing but obligations for the other it is unilateral, but if the contract results in rights and obligations for both parties it is called bilateral. A loan contract is an example of a unilateral contract. Examples of bilateral contracts are contracts for sale and purchase, delivery contracts, independent-work contracts, and shipping contracts.

In Soviet civil law the contract is one of the most important foundations on which compulsory legal relationships arise. It is a means of establishing and organizing economic relationships among socialist enterprises—state, cooperative (including kolkhozes), and public —and other organizations that participate in Soviet economic transactions. The contract is also the basic legal form for the disposal of the personal property of citizens of the USSR.

According to the principle of specific performance that has been adopted in Soviet civil law, the contract should be performed in physical fact (for example, the product should be transferred or the work performed). The contract usually includes conditions that are incentives to specific performance of the parties’ obligations as established in the contract (for example, property liability [sanctions] for nonperformance, compensation for losses, and payment of a penalty).

The conditions established by the parties in the contract are called its content. The conditions that are recognized as essential in law or necessary to a contract of a given type (for example, the object and price in a contract for sale and purchase) are considered to be substantial; that is, they are the conditions without which it is impossible to conclude the contract. Also considered substantial are those conditions on which, according to the statement of one of the parties, agreement must be reached (for example, the condition on delivering the commodity in a certain container or packing). A contract is considered concluded when agreement is reached between the parties on all substantial points in the form appropriate for the given instance.

Contracts are classified according to form as simple contracts and contracts verified by notaries. Some contracts must be registered at appropriate state agencies. For example, contracts for sale of a residential building must be verified by a notary and registered at the executive committee of the local soviet of working people’s deputies if even one of the parties to the contract is a citizen. Consent to conclude a contract by the party who initiated the process is called the proposal (offer), and consent by the party who responds to the offer is called acceptance. If only the parties’ reaching agreement on all substantial points is required for a contract obligation to arise, the contract is called consensual (from the Latin consensus, agreement). An example of a consensual contract is a contract for sale and purchase. If, in addition to agreement, an actual transfer of goods is required for a contract obligation to arise, the contract is called real. For example, a shipping contract is considered concluded when the freight is turned over to the shipper.

A specific type of contract is the contract in favor of a third person. This contract gives the right to demand performance either from the person who concluded the contract and the third party in whose favor the contract was concluded or from only the third party, who did not participate in the conclusion of the contract either directly or through a representative. For example, in the USSR the right to demand payment of the amount of insurance on a life insurance contract in case of the death of the insured resides only with the third party in whose favor the contract was concluded. The question of the possibility of changing contract conditions in favor of a third party without the consent of that party is resolved in different ways, depending on the type of contract. For example, when a deposit is made in a savings bank in the name of a third party, that party is considered to be the depositor, and the person who made the deposit does not have the right to change the conditions of the contract or to receive the deposit. With life insurance, the insured has the right at any time to change the party in whose favor the contract has been concluded.

If the third party has refused the right given to him by the contract, the person who concluded the contract may take advantage of this right if it does not conflict with the law, the sense of the contract, or the substance of the obligation.

In Soviet civil law the manner in which contracts are concluded is determined by the Basic Principles of Civil Legislation of the USSR and Union Republics of 1961 and the civil codes of the union republics (for example the Civil Code of the RSFSR, arts. 160-65). The manner in which contracts are concluded between socialist organizations is also regulated by special rules. In instances established by law, contracts between these organizations may be concluded by accepting an order for performance. Disagreements that arise between state, cooperative (excluding kolkhoz), and public organizations during the conclusion of a contract based on a plan assignment that is compulsory for both parties are resolved by arbitrators (arbitration tribunal) if the law does not provide otherwise. Disagreements that arise during the conclusion of a contract not based on a plan assignment that is compulsory for both parties are resolved in the same way, if this is specially provided for by the law or by agreement of the parties.


The Great Soviet Encyclopedia, 3rd Edition (1970-1979). © 2010 The Gale Group, Inc. All rights reserved.


A legally enforceable promise or agreement between two or among several persons. Also see agreement.
McGraw-Hill Dictionary of Architecture and Construction. Copyright © 2003 by McGraw-Hill Companies, Inc.


1. a formal agreement between two or more parties
2. a document that states the terms of such an agreement
3. the branch of law treating of contracts
4. marriage considered as a formal agreement
6. Bridge
a. (in the bidding sequence before play) the highest bid, which determines trumps and the number of tricks one side must try to make
b. the number and suit of these tricks
Collins Discovery Encyclopedia, 1st edition © HarperCollins Publishers 2005

contract manufacturer

An organization that makes products under contract for other companies. It caters to the OEM market. In the computer and electronics fields, thousands of products are manufactured by contract manufacturers. These products are ordered by and branded with the OEM's name, which sells them to its customers.

Contract Manufacturers Can Be Huge
Some of the most popular products in the business are made by contract manufacturers. For example, Microsoft's Xbox game machine is made by Flextronics Corporation (, a huge company with factories around the world and nearly $15 billion in sales in 2004. Flextronics also makes cellphones for Ericsson, routers for Cisco and printers for HP. Other major contract manufacturers are Flextronics International (, Sanmina-SCI Corporation ( and Celestica (

An "original design manufacturer" (ODM) is similar to a contract manufacturer, but typically owns the intellectual property (IP) for the product itself, while the regular contract manufacturer uses its customer's designs and IP. Contract manufacturers can make hundreds or even thousands of different products, but ODMs often specialize in only a handful of categories.

Contract manufacturers in the electronics field that not only make products, but offer assistance with the design and supply chain generally prefer to call themselves "electronics manufacturing services" (EMS) or "contract electronics manufacturing services" (CEMS). See OEM.

smart contract

An agreement recorded on a decentralized blockchain that automatically enforces a predefined arrangement, typically financial in nature, without an intermediary. On the Ethereum network, which is a general-purpose blockchain designed for this purpose, a smart contract can be used to exchange anything of value as well as self-execute when conditions are met such as a monetary amount has been accumulated or a date on the calendar has arrived.

Just like a bot or application running in a computer follows instructions, a smart contract executes its own programming code to perform an action. Smart contracts are traceable. verifiable and irreversible, which are the primary attributes of a blockchain architecture. See blockchain, Ethereum, Bitcoin smart contract, blockchain oracle and bot.

Copyright © 1981-2019 by The Computer Language Company Inc. All Rights reserved. THIS DEFINITION IS FOR PERSONAL USE ONLY. All other reproduction is strictly prohibited without permission from the publisher.
References in periodicals archive ?
There is thus a challenge before us, and that is to answer to the workers' demand for a genuine legislation that would protect their right to security of tenure, declare all forms of contractual employment as illegal and penalize those who will continue to carry out this anti-worker scheme," Gaite stressed.
Blaming poor salary scale contractual Asst Proffs stated that young and promising candidates are not joining and hence many of the seats are lying vacant in country's premier medical institution.
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He noted that life will be miserable for him in the coming months, saying that it was most likely that Belmonte will fire or not re-hire contractual city hall employees,
In their pleading to the SC, Bello said they will maintain that 7,344 contractual employees covered by their orders were deployed by illegitimate service contractors.
In Nov 2017, the high court had accepted several petitions filed by the contractual employees and ordered regularisation of their services.
Lawyers representing the WWB were of the view that contractual employees cannot be regularised through court orders and presented before the bench several verdicts in this regards.
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They said the government had issued a notification about regularization of contractual employees from scale
According to the details, Islamabad High Court in its ruling had directed that no contractual officer can be promoted without qualifying FPSC exam but in an unambiguous violation of the judgment, FIA has recommended such 31 contractual officers for not only regularization of their service but also for promotion without appearing in the commission.
According to the general principles of the law of obligations, a contractual relationship is null and void, from which one party (in this case the citizen) can only come out with the fulfillment of a number of conditions, which are subsequently added, some of which are practically impossible because they depend on the will of third parties and which imply additional financial obligations of just one side.
He said this with regard to the demands of the contractual employees of KMC for regularisation of their services on Wednesday.