Contracts are, in simple terms, legal agreements that describe the terms of a transaction between two parties. Contracts are a fundamental part of any business deal and it brings value to any organization.
A typical situation, let’s say when someone wants to buy a car. The seller has put a price tag of $2500, and the buyer thinks it is a fair price. The buyer values the car more than $2500 and the seller values $2500 more than the car. Hence an agreement is made through a contract. It makes sure to allocate the risks associated with the transition. And in nearly every country in the world, contracts are seen as a medium of legal documents because of its importance in any transaction.
Furthermore, you could draw the connection that it is a way for society to expresses its rights for freedom and it works efficiently in both domestic and international agreements. It is a way for both parties to bridge the information gap, and it is usually done holistically through (the basic contract components): reps, warranties, and covenants with indemnity and with closing conditions.
The representations are statements of fact in an agreement, and they are supported by the warranties, the pledges that the statements are true. Moreover, covenants are promises to take action (or not to take action) if a certain condition is met. At the same time, conditions for closing are contract terms that must be met for both parties to sign the deal. Finally, indemnities allow the price of the deal to be lowered or raised based on certain criteria. But what relationship do these contract components have to each other?
The connection between reps, warranties, and covenants with closing conditions it that closing conditions often require the facts of the reps, the pledges, and promises of the warranties and covenants, to be true before the deal is signed. If the closing conditions are not satisfied, the parties who benefitted from the condition can walk away from the deal, since it is no longer as valuable to them as they first had thought. Additionally, the relationship between reps, warranties, and covenants with indemnities are that in the case of a breach, provisions may be reduced or otherwise limit the amount of damage that can be avoided based on the indemnities. Since the reps, warranties, and covenants are back up by contract law, damages can be rewarded if they are breached.
I found researching the fundamentals of contracts interesting, and I am sure this research will help further with my law studies and work.