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Analyzing The Legal Obligations In Contracts

Updated: Jan 18

A legal duty between the contracting parties of fulfilling the promises specified in the contract is referred to as the obligation of contracts. If the contractual obligations are in doubt, consideration will be given to the reasonable capacity of a person to perform or refrain from performing the necessary duty. The parties involved in a contract give something useful to each other which can be anything from a product or service to money. They are legally obligated to fulfil their responsibilities for the exchange to be completed.

Examples Of Contract Obligations

The types of contractual obligations that a person may face depend on the type of contract he enters. A sales contract would be a lot different from a leasing contract. However, there are certain responsibilities, that you are likely to experience in most of the contracts ;

  • Payment- If the contract is one-sided, or bilateral, one would be expected to exchange any value item or service for the value item or service you get. It may be a one-time transaction or reward, or it may take place in the contract for a period to be specified.

  • Delivery- The other party shall, unless the arrangement is unilateral, be obliged to deliver what they are paying for.

  • Quality- For certain situations, the seller would be required to follow such quality requirements to be stipulated in the contract for the product or service that they offer.

Transferring Obligations Of Contract

  • In some cases, contractual duties can be passed to a third party. For example, if one party to the contract is responsible for painting the house of the other party, he or she might be permitted to employ a third party to perform the job. This is referred to as the delegation of contracts.

  • While certain duties can be delegated, some cannot be delegated. The right to delegate contractual obligations depends on the contract laws of your country, the form of obligations delegated, etc. For example, contractual obligations requiring unique artistic abilities or craftsmanship cannot normally be delegated. Only the party which has agreed to enter the contract shall be permitted to fulfil its obligations.

Breach Of Obligations In Contract

A breach of contract occurs when a party fails to fulfil the obligations set out in the contract. If this happens resulting in the occurrence of any loss or damages, the party may pursue the following options as the compensation for the failure:

  • Sue for damages- Infringement of the contract shall give the party grounds for filing a lawsuit against the infringement party for damages incurred because of the infringement. Such damages could include the cost of finding a new party to make an agreement or any delay due to failure to perform.

  • Specific performance- Alternatively, a party may also compel the other party to complete the work provided for in the contract. For those who wish to avoid going to court, this may be the most appealing option, but if the infringing party has offered a sub-par service or product, there may be no point in asking them to continue their operation.

  • Exemption from the contract- If one party got cheated by another, they may have a court granting them freedom from the current contract.

In cases involving breach of the contract, where the legal action is sought, it is important to note that the party concerned can only win the Expectation Damages, which only cover the value lost as a result of a breach of the contract. This means that the aggrieved party may only be compensated for their loss. Punitive damages more than the lost value will not be given. Other possible remedies given by the courts are :

  • Administrating Promissory Estoppel- This requires a party to comply with its conclusion of the contract by order of the court.

  • The grant of the Unjust Enrichment- When it is found that one party has gained unfairly at the expense of the other party, restitution for the benefit of the unfair advantage can be imposed by the court.

Theories Of Contractual Obligations

Some other theories help to determine the existence of contractual obligations, out of which the five most widely used theories are will, reliance, efficiency, fairness, and bargain. These theories are generally used to explain which obligations warrant enforcement, and which do not. These theories exemplify three forms of contract theory. Will and the reliance theories are party-based, The efficiency and fairness theories are standard-based, while the bargaining theory is process-based.

However, there are lacunae for each of these theories. Party -based theories are overly critical of one party to a transaction. The theory will offer too much protection to the promissory, while the theory of reliance is known for too much security to offer. This excessive focus, which these theories put on a single party to the transaction, is described as its key drawback and it inevitably causes insoluble problems.

Standards-based theories are those that analyze the content of a contract agreement to see if it complies with the assessment criteria that the theory describes as primary. Economic efficiency and substantive justice are two of those principles that have gained a great deal of attention. All standard-based theories typically have a fundamental problem. This fundamental problem is the identification and defence of the appropriate standard by which enforceable obligations can be distinguished from those which should not be enforceable.

Process-based theories switch the focus of the inquiry from the contracting parties and the nature of the agreement to the process in which the parties reached their agreement. Such theories lay down appropriate procedures for establishing enforceable obligations and then assess any given transaction to see whether such procedures have been followed. The only major problem associated with process-based theories is that they place unmanageable obstacles in the way of minimizing enforcement difficulties.


Consequently, a contractual obligation on the parties arising out of an agreement between the parties may be enforced either specifically or by granting damages to the obligee which is again more or less stipulated in the contract itself. The cause of the action occurs only when the agreement and the violation of the agreement have been created. The duty to agree with the terms of the contract is essential and prior responsibility. The duty to pay damages is just a secondary duty and a remedial obligation.

The obligation of the parties to the contract is acquired by the signing of those specific obligations. A cluster of rights and duties must be accepted voluntarily. It is also clear that the validity of a contractual obligation lies in the very fact that the creation of a contract requires the parties to make a voluntary, rational, and binding promise. It should be kept in mind that the contract is legally recognized and enforceable, and the contractual obligation gives the moral obligation legal meaning and validity.


Akshita Kesharwani is currently pursuing BA.LLB from Alliance University.

They can be contacted at akshitakesharwani06@gmail.com or https://www.linkedin.com/in/akshita-kesharwani-07aa511a4

Edited By: Swathi. Ashok. Nair.


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