contingent remainder, the contingency being the daughter’s MARRIAGE. CONTINGENT FEE Payment to an attorney for legal services that depends, or is contingent, upon there being some recovery or award in the case. The payment is then a percentage of the amount recovered—such as 25 percent if the matter is settled, or 30 percent if it proceeds to trial. Contingent-fee agreements are valid only in civil cases and are frequently use d in PERSONAL INJURY cases. Court rules and statutes often regulate these fees in relation to the type of action and amount of recovery. Such an arrangement is generally used when the party seeking recovery cannot afford to retain an attorney and therefore would not have any effective means of prosecuting a claim. An attorney is not entitled to a contingent fee in the absence of an express contract. Contingent-fee agreements, although inten- sively scrutinized by the courts, are valid if equitable and reasonable to the client. The purpose of a contingent fee is to reward attorneys for proficiency and diligence in prosecuting disputed and litigated claims, as opposed to rendering minor services that any inexperienced attorney might perform. Contingent fees are never permitted in criminal cases, as there is no possibility of a financial recovery that would be the source of the contingent fee. These arrangements are emphatically discouraged in DIVORCE proceed- ings due to public policy considerations. An attorney may discourage a reconciliation if a fee depends upon the granting of a divorce. Public policy favors the continuation of MARRIAGE, which is traditionally viewed as a stabilizing force in society. A contingent-fee contract that prohibits a client from settling a case is also void as against public policy because society views the avoidance of unnecessary litigation as desirable. When an attorney who was retained on a contingent-fee basis dies, his or her estate will not be entitled to any fee unless the attorney had completely performed the contract prior to death. In some states, the estate cannot recover unless the jury had returned a monetary award in favor of the client before the attorney’s death. However, the attorney’s personal representatives may collect payment for the reasonable services that were rendered. An attorney might be entitled to recover his or her share of the proceeds of an action if the contingent-fee contract was substantially per- formed prior to the death of the client. If the case had been subm itted to the jury before the client died, and the jury found in favor of the client, the attorney is entitled to his or her fee from the proceeds. If the suit is dismissed or settled by the client’s personal representatives, the attorney might have no right to a fee unless the contract so provided. However, the death of a client does not deprive an attorney of the right to recover the reasonable value of his or her services rendered until the time of the client’s death. Jurisdictions are not unanimous as to the question of whether an attorney’s contingent fee should be calculated based on the net amount of the recovery that a client actually receives or the gross amount of recovery before any successful counterclaims are factored in. For example, suppose that a personal-injury lawyer agrees to represent the PLAINTIFF for a one-third contin- gent fee and recovers a $100,000 jury VERDICT. However, the jury also returned a verdict on the defendant’s counterclaim for $10,000. Should the plaintiff’s lawyer receive a $33,000 contin- gent fee or a $30,000 contingent fee? Section 35 of the Restatement (Third) of the Law Governing Lawyers provides that “when a lawyer has contracted for a contingent fee, the lawyer is entitled to receive the specified fee only when and to the extent the client receives payment.” Comment d to section 35 provides that “[i]n the absence of [a] prior agreement to the contrary, the amount of the client’s recovery is computed net of any offset, such as a recovery by an opposing party on a counterclaim.” To date, Section 35 has been adopted only in Texas. Other states calculate the fee based on the client’s full award, regardless of whether the client ever actually recovers the full amount awarded, reasoning that such a calculation better reflects the comprehensive value of the attorney’s services and the economic value received by the client. CONTINUANCE The adjournment or postponement of an action pending in a cour t to a later date of the same or another session of the court, granted by a court in GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 168 CONTINGENT FEE CONTINGENT FEE 169 Contingent Fee Agreement NEW HAMPSHIRE Contingent Fee Agreement I, ________________________________________, hereby employ and appoint _______________________ of ___________________ ________________________ my attorney(s) to represent me in my possible cause of action against _____________________________ __________________________________________________________ and other possible defendants, which cause of action arises out of ____________________________________, which occurred on or about ___________________________ in ___________________ __________________. I agree to pay my attorneys a contingency fee of _______________________________ percent (______%) of any sums obtained or recovered by suit, settlement, or otherwise in this matter. This contingent fee shall be calculated on the gross amount of any recovery— that is, prior to any reduction for costs, expenses, liens, medical bills, and other claims. I further authorize ________________________________________ to incur reasonable expenses in connection with the prosecution or settlement of said case and agree to reimburse __________________________________________ in the amount of the actual expenses so incurred to the extent that any recovery is had by way of settlement, verdict, or judgment. To the extent that no recovery is had, the expenses advanced shall be reimbursed to ________________________. I agree to pay for costs incurred and out-of-pocket disbursements made by the attorney, including, but not limited to, filing fees, witness fees, travel (at a rate of ______________), sheriff’s fees, expenses of depositions, investigative expenses, expert witness fees, charges for photocopies (at a rate of ___________________), charges for facsimiles (at a rate of ________________________), and telephone, and other incidental expenses. The attorney agrees to obtain the client’s approval before incurring any single cost or disbursement in excess of $_______________, and incurring total costs in excess of $_______________. In the event that a “structured settlement” is reached, the attorneys’ fees shall be computed on the basis of the present value of the structured settlement at the time of settlement. The attorneys’ fees, computed on the basis of “present value,” shall be paid at the time of any settlement. Attorneys will make no compromise or settlement in this matter without client’s approval. Client will be notified whenever an offer of settlement or compromise is received, along with the attorney’s recommendation. Likewise, client agrees to make no compromise or settlement in this matter without first notifying the attorney. Client understands that a consent to settlement orally given by the client to the attorney, and which the attorney orally communicates to the opposing side, will bind the client to the settlement even though formal settlement documents have not been signed by the client. Attorney(s) may terminate representation of the client for any just reason as permitted or required under the Rules of Professional Conduct or as permitted by the Rules of Court of the State of New Hampshire. In the event of termination of representation, the attorneys shall be paid a fee equal to the reasonable value of the attorneys’ services prior to such termination of attorneys, which shall be determined as follows: 1. If the parties had reached an agreed-to settlement, then the contingent fee agreed to herein; 2. If the opposing parties have offered settlement in amounts not yet accepted by the client, then the contingent fee on the offered settlement, even if the final settlement or verdict amount is less; 3. If no settlement offer has been made, the attorneys will bill the client for all services rendered at hourly rates described herein. The Client agrees that, if termination occurs and this matter ultimately results in recovery, the attorney shall have a lien on the recovery to secure payment at the time of disbursement of the proceeds. In the event of a dispute, client agrees to escrow funds sufficient to satisfy the attorneys’ claim. I agreed to this Contingent Fee Agreement after having been advised by ___________________________ of my right under RSA 508:12 to retain them under an agreement whereby my attorneys would be compensated on an hourly basis computed at the rate of ___________ _____________________________ ($________) dollars per hour for services provided by ____________________________________ attorney(s), and ________ ($________) dollars per hour for the services provided by paralegals. I have read the above Agreement with inserted provisions before signing it. Signed this _______________ day of _______________________, 20___. _______________________________________ _______________________________________________ Witness Client I/We hereby agree to assume professional responsibility in the above action entrusted to us and to make no settlement without the consent of our client(s). _______________________________________________ _______________________________________________ Attorney(s) A sample contingent fee agreement between an attorney and a client. ILLUSTRATION BY GGS CREATIVE RESOURCES. REPRODUCED BY PERMISSION OF GALE, A PART OF CENGAGE LEARNING. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3 RD E DITION response to a motion made by a party to a lawsuit. The entry into the trial record of the adjournment of a case for the purpose of formally evidencing it. Courts, by virtue of their authority to hear and determine cases, have inherent discretion- ary power to grant or deny continuances, subject to restrictions imposed by statute. Continuances are granted when necessary to avert a MISCARRIAGE OF JUSTICE but will be denied if sought merely for the purpose of delay. Criminal defendants are entitled to a SPEEDY TRIAL unless GOOD CAUSE justifies a continuance of the action. In RULING on a motion for a continuance, a court examines all the facts and circumstances of a case—in particular, the applicant’s GOOD FAITH , the purpose and necessity for the postponement, the probable advantage that could result from the continuance, and the possibility of prejudice to the rights of other parties. If there are multiple defendants in a case, a continuance granted to one of them postpones the trial of the case against all of them. A continuance is usually granted if requested by a DEFENDANT, since the PLAINTIFF should have ade quately prepared his or her case before commencing the action. Acourtcan, SUA SPONTE (on its own motion), order a continuance in certain instances, such as when none of the parties appears on the date of the hearing. A continuance can occur by OPERATION OF LAW when a case has not been tried or otherwise disposed of during a particular term because of unanticipated problems, such as the death of the presiding judge. The case is automatically postponed until the following term. Parties in a lawsuit file pleadings (written statements presenting each side of the case before trial to elucidate the issues to be resolved). A plaintiff whose complaint fails to state a CAUSE OF ACTION is not entitled to a continuance to correct this failure, but a defendant can make a motion for a dismissal of the actio n. Nor can a defendant whose answer to the plaintiff’s complaint does not allege a meritorious defense cure this deficiency by seeking a continuance, but the plaintiff might make a motion for a SUMMARY JUDGMENT in his or her favor. A continuance may be granted, however, in a case that was scheduled for trial before the issues were joined or clearly established. After a trial has begun or while motions are made pending the decision, a court can grant a continuance provided adequate grounds exist. The trial of a case that has been remanded (sent back) by an appellate court to a lower court for a new trial may be continued at a later date if there is not enough time to prepare for the new trial. When the parties consent to or stipulate a postponement of a case, a court will grant a continuance only if their agreement meets its approval. Grounds Continuances are granted only if valid grounds exist that justify the postponement of the action. For example, a court will continue a case in which all the interested parties have not appeared in order to bring them into the action so that they may present their side of the case. If SERVICE OF PROCESS has not been properly made upon a defendant, a court may grant a continuance to perfect service so that a plaintiff will not be deprived of an opportunity to have the action tried. A delay in filing pleadings, which surprises the opposing party and affects the issues in an action, ordinarily entitles the adverse party to a continuance, because that party must be given time to prepare a respo nse before the trial in order to prevent prejudice to his or her rights. A continuance may be granted for the accidental loss or destruction of papers in an action provided they cannot be readily replaced and the applicant for the continuance was not responsible for their loss. Lack of Preparation Where the party making the motion is guilty of inexcusable ignorance, delay, or NEGLIGENCE in preparing the case, the court will deny a motion for a continuance. An applicant who can, however, demonstrate some legal or equitable reason or exercise of diligence in trying to prepare for the case may win a continuance. Change of Counsel Withdrawal of legal coun- sel or employment of new counsel immediately preceding or during a trial does not necessarily warrant a continuance of the action. For example, if it is clear that a party has changed attorneys a number of times solely as a dilatory tactic for the purpose of delay, that party will be denied a continuance. Only where the circum- stances of the case demonstrate that a miscar- riage of justice will ensue from a denial of a GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 170 CONTINUANCE continuance will a court seriously consider postponing the action. Pendency of Action A continuance is granted when it is in the interests of justice to await the outcome of another proceeding affecting the same parties or where the interests of the parties are closely related, such as in cases dealing with VICARIOUS LIABILITY. Illness The illness of a party to a lawsuit justifies a continuance only if injustice would result from proceeding with the case . If an illness is feigned or alleged merely for the purpose of delay, the applicant’s motion will be denied and the applicant might be held in CONTEMPT. A party who becomes ill before trial should notify the court and the other parties, as soon as it is reasonably practicable to provide such notice, that his or her condition may jeopardize his or her participation in the proceedings. An AFFIDAVIT or certificate of a physician that a party’s illness precludes his or her presence at trial should be filed with the court. The illness of the judge presiding over the trial operates as a continuance of the action. Determination A motion for a continuance is heard by the court which rules upon it after an evaluation of the evidence before it. If a continuance is granted, the trial court will set its duration with regard to the rights of both parties and impose any necessary restrictions. During the time of the adjournment the court may modify or revoke its order if reasonable cause is shown or if the court is satisfied that no injustice will result. Successive continuances sought by a party are scrutinized closely by a court because there is a likelihood that they are sought for dilatory purposes. Unless the applicant clearly estab- lishes that a postponement is essential to the integrity of the judicial process and a preserva- tion of the rights of the parties, it will be denied. A motion based upon newly discovered evi- dence will be denied if the applicant could have discovered the evidence sooner by the use of reasonable efforts. A continuance expires on the date specified in the court order. If the basis for the continuance ceases to exist prior to that date, the court may revoke its order and require that the case proceed to trial. Waiver A party relinquishes or waives the right to obtain a continuance if he or she (1) fails to request one; (2) proceeds with the case after the motion for a continuance has been denie d without making an exception to the ruling; or (3) voluntarily discontinues the action. FURTHER READINGS Chapter 19, Continuance NTE (Nature of Action 750). Available online at http://www.opm.gov/feddata/gppa/ gppa19.pdf; website home page: http://www.opm.gov (accessed September 1, 2009). Saltzbury, Stephen A., and Daniel J. Capra. 2008. American Criminal Procedure: Cases and Commentary. Eagan, Minn.: West. Yeazell, Stephen C. 1998. Federal Rules of Civil Procedures: With Selected Statutes and Cases. Frederick, Md.: Aspen. CROSS REFERENCES Miscarriage of Justice; Motion; Pleading; Speedy Trial. CONTINUING LEGAL EDUCATION The purpose of continuing legal education is to maintain or sharpen the skills of licensed attorneys and judges. Accredited courses exam- ine new areas of the law or review basic practice and trial principles. Programs for continuing LEGAL EDUCATION are sponsored by state, local, and federal bar associations, law firms, law schools, and groups such as the AMERICAN BAR ASSOCIATION (ABA) and the American Law Institute. Continuing legal education is mandatory in 40 states; voluntary programs are offered in the remaining 10. Courses are approved by state boards that oversee continuing education. In states with mandatory continuing legal educa- tion, attorneys receive credits for attending lectures and seminars taught by respected attorneys, judges, and scholars. The courses cover a variety of topics involving virtually all areas of practice. Written program materials are usually included as part of the tuition fee. A 1974 informal poll conducted by state and local bar associations revealed widespread support for compulsory continuing legal educa- tion. The measure was favored to ensure professional competence and to improve the public image of lawyers. Supporters believed that continuing legal education would reduce the number of LEGAL MALPRACTICE suits, keep lawyers updated on important changes in the law, and improve the representation of clients. A year later, in 1975, Minnesota became the first GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION CONTINUING LEGAL EDUCATION 171 state to adopt mandatory continuing legal education. The Minnesota Legislature appeared ready to take over the administration of continuing legal education; the Minnesota Supreme Court, however, preferred judicially mandated education, and took appropriate steps to institute it. The court ordered all Minnesota lawyers and judges to complete 45 hours of post-admission legal education every three years. The Code of PROFESSIONAL RESPONSIBILITY adopted by every state maintains that lawyers must remain proficient in their work. Continu- ing leg al education is one way to achieve professional competence. Other professions such as medicine, education, and accounting also require continuing education. Beginnin g in the 1990s, states added specific content require- ments. For example, Minnesota requires that in each reporting cycle attorneys must take three hours of ethics-related coursework and two hours of coursework related to the elimination of bias in the legal profession. The state of California requires attorneys to take one hour per reporting cycle of coursework on the prevention and detection of substance abuse. The delivery of continuing legal education has changed over time. Although most pro- grams are presented at the local level, many providers now videotape sessions and replay them at a variety of sites around a state. This allows attorneys in rural areas and more remote locations to earn their credits locally. In addition, national providers such as the ABA produce seminars that are delivered through satellite transmissions to cities around the United States. In most states where continuing legal education is required, nonpracticing lawyers may elect to be on restricted status. This means they can maintain their law LICENSE but do not have to fulfill continuing education require- ments. Sometimes hardship or MITIGATING CIRCUMSTANCES exempt practicing attorneys from a continuing education requirement. FURTHER READINGS MacCrate, Robert, ed. 1992. Legal Education and Professional Development: An Educational Continuum. Eagan: West. Sheran, Robert J., and Laurence C. Harmon. 1976. Minnesota Plan: Mandatory Continuing Legal Education for Lawyers and Judges as a Condition for the Maintain- ing of Professional Licensing. Reprinted in Fordham Law Review (May). Tamayo-Calabrese, Macarena, Annette Cook, and Shirley Meyer. August 2002. “Continuing Legal Education in the United States.” Issues of Democracy 7:2. CROSS REFERENCE Legal Education. CONTRA Against; conflicting; opposite. A contra-balance is the amount in an account of a creditor that is the opposite of the usual balance of such an account. It is an ACCOUNT RECEIVABLE (a debt owed to the creditor) but with a credit balance (an amount owed to the debtor greater than what is owed to the creditor). The creditor therefore owes the debtor money, the opposite of the normal debtor-creditor relationship. CONTRABAND Any property that it is illegal to produce or possess. Smuggled goods that are imported into or exported from a country in violation of its laws. Contraband confiscated by law enforcement authorities upon the arrest of a person for the crimes of production or possession of such goods will not be returned, regardless of the outcome of the prosecution. CONTRACT WITH AMERICA In the historic 1994 midterm elections, Repub- licans won a majority in Congress for the first time in 40 years, partly on the appeal of a platform called the Contract with America. Put forward by House Republicans, this sweeping ten-point plan prom ised to reshape govern- ment. Its main theme was the decentralization Marijuana plants, such as these seized by a Miami police officer, are considered contraband because it is illegal to produce or possess them. AP IMAGES GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 172 CONTRA of federal authority: deregulation, tax cuts, reform of social programs, increased power for states, and a balanced FEDERAL BUDGET were its chief ambitions. With unusual speed, all ten items came to a vote in the House of Representatives within 100 days, and the House passed nine of the ten measures. Yet, even as House Speaker Newt Gingrich (R-Ga.) com- pared the plan to the most important political reforms of the twentieth century, progress on the contract stalled. Senate Republicans were slow to embrace it, Democrats in both cham- bers denounced it, and President BILL CLINTON threatened to veto its most radical provisions. Only three of the least controversial measures had become law by the end of 1995 as Congress and the White House battled bitterly over the federal budget. On the surface, the contract differed little from other modern Republican platforms. It began with a statement of three “core” princi- ples in the form of an argument: the federal government is too big and unresponsive (ac- countability), and big government programs sap individual and family willpower (responsibility)— and thus an overtaxed and overregulated citizenry cannot pursue the American Dream (opportunity). Republicans had been saying as much for at least two decades. Although Democrats had controlled Congress for more than 40 years with an almost opposite view of government’s duty to its people, Republicans had held the White House from 1980 to 1992. The election of President Clinton in 1992 was a striking setback for REPUBLICAN PARTY strategists. Yet, they took encouragement from voter discontent with the pace of Clinton’s legislative plans, two key provisions of which—an economic stimulus package and health care reform—failed to pass even with a Democratic majority in Congress. For the mid-1994 congres- sional elections, they intended to capitalize on this discontent with a platform that promised quick and dramatic change. Toward this end, the Contrac t with America made two promises “to restore the bonds of trust between the people and their elected representatives.” First, it promised to change the way Congress works by requiring that lawmakers follow the same workplace laws as the rest of the country—notably, SEXUAL HARASS- MENT laws—and by strictly reforming the sluggish committee process in the House of Representatives. Second, it promised that the House would vote on the ten key planks of the contract within the first one hundred days of the new Congress. The contract gave these ten planks names such as the Fiscal Responsibility Act, the Taking Back Our Streets Act, and the Personal Responsibility Act. The contract promised action on the followin g issues: the federal deficit, crime, welfare reform, family values, middle-class tax cuts, national defense, SOCIAL SECURITY, federal deregulation and capital gains tax cuts, legal reform, CIVIL LAW and PRODUCT LIABILITY, and term limits for federal lawmakers. The actua l proposals repr esented a mixture of old and new ideas. Republicans had long supported deregulation of industry, tort re- form, and middle-class tax cuts. As a d eficit reduction solution, the line-item veto was an old idea: Ever since the 1980s, Republicans had called for a presidential power to veto specific parts of federal sp ending bills (rathe r than the entire bills). More revolutionary was the contract’s related proposal: a CONSTITUTIONAL AMENDMENT requiring a balanced budget. In the same sense, the welfare reform proposals reflected a long-running debate and yet offere d ambitiously strict limits on spending, el igibility, and administration, and even sought to transfer authority over traditionally federal programs to the states. Other proposals grew out of more recent concerns. The crime reform measure was a Republican effort to scale back social spending and increase law enforcement spend- ing, in reaction to the Clinton crime bill of 1994; and proposals to curb U.S. military In September 1994, Newt Gingrich and a group of Republican congressional candidates announced their plans for a platform called Contract with America. The ten- point plan helped the Republican Party win a majority in Congress. AP IMAGES GALE ENCYCLOPEDIA OF AMERICAN LAW, 3 RD E DITION CONTRACT WITH AMERICA 173 involvement in the United Nations’ peacekeep- ing missions reflected Republican criticism of Clinton’s decisio ns to send tro ops to Somalia and Ha iti. The contract met with mixed results in 1995. The House Republican leadership did indeed put each item to a vote within the first 100 days. It divided each item into one or more bills, and 31 of the resulting 32 measures passed—only one, for congression al term limits, failed. The Sen ate moved much more slowly. In part, this was because the Senate, as a debating body, customarily proceeds more cautiously. Another reason was that the senators, unlike their first-year counterparts in the House, were far less eager to pass sweeping reforms: The Senate killed the proposal for a constitutional amendment o n the budget, for example, and simply delayed action on several other b ills. President Clinton’s promise to veto any far- ranging welfare and budgetary proposals also crimped Republican plans, and by November 1995 this threat had produced a bitter standoff that resulted in the temporary closing of the federal government. Three contract proposals becam e law: the Congressional Accountability Act of 1995 (Pub. L. No. 104-1, 109 Stat. 3), which requires Congress to follow eleven workplace laws; the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-4, 109 Stat. 48), which restricts Congress from imposing mandates on states that are not adequa tely funded; and the Paperwork Reduction Act of 1995 (Pub. L. No. 104-13, 109 Stat. 163), which reduces federal paperwork requirements. CONTRACTS Agreements between two entities, creating an enforceable obligation to do, or to refrain from doing, a particular thing. Nature and Contractual Obligation The purpose of a contract is to establish the agreement that the parties have made and to fix their rights and duties in accordance with that agreement. The courts must enforce a valid contract as it is made, unless there are grounds that bar its enforcement. Statutes prescribe and restrict the terms of a contract where the general public is affected. The terms of an insurance contract that protect a COMMON CARRIER are controlled by statute in order to safeguard the public by guaranteeing that there will be financial resources available in the event of an accident. The courts may not create a contract for the parties. When the parties have no express or implied agreement on the essential terms of a contract, there is no contract. Courts are only empowered to enforce contracts, not to write them, for the parties. A contract, in order to be enforceable, must be a valid. The function of the court is to enforce agreements only if they exist and not to create them through the imposition of such terms as the court considers reasonable. It is the policy of the law to encourage the formation of contracts between competent parties for lawful objectives. As a general rule, contracts by competen t persons, equitably made, are valid and enforceable. Parties to a contract are bound by the terms to which they have agreed, usually even if the contract appears to be improvident or a bad bargain, as long as it did not result from FRAUD, duress, or UNDUE INFLUENCE . The binding force of a contract is based on the fact that it evinces a meeting of minds of two parties in GOOD FAITH. A contract, once formed, does not contemplate a right of a party to reject it. Contracts that were mutually entered into between parties with the capacity to contract are binding obligations and may not be set aside due to the caprice of one party or the other unless a statute provides to the contrary. Types of Contracts Contracts under Seal Traditionally, a contract was an enforceable legal document only if it was stamped with a seal. The seal represented that the parties intended the agreement to entail legal consequences. No legal benefit or detri- ment to any party was required, as the seal was a symbol of the solemn acceptance of the legal effect and consequences of the agreement. In the past, all contracts were required to be under seal in order to be valid, but the seal has los t some or all of its effect by statute in many jurisdictions. Recognition by the courts of informal contracts, such as implied contracts, has also diminished the importance and em- ployment of formal contracts under seal. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 174 CONTRACTS Express Contracts In an express contract, the parties state the terms, either orally or in writing, at the time of its formation. There is a definite written or oral offer that is accepted by the offeree (i.e., the person to whom the offer is made) in a manner that explicitly demonstrates consent to its term s. Implied Contracts Although contracts that are implied in fact and contracts implied in law are both called implied contracts, a true implied contract consists of obligations arising from a mutual agreement and intent to promise, which have not been expressed in words. It is misleading to label as an implied contract one that is implied in law because a contract implied in law lacks the requisites of a true contract. The term quasi-contract is a more accurate desig- nation of contracts implied in law. Implied contracts are as binding as express contracts. An implied contract depends on SUBSTANCE for its existence; therefore, for an implied contract to arise, there must be some act or conduct of a party, in order for them to be bound. A contract implied in fact is not expressed by the parties but, rather, suggested from facts and circumstances that indicate a mutual intention to contract. Circumstances exist that, according to the ordinary COURSE OF DEALING and common understanding, demonstrate such an intent that is sufficient to support a finding of an implied contract. Contracts implied in fact do not arise contrary to either the law or the express declaration of the parties. Contracts implied in law (quasi-contracts) are distinguishable in that they are not predicated on the assent of the parties, but, rather, exist regardless of assent. The implication of a mutual agreement must be a reasonable deduction from all of the circumstances and relations that contemplate parties when they enter into the contract or which are necessary to effectuate their intention. No implied promise will exist where the relations between the parties prevent the inference of a contract. A contract will not be implied where it would result in inequity or harm. Where doubt and divergence exist in the minds of the parties, the court may not infer a contractual relation- ship. If, after an agreement expi res, the parties continue to perform according to its terms, an implication arises that they have mutually assented to a new contract that contains the same provisions as the old agreement. A co ntract implied in fact, which is inferred from the circumstances, is a true contract, whereas a contract implied in law is actually an obligation imposed by law and treated as a contract only for the purposes of a remedy. With respect to contracts implied in fact, t he contract defines the duty; in the case of quasi- contracts, the duty defines and imposes the agreement upon the parties. Executed and Executory Contracts An exe- cuted contract is one in which nothing remains to be done by either party. The phrase is, to a certain extent, a misn omer because the comple- tion of performances by the parties signifies that a contract no longer exists. An executory contract is one in which some future act or obligation remains to be performed according to its terms. Bilateral and Unilateral Contracts The ex- change of mutual, reciprocal promises between entities that entails the performance of an act, or forbearance from the performance of an act, with respect to each party, is a BILATERAL CONTRACT . A bilateral contract is sometimes called a two-sided contract because of the two promises that constitute it. The promise that one party makes constitutes sufficient consideration (see discussion below) for the promise made by the other. A UNILATERAL CONTRACT involves a promise that is made by only one party. The offeror (i.e., a person who makes a proposal) promises to do a certain thing if the offeree performs a requested act that he or she knows is the basis of a legally enforceable contract. The performance constitu- tes an acceptance of the offer, and the contract then becomes executed. Acceptance of the offer may be revoked, however, until the performance has been completed. This is a one-sided type of contract because only the offeror, who makes the promise, will be legally bound. The offeree may act as requested, or may refrain from acting, but may not be sued for failing to perform, or even for abandoning performance once it has begun, because he or she did not make any promises. Unconscionable Contracts An unconsciona- ble contract is one that is unjust or unduly one- sided in favor of the party who has the superior bargaining power. The adjective unconscionable implies an affront to fairness and decency. An unconscionable contract is one that no mentally competent person would accept and that no fair GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION CONTRACTS 175 and honest person would enter into. Courts find that unconscionable contracts usually result from the exploitation of consumers who are poorly educated, impoverished, and unable to shop around for the best price available in the competitive marketplace. The majority of unconscionable contracts occur in consumer transactions. Contractual provisions that indicate gross one-sidedness in favor of the seller include limiting damages or the rights of the purchaser to seek court relief against the seller, or disclaiming a warranty (i.e., a statement of fact concerning the nature or caliber of goods sold the seller, given in order to induce the sale, and relied upon by the purchaser). Unconscionability is ascertained by examin- ing the circumstances of the parties when the contract was made. This doctrine is applied only where it would be an affront to the integrity of the judicial system to enforce such a contract. Adhesion Contracts Adhesion contracts are those that are drafted by the party who has the greater bargaining advantage, providing the weaker party with only the opportunity to adhere to (i.e., to accept) the contract or to reject it. (These types of contract are often described by the saying “Take it or leave it.”) They are frequently employed because most businesses could not transact business if it were necessary to negotiate all of the terms of every contract. Not all adhesion contracts are uncon- scionable, as the terms of such contracts do not necessarily exploit the party who assents to the contract. Courts, however, often refuse to enforce contracts of adhesion on the grounds that a true meeting of the minds never existed, or that there was no acceptance of the offer because the purchaser actually had no choice in the bargain. Aleatory Contracts An ALEATORY CONTRACT is a mutual agreement the effects of which are triggered by the occurrence of an uncertain event. In this type of contract, one or both parties assume risk. A fire insurance policy is a form of aleatory contract, as an insured will not receive the proceeds of the policy unless a fire occurs, an event that is uncertain to occur. Void and V oidable Contracts Contracts can be either void or VOIDABLE. A void contract imposes no legal rights or obligations upon the parties and is not enforceable by a court. It is, in effect, no contract at all. A voidable contract is a legally enforceable agreement, but it may be treated as never having been binding on a party who was suf fering from some legal disability or who was a victim of fraud at the time of its execution. The contract is not void unless or until the party chooses to treat it as such by opposing its enforcement. A voidable contract may be ratified eithe r expressly or impliedly by the party who has the right to avoid it. An express ratification occurs when that party who has become legally competent to act declares that he or she accepts the term s and obligations of the contract. An implied ratification oc curs when the party, by his or her conduct, manifests an intent to ratify a contract, such as by performing according to its terms. Ratification of a contract entails the same elements as formation of a new contract. There must be intent and complete knowledge of all material facts and circumstances. Oral ACKNOWLEDGMENT of a contract and a promise to perform constitute sufficient ratification. The party who was legally competent at the time that a voidable contract was sign ed may not, however, assert its voidable nature to escape the enforcement of its terms. Which Law Governs Although a general body of contract law exists, some aspects of it, such as construction (i.e., the process of ascertaining the proper explanation of equivocal terms), vary among the different jurisdictions. When courts must select the law to be applied with respect to a contract, they consider what the parties intended as to which law should govern; the place where the contract was entered into; and the place of performance of the contract. Many courts apply the modern doctrine of the “grouping of contracts” or the “center of gravity,” in which the law of the jurisdiction that has the closest or most signifi- cant relationship with the matter in issue applies. Courts generally apply the law t hat the parties expressly or impliedly intend to govern the contract, provided that it bears a reason able relation to the transaction and the parties acted in good faith. Some jurisdictions follow the law of the place where the contract was performed, unless the intent of the parties is to the co ntrary. Where foreign law governs, contracts may be recognized and enforced under the doctrine of COMITY (i.e., the acknowledgment that one nation gives within its territo ry to the legislative, executive, or judicial acts of another nation). GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 176 CONTRACTS Elements of a Contract The requisites for formation of a legal contract are an offer, an acceptance, competent parties who have the legal capacity to contract, lawful subject matter, mutuality of agreement, consid- eration, MUTUALITY OF OBLIGATION, and, if re- quired under the STATUTE OF FRAUDS, a writing. Offer An offer is a promise that is, by its terms, conditional upon an act, forbearance, or return promise being given in exchange for the promise or its performance. It is a demonstra- tion of willingness to enter into a bargain, made so that another party is justified in understand- ing that his or her assent to the bargain is invited and will conclude it. Any offer must consist of a statement of present intent to enter a contract; a definite proposal that is certain in its terms; and communication of the offer to the identified, prospective offeree. If any of these elements are missing, there is no offer to form the basis of a contract. Preliminary Negotiations, Advertisements, Invitations to Bid Preliminary negotiations are clearly distinguished from offers because they contain no demonstration of present intent to form contractual relations. No contract is formed when prospective purchasers respond to such terms, as they are merely invitations or requests for an offer. Unless this interpretation is emplo yed, any person in a position similar to a seller who advertises goods in any medium would be liable for numerous contracts when there is usually a limited quantity of merchan- dise for sale. An advertisement, price quotation, or cata- logue is customarily viewed as only an invitation to a customer to make an offer and not as an offer itself. The courts reason that an establish- ment might not have sufficient stock to satisfy potential demand and that it would not be reasonable for a customer to expect to form a binding contract by responding to advertise- ments that are intended to make consumers aware of a product for sale. In addition, the courts have held that an advertisement is an offer for a unilateral contract that can be revoked at the will of the offeror, the business enterprise, prior to perfo rmance of its terms. An exception exists, however, to the general rule on advertisements. When the quantity offered for sale is specified and contains words of promise, such as “first come, first served,” courts enforce the contract where the store refuses to sell the product when the price is tendered. Where the offer is clear, definite, and explicit, and no matters remain open for negotiation, acceptance of it completes the contract. New conditions may not be imposed on the offer after it has been accepted by the performance of its terms. An advertisement or request for bids for the sale of particular property or the erection or construction of a particular structure is merely an invitation for offers that cannot be accepted by any particular bid. A submitted bid is, however, an offer, which upon acceptance by the offeree becomes a valid contract. Mistake in Sending Offer If an intermediary, such as a telegraph company, errs in the transmission of an offer, most courts hold that the party who selected that method of commu- nication is bound by the terms of the erroneous message. The same rule applies to acceptances. In reaching this result, courts regard the telegraph company as the agent of the party who selected it. Other courts justify the rule on business convenience. A few courts rule that if there is an error in transmission, there is no contract, on the grounds that either the telegraph company is an INDEPENDENT CONTRAC- TOR and not the sender’s agent, or there has been no meeting of the minds of the parties. However, an offeree who knows, or should know, of the mistake in the transmission of an offer may not take advantage of the known mistake by accepting the offer; he or she will be bound by the original terms of the offer. Termination of an Offer An offer remains open until the expiration of its specified time period or, if there is no time limit, until a reasonable time has elapsed. A reasonable time is determined according to what a reasonable person would consider sufficient time to accept the offer. The death or insanity of either party, before an acceptance is communicated, causes an offer to expire. If the offer has been accepted, the contract is binding, even if one of the parties dies thereafter. The destruction of the subject matter of the contract, conditions that render the contract impossible to perform, or the SUPERVENING illegality of the proposed contract results in the termination of the offer. When the offeror, either verbally or by conduct, clearly demonstrates that the offer is no longer open, the offer is considered revoked GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION CONTRACTS 177 . BY PERMISSION OF GALE, A PART OF CENGAGE LEARNING. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3 RD E DITION response to a motion made by a party to a lawsuit. The entry into the trial record of the adjournment of. adjournment or postponement of an action pending in a cour t to a later date of the same or another session of the court, granted by a court in GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 168 CONTINGENT. Should the plaintiff’s lawyer receive a $33 ,000 contin- gent fee or a $30 ,000 contingent fee? Section 35 of the Restatement (Third) of the Law Governing Lawyers provides that “when a lawyer has contracted