Defining Contractual Obligations
Contractual obligations refer to the binding promises contained within a contract. For a person or company’s promise, or statement, to be deemed a binding contractual obligation, it must meet all of the basic elements constituting a legally enforceable deal.
Contracts are, simply put, legally enforceable agreements between two or more parties. They can even be legally created between parties in different countries; as long as there are offers, acceptances, and the intention for contractual obligations (and the consideration) its relevant laws help facilitate, then they are legally enforceable contracts.
To be valid, a contract must contain:
• offer — a proposal put forth to another party with an extent of seriousness and intent
• acceptance — the agreeing to the terms of a proposal , without it being derailed by other factors
• consideration — a legally sufficient and mutual exchange or "bargain"
• intention — having the intent to create a legal relationship
When obligations of a contract are offered, a person or group must commit to it, whether that might occur verbally or in writing. If an offer is made and the other end doesn’t accept, then the contract cannot be formed, meaning there aren’t contractual obligations. As said in the previous paragraph, contracts may be verbal, written, or even implied through actions. For example, if you frequent a restaurant for dinner on a Tuesday night, you are offering yourself as a customer and the restaurant is accepting — thereby committing to a type of contract.
Different Types of Contractual Obligations
A contract is defined as a "voluntary arrangement for the exchange of legal obligation between the parties to it…" Walsall Football Club Ltd v. Danbourne Ltd. It is an agreement that is legally enforceable. "Since we now speak of contract law in terms of the social theory of the courts, it is not surprising that we frequently hear of judges referring to ‘the intention of the parties’ . . . when they mean ‘the rule made by courts to protect the reliance of purchasers on enforceable contracts’. The meaning of intention has disappeared from the legal vocabulary" Corpe v Overton. As discussed in the article "What Is a Contract," a contract consists of an offer, acceptance, intention to create legal relations and consideration. This article focuses on the obligations that arise as a result of a contract. The most common example of a contractual obligation is a debt i.e. if I lend you $20 I have a legal obligation to ensure you repay the money.
A creditor would be able to sue a debtor who fails to make repayment, providing certain conditions were met; such as the debtor being able to afford to pay the debt. Must be clear intention to create a legal obligation. A debtor could plead in defence that the debt was a gift rather than a loan. A contract usually creates reciprocal obligations between the contracting parties. Both parties are under an obligation to fulfil here duties. Upon the breach of a contract the injured party may pursue legal action against the party which breached the contract when obligations are not fulfilled. There are different types of contractual obligations including express, implied, joint, several, and contingent obligations.
An express obligation refers to an obligation which forms a part of the contract. It can also refer to an obligation in respect of which a term of the contract is expressed. For example, a contracting party must perform their part of the deal. If you are selling a car you must provide the car, an express term is included which states ‘You have agreed to buy the car’. Implied obligations are obligations that are assumed to exist e.g. if I enter into a contract to paint a house purchasing the paint would be considered an implied obligation of the contract.
Joint obligations is when more than one person creates an obligation to perform the contract. "Where two or more persons are liable to the performance of an obligation, it is called a joint obligation. If two or more persons owe the same obligation to the same person, it is a joint and several obligation, and the promise is called a joint and several promise. If the promise is made by two or more persons together, and if breach occurs, then anyone of the promisors can be sued by a promisee for the whole performance. Even though the liability is joint and several, as between them, each joint tort-feasor is liable only for his proportionate share of the damage." Tawney Counsel Insurance Ltd v Chansee Investent Trustee Ltd. Several obligations is the contracting and borrowing of more than one person. "An example of this might be a group of parents who enter into an agreement with a school to pay for each others’ child’s lunch expenses. The school can then sue each parent individually, and each parent will be responsible for only his or her own child’s lunch expenses owed to the school".
A contingent obligation is a legal obligation which depends on the occurrence of a particular event. In these types of cases the outcome is uncertain until the event occurs. If the event does occur it becomes a legal right which can be redeemed in a court of law in exchange for a legal remedy. "Such an obligation arises when the debtor’s responsibility to make a payment is triggered by an event, such as a fortuitous event. For example, an insurance company is bound to make payments once there has been a loss or damage to the risk that was insured. In other words, if Mr. A suffers a loss of $1000 USD as a result of a fire on January 1, 2010 and he had a fire insurance contract with an insurance company Ms. B, Ms. B, the insurer, will need to honour that contract and compensate Mr. A for his loss. Ms. B will be obliged to make a payment of $1000 USD to Mr. A if the incident triggering that obligation, in this case the loss or damage to the risk that was insured, occurs".
Creating a PDF on Contractual Obligations
To draft a PDF document that effectively conveys contractual obligations, follow these essential steps. First, choose a software tool that can export or save a document as a PDF. Common options include word processors like Microsoft Word or Google Docs, or dedicated PDF creation software. When the time comes to finalize the document, select the PDF export or save feature in the software menu. This usually takes the form of an option labeled "Save as PDF," "Export as PDF," or similar. When you click this, a dialogue box will usually appear to allow you to choose the file name, location for saving it, and other settings. Follow the on-screen instructions and save the file.
Next, structure the PDF document. Start with a title or heading that clearly states what the document is. Use sections or bullet points to separate different obligations, making it easy for all parties to scan and understand their responsibilities. Incorporate headers and footers if applicable, and include page numbers if the document is long. It’s also good practice to include a date printed on the document, to provide a point of reference for when it was last modified or updated.
Finally, ensure clarity, precision, and correctness in language. The text should be clear of typos and grammatical errors. Be concise yet thorough to avoid misinterpretation. If the document contains multiple obligations and conditions, consider including a table of contents. In addition to the contents page, mandatory metadata should include the title of the digital PDF document and the author’s information. You may also add a statement of strict liability or a disclaimer to the mandatory metadata.
When setting up the mandatory metadata fields, also ensure that the Document Properties settings are properly filled in. This step allows the document to be easily searched and indexed by search engines and legal databases, maximizing the document’s visibility and accessibility. This final stage is generally conducted in the same place where you set the PDF’s security settings.
Common Mistakes Made with Contractual Obligations
Many companies have fallen into one of these traps when agreeing to a contract.
Contractual obligations that use vague or ambiguous terms can lead to misunderstandings or disputes down the road. Some terms may even be unenforceable in some states. It is important to have clarity around how and when payments will actually be made. If there are any exceptions to the agreement, be sure to specify them. Otherwise, the other party may argue they shouldn’t have to abide by the provisions.
One example of this would be if a payor of an invoice was supposed to pay a discount price. If the discount was given to the payee, but not also to the payor, there could be a dispute if it wasn’t clearly stated in the contract.
If there are any conditions to the payor’s obligations, be certain to specify who pays for those, otherwise, you may end up losing money.
And finally, make sure you update or review the contract regularly. If there have been material changes over the life of the contract, it may be necessary to adjust the terms.
Legal Considerations and Enforcing Contractual Obligations
The legal implications of failing to fulfill contractual obligations can be significant. A party who fails to perform their end of the deal is generally deemed to have breached the contract. Breach of contract can result in various remedies; the most common of these is "expectation damages," which refers to the amount of money needed to put the non-breaching party in the position it would have been in had the contractual obligations been fulfilled. Sometimes a non-breaching party is only entitled to "reliance damages," which costs associated with preparing to perform on the contract rather than simply the amount they would have received had the contract been performed. Liquidated and consequential damages may also be awarded if contemplated by the parties at time of contracting .
Breach of contract, however, is not the only remedy available to a non-breaching party. Instead of, or in addition to, suing for monetary damages, a non-breaching party may be entitled to an "injunction," which is a court order that requires a party to do something or prohibiting a party from doing something. Injunctions may be permanent or temporary, and temporary injunctions are often issued pre-trial in order to maintain the status quo for the duration of the case.
An individual or entity awarded an injunction must comply with all orders issued by the court. If an individual or entity fails to comply with a court order, it can be held in contempt, which could result in severe penalties including fines, jail time, and/or seizure of property.
The Importance of PDFs in Contractual Obligations
Managing contractual obligations is crucial for businesses of all sizes. With the increase of remote work and online collaboration, having a system to manage these contracts is essential. Portable Document Format (PDF) files offer a practical solution for organizing, sharing, and keeping track of different versions of your business documents. This section provides an overview of how using PDFs can help manage contractual obligations, from easy sharing and simplified version tracking to ensuring document security and integrity.
The evolution of contracts has incorporated technology to various degrees. From traditional paper-based contracts to simple electronic text documents, we have seen significant progress in the contract realm. With the arrival of the PDF, securing contractual obligations has become easier than ever. PDFs allow users to quickly and easily share information while maintaining the visual integrity of the original document. While it is not the only file format used by people, it is a preferred choice for many since it is simple to work with and can be stored with minimal space.
Sharing information is made easy when the document is in PDF format. When sending a contract, the last thing anyone wants is for the file to get corrupted in transit or for the recipient to be unable to open the document. These problems are eliminated by using a PDF document since the intended recipient will receive the document with the intended information intact.
Version control can be tedious when it comes to contracts, especially if there is the potential for multiple people to be using a contract simultaneously. PDF document signing simplifies this process by allowing for easy tracking and document management. Users can simply keep the most recent contract at hand instead of worrying about which copy contains the most accurate information.
These days, digital security is one of the main concerns regarding contracts. The last thing you want is for third parties to gain access to your sensitive information. PDFs can be both signed and secured making it impossible for unauthorized users to access them without permission. You can also keep the content of your PDF secure by protecting it with a password.
Best Practices for Contractual Obligations Review in a PDF
Once a PDF is created, a primary contractual obligation of a data room provider is to ensure that the contents of the uploaded documents accurately reflects the contents of the source documents, and to provide notice to parties accessing the documents of the relevant terms and conditions applicable to such documents. Generally, this will involve an evaluation of the contract in order to (a) ensure that the contents of the source document was preserved, and (b) to draw parties’ attention to any significant premium terms, including any compliance checks, by either making the clauses of interest searchable or providing separate notification.
In reviewing contractual obligations of uploaded documents , attention should be given to the retention of clauses in a source document. All clauses should be legible. Certain clauses commonly appear in contracts that require, among other things, that parties should provide notice to other parties under specified circumstances and/or obtain consents from other parties under specified circumstances (i.e., change of control, assignment, preemptive rights, management rights, rights of first refusal). When such clauses appear in a contract, the data room is then responsible for creating a simple compliance checklist to be reviewed and downloaded if necessary.
To facilitate review, it is advisable to provide the relevant sections of a contract as a separate download. A separate appendix may also be included with respect to any required compliance check(s).