A contract is an agreement to do or not to do a certain thing. (California Civ. Code, §1549) The elements of a contract include parties capable of contracting, their mutual agreement, a lawful objective, and sufficient consideration. (id., §§ 1550, 1565) (See Agosta v. Astor (2004) 120 Cal.App.4th 596, 604-605.)
Intent is the touchstone of contract enforcement. A contract is an agreement formed between parties to represent their mutual intent. See Restatement (Second) of Contracts §3. A contract provision has only one true meaning – that intended at the time of the agreement – even though one or both parties may later dispute the correct interpretation. "[T]he fundamental goal of contract interpretation is to give effect to the mutual intent of the parties as it existed at the time of contracting." U.S. Cellular Inv. Co. v. GTE Mobilnet, Inc., 281 F.3d 929, 934 (9th Cir. 2002) (emphasis added).
It is essential to the existence of a contract that there should be: 1. Parties capable of contracting; 2. Their consent; 3. A lawful object; and, 4. A sufficient cause or consideration. All persons are capable of contracting, except minors, persons of unsound mind, and persons deprived of civil rights. It is essential to the validity of a contract, not only that the parties should exist, but that it should be possible to identify them. The consent of the parties to a contract must be: 1. Free; 2. Mutual; and, 3. Communicated by each to the other. An apparent consent is not real or free when obtained through: 1. Duress; 2. Menace; 3. Fraud; 4. Undue influence; or, 5. Mistake.
"The covenant of good faith is read into contracts in order to protect the express covenants or promises of the contract…." Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 690.
Duress consists in: 1. Unlawful confinement of the person of the party, or of the husband or wife of such party, or of an ancestor, descendant, or adopted child of such party, husband, or wife; 2. Unlawful detention of the property of any such person; or, 3. Confinement of such person, lawful in form, but fraudulently obtained, or fraudulently made unjustly harassing or oppressive.
Actual fraud, within the meaning of this Chapter, consists in any of the following acts, committed by a party to the contract, or with his connivance, with intent to deceive another party thereto, or to induce him to enter into the contract: 1. The suggestion, as a fact, of that which is not true, by one who does not believe it to be true; 2. The positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true; 3. The suppression of that which is true, by one having knowledge or belief of the fact; 4. A promise made without any intention of performing it; or, 5. Any other act fitted to deceive.
Mistake of fact is a mistake, not caused by the neglect of a legal duty on the part of the person making the mistake, and consisting in: 1. An unconscious ignorance or forgetfulness of a fact past or present, material to the contract; or, 2. Belief in the present existence of a thing material to the contract, which does not exist, or in the past existence of such a thing, which has not existed.
Any benefit conferred, or agreed to be conferred, upon the promisor, by any other person, to which the promisor is not lawfully entitled, or any prejudice suffered, or agreed to be suffered, by such person, other than such as he is at the time of consent lawfully bound to suffer, as an inducement to the promisor, is a good consideration for a promise.
A contract must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful.
§1671 Civ. (a) This section does not apply in any case where another statute expressly applicable to the contract prescribes the rules or standard for determining the validity of a provision in the contract liquidating the damages for the breach of the contract. (b) Except as provided in subdivision (c), a provision in a contract liquidating the damages for the breach of the contract is valid unless the party seeking to invalidate the provision establishes that the provision was unreasonable under the circumstances existing at the time the contract was made. (c) The validity of a liquidated damages provision shall be determined under subdivision (d) and not under subdivision (b) where the liquidated damages are sought to be recovered from either: (1) A party to a contract for the retail purchase, or rental, by such party of personal property or services, primarily for the party's personal, family, or household purposes; or (2) A party to a lease of real property for use as a dwelling by the party or those dependent upon the party for support. (d) In the cases described in subdivision (c), a provision in a contract liquidating damages for the breach of the contract is void except that the parties to such a contract may agree therein upon an amount which shall be presumed to be the amount of damage sustained by a breach thereof, when, from the nature of the case, it would be impracticable or extremely difficult to fix the actual damage.