Classification of Contracts

Executory contracts

A contract in which not all of the terms have been fully performed

Quasi-contract

"implied-in-law" contracts; but they are not usually contracts. Rather, to prevent one party from being unjustly enriched at the expense of another, the courts impose contractual obligations on one of the parties as if that party had entered into a contract. There are limits to the doctrine: the enrichment must be unjust. Sometimes a benefit may simply be conferred on you because of a mistake by the other party, and the courts will not make people pay for others' mistakes.

Classification of contracts

1. Bilateral vs Unilateral 2. Express vs Implied 3. Quasi-contracts 4. Valid, Void, Voidable, & Unenforceable 5. Executed vs Executory 6. Formal vs Informal

Express contract

A contract in which the terms of the agreement are fully and explicitly stated in words, oral or written.

Bilateral vs Unilateral Contracts

All contracts can be classified as either bilateral or unilateral. Knowing whether a contract is bilateral or unilateral is important because that classification determines when the offeree is legally bound to perform. When a contract is bilateral or unilateral depends on hat response the offeror (person proposing the contract) expects from the offeree (person agreeing to or accepting the contract).

Letter of credit

An agreement by the person or institution that issues the letter to pay a sum of money on receipt of an invoice and other documents (typically documents indicating that the goods were insured against damage in transit). The UCC governs letters of credit.

Recognizance

An obligation in which a party acknowledges in court that he or she will perform some specified act and/or pay a price on failure to do so. An example of a recognizance is a bond used as bail in a criminal case. The person agrees to return to court for trial or forfeit the bond.

Express vs. Implied Contracts

Contracts are classified as express or implied, depending on how they are created.

Executed vs Executory Contracts

Once all the terms of the contract have been fully performed, the contract is said to have been executed. As long as some of the duties under the contract have not yet been performed, the contract is considered executory.

Types of formal contracts

The Restatement (Second) of Contracts identifies the following four types of formal contracts: 1. Contracts under seal 2. Recognizances 3. Letters of credit 4. Negotiable instruments

Voidable contracts

A contract is voidable if one or both of the parties can either withdraw from the contract or enforce it. If the parties discover that the contract is voidable after one or both have partially performed, and one party chooses to terminate the contract, both parties must return anything they had already exchanged under the agreement so that they will be returned to the condition they were in at the time they entered into the agreement. Certain types of errors in the formation of a contract lead to it being voidable. Typically, the person who can void the contract is the person whom the court is attempting to protect or the party the court believes might be taken advantage of by the other party. Contracts entered into as a result of fraud, duress, or undue influence (problems with the validity of the acceptance) may be voided by the innocent party.

Implied contract

A contract that arises not from words of agreement but from the conduct of the parties

Contract under seal

A contract that has a seal certifying its legality. Such contracts require no consideration for them to be legal. The term "under seal" comes from the days when a contract was literally sealed by a piece of wax into which an impression was made. Today, sealed contracts may still be literally sealed, but they are more likely to be simply identified with the word seal or LS (locus sigilli: "the place for the seal").

Formal contracts

A contract that must have a special form or must be created in a specific manner

Executed contracts

A contract whose terms have all been fully performed.

Bilateral contract

A promise exchanged for a promise; when the offeror wants a promise from the offeree to form a binding contract. As soon as the promises are exchanged, a contract is formed and the parties' legal obligations arise. If either party fails to perform, the other may sue for breach.

Unilateral contract

A promise exchanged for an act; when the offeror wants a performance to form the contract. The offeror wants the offeree to do something, not promise to do something. The most common unilateral offer is a reward. Just as the offeree is under no obligation actually to do the act called for by the offeror, the offeror may revoke the offer at any time before performance. However, to prevent injustice, once an offeree begins performance, the offeror must hold the offer open for a reasonable time to allow the offeree to complete the performance.

Unenforceable contracts

A valid contract may be unenforceable when some law prohibits the courts from enforcing it. For example, the statute of frauds requires certain contracts to be evidenced by a writing before they can be enforced. Similarly, the statute of limitations mandates that an action for breach of contract must be brought within a set period of time, thereby limiting the enforceability of the contract.

Void contracts

A void contract is, in effect, not a contract at all. Either its object is illegal or it has some defect that is so serious that it is not a contract.

Negotiable instrument

A written document signed by a person who makes an unconditional promise to pay a specific sum of money on demand or at a certain time to the holder of the instrument; an acceptable medium for exchanging value from one person to another The most common forms of negotiable instruments are checks, notes, drafts, and certificates of deposit. They are governed primarily by the UCC.

Informal contract

Any contract that is not a formal contract is an informal contract, or a simple contract. Informal contracts may in fact be quite complex, but they are called simple because no formalities are required in making them/

Conditions of an implied contract

As a general rule, three conditions must be met for the courts to find an implied (or implied-in-fact) contract: 1. First, the plaintiff provided some property or service to the defendant. 2. Second, the plaintiff expected to be paid for such property or service and a reasonable person in the position of the defendant would have expected to pay for such property or services. 3. Third, the defendant had an opportunity to reject the property or services but did not.

Formal vs Informal Contracts

Contracts may also be classified as formal or informal. Formal contracts are those that have a special form or must be created in a specific manner. Any contract that is not a formal contract is an informal contract, or a simple contract.

Valid contracts

What everyone hopes to enter into is a valid contract. This is a contract that contains all the legal elements of a contract (agreement, consideration, contractual capacity, and legal object). As a general rule, a valid contract is one that will be enforced. However, sometimes a contract may be valid yet unenforceable.