6 Legal Types of Contracts In Business Law

Types of Contracts are described in this article. A contract is an agreement, express or implied, to do or not to do a particular thing.A contract is a promise or a set of promises for the breach of which the law gives a remedy. or the performance of which the law in some recognizes as a duty.” The U.C.C. definition of a contract is: ” ‘Contract’ means the total legal obligation which results from the parties’ agreement as afflicted by this Act and any other applicable rules of law.”

6 Legal Types of Contracts In Business Law

Generally. the following elements are required in a legal contract: (1) two or more competent parties, (2) their consent, (.31 consideration, (4) a proper subject matter. and (5) mutuality of obligation. These requirements are considered in subsequent chapters. For our purposes. we can classify contracts as follows: (1) express or implied, (2) unilateral or bilateral, (3) executed or executory, and (4) void, voidable, or unenforceable.

6 Legal Types of Contracts

An Express Contract

An express contract is one in which its terms are stated in words oral or written, An implied in fact contract is one in which the existence and terms are manifested by conduct. The distinction between an express con- tract and an implied in fact contract relates only to the manner in which the consent was made evident by the parties. To illustrate: A man waves to a taxi, gets in, and gives the driver an address. No other words are spoken. This is an implied contract that the driver will receive compensation for taking the man to the address.


Another type of contract is one that is implied in law, normally referred to as a “quasi-contract.” In this case, the law an obligation on a party to prevent an unjust enrichment. That is, the law may imply a promise to pay for benefits or services rendered even though no such promise may have been made or intended. For example, a nurse furnishes beneficial services to a person who has been insane for many years. There is no con- tract as such. However, if the nurse rendered the services in good faith with no intention of making a gift of such services, the nurse could recover the reasonable value of the services in a quasi-contract or, as is also said, as if there were a contract. The following case is an example of a quasi-contract.

A Unilateral Contract

A unilateral contract is one in which a promise is given in exchange for an act or the forebearance of an act, with only one promisor. An example of a unilateral contract is the reward type of case. The law enforcement agency offers a reward for the capture ofa criminal.

The promise is the offer of the reward, and the act is the capture of the criminal. A bilateral contract is one in which mutual promises are given. One promise is given in consideration for the other promise. Most contracts are bilateral. An attorney promises to perform certain services for a client. The client promises to pay money for the services. This is a bilateral contract.

An Executed Contract

An executed contract is one in which the object of the contract is fully performed (e. g., a cash sale). All others are executory (i. e., a contract that is wholly performed on one side but unperformed on the other side) or unperformed on both sides in whole or in part). The distinction is important in certain cases such as illegality, modification of a written contract by executed oral agreement, consideration, and the statute of frauds. In such cases (discussed in detail in later chapters), the defenses normally available to performance of the contract are no longer available if the contract has been executed.

A void contract

A void contract is a nullity and cannot be enforced by either party; for example, the victim of fraud in the inception did not know she was signing a legal document. A voidable contract is void or valid at the option of the parties. For example, a contract induced by fraudulent misrepresentations would be voidable at the option of the victim.

An Unenforceable Contract

An unenforceable contract is one that cannot enforced because of some legal technicality, such as the failure to satisfy the statute of frauds (failure to put the contract in writing which the statute of frauds requires of certain contracts) or because the statute of limitations has run on the contract (failure to file the lawsuit within the time prescribed by local statute). Such contracts are unenforceable rather than void or voidable.

A contract or clause therein, can also be unenforceable because it is unconscionable (i. e. , an absence of meaningful choice on the part of one of the parties together with unreasonable contract terms favoring the other party).  The test is whether the clauses involved are so one-sided as to be unconscionable under the circumstances existing at the time the contract was made and in light of the general commercial needs of the particular trade or case.

Examples of unconscionable contracts are those involving grossly excessive prices, particularly when the buyer is a person of limited income and education, or contracts with clauses hidden in fine print and unknown to the consumer. Most courts do not limit the test of unconstitutionality to the sale of goods but will apply it to any agreement. The following case is an example of an unconscionable clause in a commercial setting.

by Abdullah Sam
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