Types Of Contacts

 

By Albert Kelley

 

Contracts come in many different styles and are divided by many different names.

Formal Contracts: These are contacts that are executed (signed) under special formalities to authenticate them. An example of this is a Contract Under Seal. What is this? Simply your signature or corporate signature, followed by some mark indicating a legal seal. This may be a wax impression of a signet ring as back in olden times, or it may be simply an impression of a corporate seal. The purpose of the seal is to ensure the authenticity of the signature. Today, seals are rarely used and are not required for most contracts. Another example is a Contract of Record. These are simply contracts that have been recognized by the Court, such as settlement agreements in a lawsuit. Finally are Notarized Instruments, such as mortgages, and Negotiable Instruments such as promissory notes. These often require additional formalities such as witnesses.

 

 

Informal Contracts: All contracts that are not Formal Contracts, whether written or verbal.

 

 

Express Contracts: Actual communication between the parties of the terms of the contract, whether written or verbal. This may sound unusual, until you read the next section.

 

 

Implied Contracts: This is not a contract by words, but by deed. It arises where an agreement is shown by action. As an example, where Bob provides goods or services to Steve who accepts them without objection, it can be implied that a contract has arisen where Steve must pay Bob the fair market value for the goods or services.

 

 

Quasi-Contracts: These are not true contracts, but rather, contracts that the law creates. It is often referred to as Unjust Enrichment. If one person gains a benefit and it would be inequitable to allow them to keep the benefit at someone else’s expense, the Court can deem that this is a quasi-contract and require the party to pay for the benefit.

 

 

Valid Contracts: Any contract that is binding and enforceable.

 

 

Voidable Contracts: Contracts that are binding and enforceable, but due to certain circumstances may be rejected by one of the parties. The best example of this is a contract with a minor. People under the age of 18 may enter into contracts, however, with few exceptions, at any time before the minor turns 18 they may reject the contract and demand the return of their money, or other consideration. This is true, even if the minor cannot return the item purchased or if all parts of the contract have been completed.

 

 

Void Contracts: Not binding and not enforceable. Any contract for an illegal action is void. You cannot have a contract for prostitution services or for the sale of illegal drugs. You cannot have a contract to kill someone.

 

 

Executed Contracts: A contract where all parties have completed their mutual obligations under the agreement.

 

 

Executory Contract: A contact where one or more parties still have obligations to perform under the agreement; an unfinished contract.

Bilateral Contract: A contract that obligates both parties to perform some action; i.e. I will provide service, and you will pay $X.

 

 

Unilateral Contract: Only one party is obligated to act. This is distinguished from the above in that one action is only required if another occurs; i.e., If someone does X, then I will do Y.

 

 

Option Contract: This is an agreement to do something at a later date. The primary place you see this is in real estate leases with an Option to Buy. Here the tenant can at some point in the future decide to buy the property at a pre-set price. If the tenant exercises the option, the Owner must sell at that price.

 

 

Right of First Refusal: This is similar to an Option, however, the action starts with the Owner. If the Owner decides to sell, the Owner must offer the property to the Tenant first. Likewise if a third party makes an offer to the Owner to purchase the property, the Owner must allow the tenant to match the offer before accepting it.

 

 

 

Al Kelley is a Florida business law attorney located in Key West and previously taught business law, personnel law and labor law at St. Leo University. He is so the author of “Basics of Business Law” (Absolutely Amazing e-Books). This article is being offered as a public service and is not intended to provide specific legal advice. If you have any questions about legal issues, you should confer with a licensed Florida attorney.

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