Contract Law

Overview and Practice Tests

Types of Contracts

There are several different kinds of contracts, but there are basic elements required for any contract to be valid. First, a party makes an offer to another. Then, the other party must accept the offer. Lastly, most contracts require what is called consideration, which is something of value given by each party. If these elements are met and both parties intend to be parties to the contract, then a valid contract is formed.

Outside of these basic elements, there are several different kinds of contracts that can arise under contract law.

Under Seal

Contracts under seal are contracts that are formalized in writing or print, and contain the seal of the person or entity signing the contract. These contracts differ from traditional contracts in that they do not require anything of value to be given between the parties.

Express Contracts

Express contracts are oral or written contracts in which the terms of the agreement are clearly stated, and the terms may not be substituted. Whatever terms are stated in the contract cannot be altered, and whatever the contract states will govern.

Implied

Implied contracts arise when there is no contract in writing, but the facts or the law warrants an obligation between the parties. There are two types of implied contracts: implied-in-fact and implied-at-law. Implied-in-fact contracts arise when the conduct of two parties suggests that an agreement was in place, even if there was no writing to govern the agreement. Implied-at-law contracts are created when a court will enforce an agreement because it would be unfair to one party not to enforce it.

Executed and Executory

An executory contract is a contract in which both sides still have something that they need to do. For example, if a contract is made to paint a house for payment, the contract is executory until one party paints the house and the other party renders payment for the job. Once performance is performed on both sides, the contract has been executed.

Bilateral and Unilateral

A bilateral contract is a contract in which there is an agreement between two people or groups. Most traditional contracts are bilateral contracts.

A unilateral contract is an agreement or promise made by one person to do something in exchange for something else. Nobody is obligated to perform the contract, but if someone does, then the person must fulfill the obligation. An example is offering an amount of money for returning a lost item. Nobody has to return the item, and if they do not, the person does not have to fulfill the promise to give reward money. But if someone does choose to perform the act of returning the lost item, then the promisor fulfills the promise to pay the reward money.

Unconscionable

An unconscionable contract is a contract that is legally unenforceable because it is so one-sided that it is unfair to one party. It doesn’t leave any real room to bargain, and is so unfair that it “shocks the conscience.”

Adhesion Contracts

Adhesion contracts are contracts with a big difference in bargaining power between the parties. The adhesion contract is presented on a “take it or leave it” basis with nonnegotiable terms. Adhesion contracts may also be called “boilerplate contracts,” and they contain the same terms and conditions for every person who enters into the contract. An example of an adhesion contract is an insurance policy, where the insured person cannot negotiate the terms of the contract, and every insured person is subject to the same terms and conditions.

Aleatory

An aleatory contract is a contract in which performance by one party is contingent on an uncertain event. Usually, the amount paid by the parties under the contract are unequal. An insurance policy is an example of an aleatory contract, because although the insured pays a monthly premium, the performance of the insurance company is dependent on something happening before they will make a payment.

Void and Voidable

A void contract is an illegal and unenforceable contract that is treated by the courts as if there is no contract. A contract that requires somebody to do something illegal is an example of a void contract.

A voidable contract is a valid contract that can be enforced, but can also be voided by one party. For example, if somebody is underage when they enter into the contract, the contract is voidable by that person when they reach legal age. When the minor reaches legal age, he or she may cancel the contract if he or she does not wish to be bound by the contract; but if he or she decides to enforce the contract, the other party is bound and does not have the option to cancel the contract.