Contract Law: Differentiating between Various Types of Contracts

A contract exists as a well-known concept amongst the public, and not simply limited to those working in the business-related activities. Contracts may occur in varying ways and forms. For instance, buying and selling of property, supply of products or an agreement to hire staff. However, a contract enforceable by law represents an agreement reached or a set of promises that two or more individuals arrive at, to enable them to do or refrain from performing something (Dooley, 2006, p. 203). Unlike a mere promise, it should reveal the intention of the participating parties to reach a legally binding relation, an offer, acceptance and consideration. Besides the aforementioned existing as the essential elements of a contract irrespective of its value or size, certain types of contracts may contain varying terms generating different legal effects as outlined below.

Bilateral Contracts

Every enforceable contract requires at least two participating parties, with intent to create a legal and binding agreement. The party making or presenting the offer is referred as the offeror, while the offeree being the party whom it is made. The former rests as the promisor as the party will always make promises to do or refrain from performing something. The classification of the contract as either bilateral or unilateral relies on what it demands of the offeree to do in the acceptance of the offer that binds the promisor (Cross & Miller, 2009, p. 196).

Bilateral contracts arise when the obligations conferred by the agreement on both parties are prominent when creating the contract. The contract replicates a promise made for another promise. Simply, the offeree accepts the offer by committing to perform. It means that, the contract demands no performance, taking the forms of delivering of products or payment of funds during its creation. Consequently, the existence of the contract comes into force at the moment the participating parties exchange their promises. The legal detriment that the offeree incurs entails a different promise that one makes to do or refrain from performance that one was never previously, and legally mandated (Cross & Miller, 2009, p. 196). The consideration rests on the legal detriment as the motive or benefit inducing either party to enter the contract.

Unilateral Contracts

To the contrary, a unilateral contract arises when the offer is phrased in a manner allowing the offeree acceptance by completing the performance obligated by the contract. The easiest approach to understanding a unilateral contract is examining the meaning of unilateral. It suggests that the contract constitute the action undertaken by one party alone. Similarly, it allows only a single party to make the agreement. Unlike the bilateral demanding at least two parties promising, a unilateral contract only mandates action on one part to create a binding relation (Cross & Miller, 2009, p. 196). For that reason, the creation of a unilateral contract arises on the performance of the contract rather than at the exchange of promises.

The distinction between the two emerges from their application in case laws. The contract involving Carlill v. Carbolic Smoke Ball Co presents a unilateral contract that required, the offee acceptance by performing the stipulated bargain. This differs from the bilateral contract revealing the exchange of promises in the Australian Woolen Mills Pty Ltd v. The commonwealth of 1954.

Express Contract

The sanctity of a contract attracts the fundamental meaning and freedom from the true intentions during its creation. Although parties are reaching a contract may explicitly put the provisions of the agreement in written terms, the contract generates a broader realm to the presumed intentions of the parties. This suggests that the determination of a contract as either express or implied rests on the terms that root from the intention of the parties. Given that the parties may express the terms defining their rights either orally, in writing or by conduct, this avenue generates both express and implied terms.

An express contract involves one that all the fundamental elements and binding terms are explicitly outlined at its time of creation. This implies that it reveals the actual agreement that was openly declared when creating it, distinctly stated in explicit language, whether oral or written (Black, 1995, p. 261). The express contracts draw varying legal effects. Initially, where parties encounter handwritten and written instruments as contradicting each other, former terms prevail over the rest as it portrays a superior manifestation of their intentions. This was so demonstrated in Glynn v. Margetson.

The content set out in writing precludes the parties from presenting oral evidence to vary, add or contradict the outlined terms. This leaves oral evidence inadmissible to prove other terms as omitted from the written instrument, even though the parties agreed orally. Nevertheless, this provision never prevents parties from rectifying a mistake spotted in the written instrument, provided such conditions are spelt out. Furthermore, it is admissible where a party proves it as the collateral agreement and a subsidiary to the vital purpose constituting the contract. This was demonstrated in the Couchman v Hill (1947), where the Court of Appeal held the verbal statements to override the printed conditions of the sale agreement. The bench allowed the plaintiff to recover damages from the defendant, as the oral confirmation of the latter formed the main purpose of concluding the purchase discharging the written description.

Implied Contract

Typically, not every binding contract reveals the express terms. In this light, an implied contract will evolve where the agreement lacks the written instrument or circumstances leaves one party unjustly enriched from the existing actions or understanding. A contract between the parties exists even when explicit terms are missing from their agreement. It arises as either implied in-fact where they assumed a binding contract existed, or implied in-law where denying the existence amounts to unjust enrichment to either party. Although not agreed by the participating parties, the implied terms form an integral part of the binding contract.

The implied terms arose in the Moorcock case where the defendants were found as failing to ascertain the safety of the ship. Although they had no control over the River Thames bed, they offered no warranty to the ship-owner of the safety of the vessel. The court denied the defendant’s claim that no terms existed in their contract to guarantee the safety of the ship, by holding the existence of an implied warranty in the offloading contract. The owners of the wharf were better placed to determine its safety at the time of docking (McKedrick, 2014, p. 345).

Implied terms never constitute a platform for the court to improve the terms or make the contract workable. Nevertheless, certain statutes embrace the implied terms in the determination of a contract reached pursuant to the provisions. Particularly, the provisions of the Sale of Goods Act form an integral part of the agreement. They include, fitness for purpose, correspond to the explanation, merchantable quality and right to sell amongst others. Similarly, the consumer contracts and employment contracts have implied terms to protect the consumers and employees respectively.

Void Contracts

This suggests an agreement whose legality remains unenforceable by either party ab initio, since the law treats it as non-existent. In addition, the contract generates no legal remedy as it confers neither rights, nor imposes obligations on the participating parties. Given that it is unenforceable, the question of granting compensation never arises on occasion of non-performance of its provisions. Equally, any collateral transaction becomes void, hence unenforceable by law.

Void contracts arise in all agreements stated with the infants, including admission of debts, money-lending contracts and delivery of products excluding necessaries. It arose in the Leslie Ltd. V. Shell where the plaintiff claimed damages, citing misrepresentation of the age of the defendant when borrowing £400. Given that the plaintiff was a firm in money-lending operations, the court held the £475 claim irrecoverable as the agreement was void by the provision of the Infants Relief Act of 1874.

Voidable Contracts

Applying the above criteria to analyze voidable contract shows the legality as enforced as opted by the aggrieved party. The time of its enforceability lapses when the option upon which it unenforceable arises is rescinded by the party. It retains the right to restitution, where benefits accorded to the other party are restored upon rescinding the agreement. Additionally, a party to the contract who rightfully rescinds it receives compensation of all benefits received by the other party, under its provisions. To the contrary of a void contract, collateral transactions are unaffected (Rao, 2013, p. 35).

A voidable contract arises in agreements entered by infants, entitling them with the right to repudiate such contract either during their infancy or upon attaining the majority age. However, the latter occasion requires them to exercise this right within a reasonable period. This was so held in the Davis v. Beynon-Harris where the infant was liable for debts after failing to repudiate the lease agreement during either of the aforementioned time. Repudiating the contract shields the infant from incurring liability and facing suits. Such contracts would include lease, tenancy and partnership agreements. For instance, the Partnership Act s12 shields the infant partners from incurring debt liability or other liabilities of their undertaking during their infancy as the agreement remains voidable at their option.

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