Classifications of Contracts

Classifications of Contracts. Contracts are classified into various categories:-

  1. Formal and Simple contracts
  2. Express and implied contracts
  3. Bilateral and unilateral contracts.

There are two basic types of contracts at common law –

Formal Contracts and Simple Contracts

A formal contract is a type of contract under seal, reduced to writing, signed by the parties contracting and impressed with a seal. Formal contracts are also called specialty contracts or deeds. Its features are that it must be signed, sealed and delivered.

For signing, the person executing the deed can either sign (signature) or make a mark. Nowadays, a seal is not necessary. It suffices if there is an indication of its place in the document.

In the case of First National security Ltd V. Jones (1978) 2 All ER 221, itr was held that a document could be regarded as a deed even though not sealed, where the parties clearly intended it to operate as a deed.
A formal contract is a contract made by deed. It is also known as a contract under seal. All other contracts are simple contracts, whether or not they are in writing or by words of mouth (parol).

Contracts under seal (Formal Contracts) – Classifications of Contracts

A contract under seal or deed, may be in writing or may be typed on paper or parchment. A deed is supposed to be executed, i.e., completed and given full legal effect by the signing, sealing and delivering of it by the party executing, to the other party. However, there have been considerable changes in the law and practice regarding deeds since the second half of the nineteenth century.

In the first place, the signature was not regarded as being necessary. Execution was valid, provided that the seal of the party executing was imprinted on the deed. However, by the English Law of Property Act 1925, S.73 and various laws in Nigeria, a person executing a deed must now either sign or make his mark, in addition to sealing, if the deed is to be valid. The reason for this is not hard to seek. Whereas previously, sealing means the imprinting in wax of the executing party’s crest or coat of arms, in modern times seals are commonly affixed beforehand and they consist of small red and round adhesive wafers attached to the documents.

More so, with the seal now having a merely symbolic value, the signature has become the vital component of the deed which gives it authenticity and validity.

Previously, delivering was only effective if the deed was actually handed over by the party executing to the other party or a stranger for the latter’s benefit. But since 1867, by the House of Lords’ decision in the English case of Xenos V. Wickham a deed may be delivered even though retained in the custody of the grantor. Any acts or words showing that it is intended to be executed by the grantor as his deed, binding on him, will suffice. Classifications of Contracts

Simple Contracts – Classifications of Contracts

A simple contract (or informal contract) is a type of contract whether written or oral, which is not under seal. Simple contracts can also be implied from the conducts of the parties.

Formerly, simple contracts were referred to as parol contracts, but nowadays lawyers apply the word parol specifically to simple contracts made orally and not in writing.

Simple contracts are therefore the opposite of formal contracts. Unlike formal contracts, simple contracts are not binding except there is consideration. In simple contracts, only a party who has furnished consideration can bring an action to enforce the contract.

Furthermore, may be defined as all contracts other than formal contracts. They may be in writing, or may be oral. In the latter case, they are called parol contracts.
Generally speaking, these are contracts which do not require any special form. They are also known as informal contracts in that they are not under seal. They may be express, implied, written or just oral.

The major distinction between a formal contract and a simple contract is that, unlike the formal, only a party who has furnished a consideration can bring an action to enforce a simple contract. It’s validity is derived from the presence of consideration.

As noted above, Simple contracts can take both the oral and written form. Indeed, in some special cases, the law prescribes that the contract or a memorandum of it must be in writing in order to be enforceable. However, such contracts must be distinguished from contracts under seal or deeds, for in the latter case, there must be a seal. This is not present in ordinary written contracts. As was remarked by Skynner, C.B., in Rann V. Hughes (1778)7Term Rep. 350.

“…all contracts are by the laws of England distinguished into agreements by parol (simple contracts); nor is there any such third class…as contracts in writing. If they be merely written and not specialties, they are parol, and a consideration must be proved.

This obiter was made to repel the notion first expressed by Lord Mansfield, a famous Chief justice of the King’s Bench in the eighteenth century, that proof of consideration was necessary in the presence of writing.
However, as was stated above, only if the writing was contained in a deed (contract under seal) could consideration be dispensed with. Classifications of Contracts

Express Contract and Implied Contracts.

Express Contracts is a class of contract the term of which are expressed or stated in every clear modes, either under seal, in writing or orally. This is the usual way contract are made.
A contract is described as express when the terms of the contract are clearly stated. This is the usual position Y invites tenders from contractors for the building of a house, and invites one out of several tenders.

The contract is then awarded to the owner of that tender. All the material terms will usually be clearly spelt out in such an agreement, and the contract comes into existence after much correspondence and negotiation on price, duration of construction, materials to be used, etc.

However, in the case of implied contracts, the terms are not expressly stated. The court, in such circumstances, will normally construe the existence of a contract from the conduct of the parties rather from their words or correspondence. Yet to all reasonable men, his action implies that he will pay his fare, while the bus owner is obliged to carry him safely to his destination, provided it is on the route of that bus.

Thus, in the famous United Kingdom celebrated case of Brogden V. metropolitan Railway Co.; (1877) 2A.C.666 , the defendant was held bound by a contract between it and the plaintiff, in spite of the fact that the defendant failed to sign the document containing the contract. It was established in evidence that both parties had been acting on the terms of the unsigned contract over a reasonable period of time. The court held that “the conduct of the parties was explicable only on the assumption that both parties mutually approved the terms of the unsigned document.

See also the Nigerian case of Attorney General of Kaduna State & ors. V. Bassey Atta & Ors, were the appellate court in dismissing the appeal held that “an acceptance of an offer can be demonstrated by the conduct of the parties as well as by words and documents.

Classifications of Contracts

Bilateral contracts and Unilateral contracts

A Bilateral Contract is also one of the classifications of contract. It is a contract between two parties. Most times, this type of contract consists of exchange of promises. The offeror promising to do something in exchange for the offeree promising to do something in return.

Furthermore, contracts is one which involves two parties. It is a contract whereby an offer (the party who purposes the terms of the contract) communicates his offer to an offeree and the offeree in response accepts the offer. In bilateral contracts, the two parties are mutually bound.

A bilateral contract consists of exchange of promises; the offeror promising to do something in exchange for the offeree promising to do something else in return.

However, although a contract has come into existence at this stage, all we have is a mere exchange of promises. There is as yet no performance by either party. This type of contract is called a bilateral contract, and the consideration (the mutual promises) is referred to as executory consideration.

Furthermore, is a consideration consists of actual performance in return for a promise, it is called a unilateral contract and performance is referred to as executed consideration. See the famous Queens Bench case of Carlill V. Carbolic Smoke Ball Co. (1893) 1 Q.B 256; the above case is a good example of a unilateral contract.

Facts of the case were as follows:

The defendant company advertised in the newspapers to pay £100 to anyone who used its medical preparation called smoke ball for two weeks, and nevertheless contracted influenza.
The plaintiff Carlill bought one smoke ball and used it as specified, and still caught influenza. The company was held liable to the plaintiff for the £100. The court held that by the terms of the contract, there was no need to notify the defendant company of the fact of acceptance.
This had been waived by the company, and acceptance took the form of performance, in this case, using the smoke ball for two weeks. Performance, in this case, also constituted the conside
ration.

Unilateral contracts are also well-illustrated by the reward cases; cases in which the offeror or promisor offers a reward for information leading to the arrest and conviction of criminals, or leading to the location of a lost loved one, or a reward for finding and returning of a lost object of great value to the offeror, like a favorite dog or jewellery or even money.

In such situations, the offeree “accepts” by actually providing the information or locating the missing person or object and re-uniting it with the offeror. The act of finding or giving the relevant information constitutes the consideration furnished by the offeree.

Furthermore, it should be noted that only one party, the offeror or promisor, is under a contractual obligation at any relevant period in a unilateral contract.. Classifications of Contracts

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