Simple contracts is a kind of contract (otherwise known as informal contract) is a type of contract whether written or oral, which is not under seal. It can also be implied from the conducts of the parties.
Formerly, this agreements were referred to as parol contracts, but nowadays lawyers apply the word parol specifically to agreements made orally and not in writing.
However, this contracts are therefore the opposite of formal contracts. Unlike formal contracts, this type of contracts are not binding except there is consideration. In parol contracts, only a party who has furnished consideration can bring an action to enforce the contract.
Furthermore, it 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 parol agreement is that, unlike the formal, only a party who has furnished a consideration can bring an action to enforce the later contract. It’s validity is derived from the presence of consideration.
As noted above, This agreement 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 an English jurist 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.
In 1828, the Parliament of the United Kingdom amended the statute of frauds so that Oral acknowledgments or promises could not be used as evidence to prove the existence of a Simple Contract. Today, some American jurisdictions have established that a security interest is perfected “when a creditor on a Simple contract cannot acquire a judicial lien that is superior to the interest” of the secured party.
Contracts under seal (Formal Contracts) – Simple 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.