At its most basic, a contract is a legally enforceable agreement between two or more persons to do or not do certain things. So, does a contract need a specific formulation of words to be valid? Nope. Does it have to be in writing? Sometimes. It can be a complex area of the law but you don't need to be intimidated by contracts. Let's start out by taking a look at the different types of contracts.
Bilateral vs. Unilateral Contracts
A bilateral contract is an exchange of promises from the offeror, the person making the offer, to the offeree, the person to whom the offer is directed.
Example: Karen promises to set up Stephanie's darkroom and Stephanie agrees to pay within 30 days after completion. Karen and Stephanie have exchanged promises.
A unilateral contract is an offeror exchanging a promise for the performance of a specific act.
Example: Karen posts flyers around her neighborhood offering a $1000 reward for the return of her run-away dog. Karen is promising to pay the reward, but the offeree (in this case, any member of the general public) isn't making a promise to return the dog. Only after performance (returning the dog to Karen) is completed does Karen become obligated to pay the reward money.
Explicit vs. Implied Contracts
An explicit contract exists when the offeror and offeree expressly agree to enter into a contract, whereas an implicit contract can be created based on the conduct of the parties even if it is not expressly articulated.
Example: Karen asks Stephanie to model for the painting class she holds at her studio every Friday night. Stephanie shows up for the first three weeks and each week Karen pays her Saturday morning. If on the fourth week Karen refuses to pay Stephanie on the Saturday morning after she models, the court will infer that a contract exists based on the previous conduct of the parties and Karen will have to pay Stephanie for her services.
Oral vs. Written Contracts
Most contracts do not have to be in writing to be enforceable. However, there are certain circumstances which require it. Most states have laws known as the "Statute of Frauds" which specify these contracts. The exact requirements vary between states but here is a non-exhaustive list of some of the contracts that are required to be in writing:
Knowing the different types of contracts can help you distinguish if a contract even exists in the first place and if it does, what terms are included, what constitutes a breach of that contract and what remedies are available in the case of a breach. Stay tuned as we dive deeper into understanding, reviewing and drafting contracts!