Contract Law Essentials

Contract Legal Status

• Valid Contract: Possesses the essential elements for legal enforcement.
• Unenforceable Contract: Potentially valid, but lacks legal force.
• Void Contract: Invalid from inception, lacks legal effect.
• Voidable Contract: Potentially valid, but one or more parties can rescind.

Implied Contracts

• Established by actions, not written documents or explicit discussions.
• Legally binding like explicit contracts.
• Common examples:
  • Doctor Visit: Patient owes payment for services.
  • Restaurant Meal: Customer pays for consumption.
  • Taxi Ride: Passenger pays for transportation.
  • Barber Shop: Customer pays for services.
• Social conventions play a crucial role.
• Professionals spell out implied contract terms to avoid misunderstandings (e.g., posted rates for taxis and restaurant menus).
• Real estate license holders should avoid implied contracts to prevent confusion and potential litigation; instead favor formal written contracts.

Express Contracts

• Explicitly stated intentions and expectations of the parties.
• All terms and conditions are identified and agreed upon.
• Opposite of implied contracts (inferred from actions).
• Common in real estate: listing agreements, buyer representation agreements, sales contracts, lease agreements.
• Easier to seek damages if a party fails to perform.
• Written form is crucial for dispute resolution and prevention.

Bilateral Contracts

• Both parties make promises to perform actions.
• Creates reciprocal obligations for both parties.
• Common in business.
• Example: Anna contracts with Brandon's Bulldogs for a puppy. Both parties make promises as to what they will do.

Unilateral Contracts

• One party (offeror) makes a promise in exchange for a reciprocal act by another party.
• Second party (offeree) is NOT obligated but has the option to accept.
• Two parties, but one promise.
• Offeror is obligated once offeree accepts.
• Lack mutuality.
• Example: Seth Bullock's bounty poster for a criminal (the government made a promise, but citizens were not obligated until they chose to act).

Executed Contracts

• All terms have been fulfilled by all parties.
• Ceases to exist after fulfillment of promises.
• No further legal power to bind parties.
• Example: Amy pays Shelly for a sweater.

Executory Contracts

• Not fully performed.

• Identifies a contract's stage of existence.

• Usually aims to be fully executed.

• Two elements:

  • Binding contract.
  • One or more parties have yet to perform.

• Executory and Courts: Courts are less inclined to entertain arguments about breach of contract if a contract isn't materially complete.

• Ongoing contracts: (exception to the above). Courts will consider ongoing contract failures at any time.

• Ongoing contract examples: Rental lease (periodic payment), equipment lease (rent), rent-to-buy lease, car lease.

• Oral real estate agreements: Not considered executory since they are not legally binding in the real estate realm (per statute of frauds).

• Execution confusion: Saying "executed a contract" often means only that the contract was signed, not that it's completed.

Contract Classifications

• Express: Explicit terms and conditions.
• Implied: Created by actions.
• Unilateral: One party makes a promise.
• Bilateral: Exchange of promises from both sides.
• Executory: Not fully performed.
• Executed: Fully performed.