If you’re wondering what the many types of a contract are, you’re curious about the variations between one of the most essential components of a business. A contract is essentially a legally binding agreement between two or more parties which involves the exchange of value. The goal of the contract is to spell out the terms of the agreement and establish a record of that agreement that may be enforced in a court of law. Contracts can take many different forms, each with its own use and purpose.
7 types of a contract
1. Express and implied contracts
An express contract contains provisions declared plainly or publicly at the moment of contract creation, either in writing or orally. These are the kind of contracts that most people envision when they consider contracts.
In contrast, implied contracts include provisions that must be inferred from actions, events, and circumstances that show a mutual purpose to make a contract. Despite the lack of formal agreement, such contracts may be as enforceable as express contracts; nevertheless, if a court finds uncertainties in the minds of the parties as to whether or not a contract exists, it may opt not to enforce such a contract.
2. Unilateral and bilateral contracts
Only one party promises to take action or give something of value in a unilateral contract. These are also known as one-sided contracts, and a classic example is when a reward is given for finding something lost: The party giving the prize is under no duty to discover the lost item, but if they do, the offering party is under contract to deliver the reward.
Bilateral contracts, on the other hand, have both parties agreeing to exchange valuable products or services. These are also known as two-sided contracts, and they are the most prevalent type of contract.
3. Unconscionable contracts
Unconscionable contracts are those deemed unjust because they are disproportionately weighted in favour of one side over the other. The following are some examples of factors that may render a contract unconscionable:
- A cap on the amount of damages a party can collect for violation of a contract.
- A restriction on a party’s ability to seek redress in court.
- A warranty that cannot be honoured.
It is up to the courts to determine whether or not a contract is unconscionable. They frequently deem a contract unconscionable if it is viewed as a contract that no mentally able person would sign, no honest person would propose, or that would damage the court’s credibility if it were enforced.
4. Adhesion contracts
An adhesion contract is one that is negotiated by a party with significantly greater negotiating strength than the other side, implying that the weaker party can only accept or reject the contract.
Contracts that are sometimes referred to as “take it or leave it” contracts lack much, if any, negotiation since one side has little to nothing to deal with. Contracts of this type should not be confused with unconscionable contracts, because a lack of negotiating power does not always imply that the conditions laid out will be unjust. Nonetheless, courts may refuse to enforce adhesion contracts if they consider a meeting of the minds never occurred.
5. Aleatory contracts
Aleatory contracts are agreements that do not take effect until an external event happens. Insurance plans are an example of this, since they are agreements that provide financial protection in the face of unforeseeable catastrophes. Both parties undertake risks in such contracts: The insured are paying for a service they will never receive, and the insurer may have to pay out more than they earn from the insured.
6. Option contracts
Option contracts allow one party to engage in a subsequent contract with another party. Entering into a second contract is referred to as exercising the option, and a classic illustration of this is in real estate, when a potential buyer will pay a seller to remove a property from the market, then, at a later period, have a new contract established to acquire the property altogether if they so choose.
7. Fixed price contracts
A buyer and seller agree on a specific price to be paid for a project under a fixed price contract. These contracts, also known as lump sum contracts, carry a high level of risk for the seller since even if the project takes longer or is more comprehensive than expected, the seller will only be paid the agreed-upon payment.
FAQs
What are the four different forms of contracts?
Lump-sum contracts, cost-plus-fee contracts, guaranteed maximum price contracts, and unit-price contracts are the four types of construction contracts.
How many different kinds of contracts are there?
Contracts of many forms exist, including unilateral, bilateral, contingent, voidable, explicit, implied, executed, and executory contracts.
Housing News Desk is the news desk of leading online real estate portal, Housing.com. Housing News Desk focuses on a variety of topics such as real estate laws, taxes, current news, property trends, home loans, rentals, décor, green homes, home improvement, etc. The main objective of the news desk, is to cover the real estate sector from the perspective of providing information that is useful to the end-user.
Facebook: https://www.facebook.com/housing.com/
Twitter: https://twitter.com/Housing
Email: [email protected]
Related Posts
How does nomination affect property inheritance.
Taxation of property received through inheritance.
Floor area ratio calculator: What does floor space index mean?.
What is a Muslim woman’s right to property?.
What is tenancy? What are its different types?.
legal Procedure for land Encroachment All you Need to Know.
