What is a Business Contract?
A business contract is a legally binding agreement that elucidates and governs the duties and rights of the parties involved. A business-to-business agreement usually defines how a particular or a series of business transaction(s) is/are to be executed under various circumstances. Contracts in business law contain points that are agreed upon or are implied to be agreed by the concerned parties.
Contracts do not need to be an official sealed and signed document. It could be a simple handshake or a conversation wherein the parties agree to abide by certain restrictions and fulfil specific promises.
Legal Caring brings you the comprehensive segmentation of the various types of contracts in business law.
Types of contracts in business law
1. Based on mode of formation
A contract expressed and agreed upon in written or spoken form by both the parties involved is known as an express contract. The terms of the agreement are explicitly stated and are legally binding. In the case of mutual consent, an express contract is formed.
Implied contracts are the ones that are not particularly mentioned by either party but are inferred by the conduct of a person or based on the circumstances of the case. No verbal or written acknowledgement is required in an implied contract. For example, when an individual enters a restaurant and orders food. An obligation to make a payment for the same is established automatically.
These types of contracts in business law come into existence not because of an agreement between the parties but due to the operation of law. They are enforceable regardless of the consent of both the parties involved. This type of contract is aimed at preventing one party from unfairly taking advantage of the other party. These contracts usually come into play when the delivery of goods or services takes place without the receiver’s request. The acceptance of such a delivery creates an expectation for payment for the delivered item.
2. Based on execution
A contract agreement has already been fulfilled by both the parties involved in an executed contract. Such a contract is not active anymore. A contract is said to be executed when all the promises stated in the agreement are met.
In an executory types of Contracts in Business Law, both parties are yet to perform their agreed promises. These contracts are still in the process of execution. Such contracts are still active contracts.
They are partly Executed and partly executory contracts- A contract is said to be partially executed and partly executory when one or few of the involved parties have fulfilled their promises and the rest are yet to do so. Such contracts are still active. Once the rest of the parties fulfil their pledges, the agreement turns into an executed one.
3. Based on consideration
In bilateral contracts, both the parties involved have outstanding promises to be fulfilled. It is a two-way agreement. Typically, a bilateral contract involves equal obligation from both the offeror and offeree involved, but this is not always the case.
A type of contract in business law wherein only one of the parties involved must perform their promises is called a unilateral contract. As the name suggests, it is a one-way contract. Generally, one of the parties has considerably less or no bargaining power in such contracts.
4. Based on Validity or Enforceability
Legally enforceable contracts that fulfil all the requirements per the act are known as valid contracts. It is a must for both the parties to be competent, i.e., they are not a minor, under the influence of drugs or alcohol, and are mentally competent. These contracts are enforceable in a court of law. These Types of Contracts in Business Law follow all the state laws and guidelines.
A contract that ceases to be enforceable by law is known as a void contract. The reason behind a contract becoming void could be the unexpected decease of a party involved or the arrival of any such circumstance that makes it impossible for the contract to be fulfilled.
When one of the parties accepts the contract agreement under physical or mental pressure or an undue influence through manipulation by the other party, the contract stands voidable.
In this Types of Contracts in Business Law involving activities forbidden by the law is known as an unlawful contract. It may or may not fulfil the criteria of a valid warrant but is not an enforceable contract in business law either way.
Importance of a business contract lawyer considering the various types of contracts in business law
If you own a business, you may be required to deal with various kinds of contracts regularly. Different agreements are applicable in particular solutions, and identifying them becomes crucial to ensure the safety of your business legally.
A professional business contract lawyer may come in handy in such situations. All you need is a competent lawyer with the necessary knowledge to handle your legal contracts, focusing on more critical areas in your business.
Legal Caring offers you the best services related to the legal aspects of your business. We have specialized lawyers who hold expertise in handling business contracts. We strive to provide you with relevant assistance to ease your business operations by clearing the legal hurdles you could face.