The Main Types Of Contracts

Contracts are everywhere; we enter into contracts everyday without even knowing we did, for example, putting a coin into the vending machine, going to the restaurant and taking snacks, buying a newspaper, taking a bus.

A contract is a legally binding agreement enforceable in a court of law. However, not every agreement between two parties is a legally binding contract. Parties in valid contracts gain rights and responsibilities; and in case of any arguments, the courts will make sure that the parties follow these rights and responsibilities.

There are many types of contracts, but the main ones are:

Bilateral Contracts

In a bilateral contract both of the parties involved promise to carry out certain things.

Example: If you sign a contract to buy a used car, for example, a Black Audi, for 1900, then you have entered into a bi-lateral contract, with the person who is selling the car. The seller promised that he will not sell the car to anyone other than you; and you have promised to buy the Black Audi and will hand in the 1900 to the seller. Two promises were made here; the sellers promise to sell and your promise to buy, hence Bi-lateral.

Marianne M. Jennings, Foundations of the Legal Environment of Business, Jan 2009, ISBN: 978-0324566512

Unilateral Contracts

A Unilateral contract is a contract in which one of the party (offeror) demands performance from the other party (offeree), instead of a promise. Since the offeree makes no promise, he can not be sued for abandoning or failing to carry out his act; only the offeror is bound by the law and, therefore, this is a single-sided contract.

Example: Richard (offeror) offers a reward of 200 for the safe return of his lost cat. The offeree has made no promises, so he is not obliged to return Richards lost cat, but if he does, then Richard will have to pay 200 to the offeree.

Marianne M. Jennings, Foundations of the Legal Environment of Business, Jan 2009, ISBN: 978-0324566512

Express Contracts

Express contract is a contract in which the terms of the contract are stated verbally, either orally or in writing.

Marianne M. Jennings, Foundations of the Legal Environment of Business, Jan 2009, ISBN: 978-0324566512

Implied Contracts

Can either be implied in fact or implied in law;

Implied in fact: A contract in which an agreement is seemingly intended among the parties involved, but not particularly verbally (in writing).

Example: You go to the doctor for the treatment of an illness; you and the doctor do not negotiate the terms of the treatment, how much you will pay or how the doctor will conduct the examination. You appreciate that he will do whatever appropriate examinations to establish the cause of your illness; and that you will pay fees for the doctor’s effort.

Marianne M. Jennings, Foundations of the Legal Environment of Business, Jan 2009, ISBN: 978-0324566512

Implied-In-Law Contract: This is also known as a Quasi-Contract. It isn’t actually a contract; rather, it is a way for the courts to rectify situations in which one party would be unfairly enriched, were they not obliged to compensate the other party.

Example: At the scene of an accident, a doctor treats an unconscious patient who has not agreed to pay the doctor for the emergency services. The patient was not required to pay the doctor for his services; and therefore, the patient would be unfairly enriched by the doctor’s services.

Marianne M. Jennings, Foundations of the Legal Environment of Business, Jan 2009, ISBN: 978-0324566512

Void Contracts

A void contract is an agreement to do illegal things or it lacks legal elements.

Example: A contract for selling weapons to a country which has a ban on weapons is a void contract. None of the parties can enforce the contract, because if the seller is allowed to collect the money, then it would encourage further violations of the law which bans sales of weapons.

Marianne M. Jennings, Foundations of the Legal Environment of Business, Jan 2009, ISBN: 978-0324566512

Voidable Contracts

A contract is voidable if one of the parties has the option to abort the contract; usually in the cases of mispresentation.

Marianne M. Jennings, Foundations of the Legal Environment of Business, Jan 2009, ISBN: 978-0324566512

Simple Contracts

A simple contract is any written or oral agreement which is not required to be witnessed, signed or sealed.

Formal Contracts

This is the complete opposite of a simple contract as this needs to be written, signed, witnessed and sealed by the participating parties.

For a contract to be valid some elements are essential and there must be:




Intentions to create legal relations

Legal Capacity



Offer: The offeror is the person making the offer; and the person who accepts it is called the offeree. An offer is a promise made by the offeror to be bound in a contract if there is acceptance of the offer by the offeree.


Richard says to Charles, “I’ll sell you my car for (pound)600". {The Offer}

Charles replies, “I agree", {The Acceptance}

Therefore, we have an offer and an acceptance; Richard is the offeror and Charles is the offeree.

However, some statements are not classed as offers, these are:

Supply of Information,(price, etc), Statement of intention and

Invitation to treat: When you ask other people to make an offer to you; examples include Public Advertisements, Goods displayed on a shop window or on the shelf, etc.

Acceptance: The contract is made once the offer is accepted by the offeree. Once the contract is made, the offeree can’t withdraw from the acceptance; vise versa, the offeror can’t withdraw from the offer. The acceptance can not try to introduce new terms and it must agree to the terms of the contract.

Counter-offers: When the offeree attempts to change the terms of the offer in acceptance, this is no longer an acceptance; it is classed as a counter-offer. A counter-offer rejects the original offer and the parties’ positions are reversed; the offeror becomes the offeree and vise versa.

Impact of new technology on offer and acceptance: In the new age of technology, many contracts are made over the internet (electronic contracts) and handwritten signatures would not be available. the acceptance of the terms and conditions of the offer must be evident in some manner by the offeree. Therefore to be in a valid contract, the offeror must find a way to prove the offeree’s consent to the offer. The offeror can do so by having the offeree send confirmation of acceptance via email to the offeror. Or the offeror may request the offeree to use a certain name and pin chosen earlier as identification when ordering products online. Therefore, the Electronic Signature Act provides that electronice signature has the same probative value as a handwritten signature provided that it is secure.


Definition: When at the desire of the promiser (offeror), the promisee (offeree) does or promises to do something; this promise is called consideration for the promise. There are always 2 parts of a contract; a promise and consideration for the promise. A promise is often made in return for a promise; this promise is called consideration; and it is the most essential element of a contract.

Example: John aggress to sell his car to Jake for 2000. So, John’s promise to sell the car is for Jake’s consideration to pay 2000. Similarly, Jake’s promise to pay 2000 is for John’s consideration to sell his car to Jake.

A contract will not be enforced by the courts unless it is supported by valuable consideration; an agreement without consideration is void; therefore consideration is an essential element in contracts. For a contract to be valid, the consideration must be real and it must not be unlawful or illegal or opposed to public policy.

Intention to create legal relations: Under UK law, an agreement which is supported by consideration is not enough to create a legally binding contract; the parties must also have intentions to create legal relations and therefore, this is an essential element in creating a valid contract.

Legal Capacity: Competence to make a contract means the legal capacity to make a contract. People who are over the age of 18 and of sound mind are considered competent to make contracts; they have full legal capacity to enter contracts. A person under the age of 18 is considered a minor; if a minor makes a contract, he or she can call it off or void it. The exception to this is mainly food or shelter and may include cars too, and the minor is bound to pay for their reasonable value. A minor who backs out of the contract gets back what ever the other party acquired from him & the minor cannot be asked to refund any benefits received from a void agreement; so it is important for the parties to check that the other party has the legal capacity before entering a contract. Contracts made with minors are voidable.

A person who is of unsound mind (incompetent due to disability or mental illness) can rescind their contracts.

Consent: It means that each party to the contract agrees to the terms of the contract, and that they are doing it out of free will and not being forced into it. Both parties must agree on the same thing in the same sense to be in consent.

Legality: For a contract to be enforceable by law, the contract must be legal; contracts based on illegal activity are not enforced by the law.

There must also not be any vitiating factors (things which make a contract void or voidable such as Mistake, Mispresentation, Duress, Undue Influence and Public Policy.

Task 2:

Terms can be divided into 3 types: conditions, warranties and innominate terms.

Conditions: A condition is an important and basic part of the contract. Important terms are usually regarded by the courts as a condition. Important in a sense that if it’s breached, it would have very significant consequence on the party which is innocent. For example, the quality of the good sold must be satisfactory; another example is that when the buyer makes his purpose for the goods known to the seller; the seller must make sure that the goods he is providing fit the purpose; breach of these are known as Breach of a condition.

If a condition is breached by a party then the other party (innocent party) has 2 options:

The innocent party may terminate the contract; refuse to perform their part of the contract and claim damages or

They may continue with the contract but then sue for the damages.

Warranties: Unlike a condition, a warranty is not essential to the contract; meaning it can be broken without highly significant consequences. A warranty breaks when a promise is broken, for example, when items are not as should be expected, or defected, at the time that the sale occurs. The warranty should be honoured by the seller by making a refund, replacement or repair.

If a warranty is breached by a party, then:

The innocent party can only sue for damages, but can not terminate the contract.

Innominate terms: These are terms which can be broken with either major or minor consequences; this depends on how serious the breach is. If the breach is serious, then the court will regard this as a condition and it will have major consequences. If the breach is less serious, then it will be regarded as a warranty by the court; it will have minor consequences.

Standard form of Contract:

Exemption clauses:

An exemption clause is a clause in a contract which excludes or limits liability (or a legal duty) for a party which would otherwise arise. Any party which relies on an exemption clause which excludes or limits liability must demonstrate from the start that the clause is incorporated into the contract, by notice or signature or course of dealing, governing his (the party’s) performance of the contract; and that the clause provides protection against the consequences of breach of the contract for which he is accused.

These clauses can create unjust situations in which one party can insist they are included in the contract because they are much stronger than the other party. One common area where the courts try to control the effect of these clauses is in contracts among business and individual consumers, because usually, the business is in stronger position than the consumer.

Task 3:

Tort Law:

Tort Law is part of civil (non-criminal) law and it concerns lawsuits (not prosecutions); these lawsuits may arise from injuries one person or a group against another, and torts can be intentional or non-intentional. Under tort law, if someone suffers a legal, economic or physical harm, they may be entitled to bring suit; the victim may be awarded by damages to compensate for their trouble if the suit is deemed valid.

Tort law is divided into 3 main categories; negligent torts, intentional torts and strict liability torts.

Negligence includes slip-and-trip cases, personal injury, car accidents and malpractice. An example of negligence tort is, if you are playing cricket out in the street and you accidently hit the ball through someone’s living room window.

Intentional torts involve a deliberate attempt to harm; examples of intentional torts include defamation, assault, fraud, battery, false imprisonment, trespassing and also interference with a company’s economic operations.

Strict liability torts usually cover product liability. When injured, the plaintiff does not need to prove any negligence on the defendant’s part; he must use the products to prove that it was not safe for its intended use & that he was injured by it. Examples include cigarettes and side effects of medicines, where the duty to warn is often applied to dangerous products.

For example, if a potato peeler takes your finger off when you are operating it as directed, then the manufacturer would be liable.

A general distinguishing factor between general tortious liability & strict liability is that strict liability is liability on products and the general tortious liability is towards persons generally.

There are some differences in tortious liability and contractual liability; the main difference between them is that anyone can claim remedy and not just the contracting parties. Another difference is that tortious liability revolves around duties which are fixed by the law, but contractual liability has duties which are fixed or bargained by the parties.

Occupiers’ Liability: the law of occupiers liability is concerned with the duty of care that the occupier of premises owes towards visitors (either invited or uninvited), who suffer personal injury during the course of their visit. An occupier is the person who has control over the land or premises. Special rules are used to determine who the visitor was:

An invitee: a person invited by the occupier; it is the occupiers duty to ensure the person’s safety against defect in your property

A licensee: a person permitted to be there, either with or without your invitation. Such a person has a right to be there, example, a door-to-door salesman.

A trespasser: a person who was present without license or invitation. The occupier owes him less care than a licensee or an invitee.

A contractual entrant: people who had paid to use the premises of the occupier.

Liability is generally linked to a breach one’s own duty; and a person is liable for only the wrongs he committed. However, in certain cases, because of some legally relevant relation between 2 people, the law makes one person being liable for the harm caused by another person; and this is known as the doctrine of vicarious liability. It’s also referred as imputed negligence; some common legal relationships that can lead to this are owner of a vehicle and driver, husband and wife, parent and child and employer and employee. The person who is held liable may not be responsible for the tort; therefore the vicarious liability is a form of strict liability.

The most common example of vicarious liability is the relationship between the employer and the employee; the employer is liable for the torts of his employees which occurred in the course of employment. The vicarious liability of the employer is in addition to the primary liability of the employee for negligence; therefore, both are liable. The employer may be entitled to recover contributions from the employee; if the employer was not negligent at all, he will be fully compensated by the employee.

The common law duty of an employer is to take care of his employee’s health and safety and to guard against risks foreseeable to health and safety. The employer must ensure that there is a safe place of work, he must provide safe tools and equipment and also ensure safe working systems. The ‘Health and Safety at Work’ act imposes criminal liabilities on the employer; recently there have been jailing or heavy fining of some company directors for the breaches of this Act. The employer must make ensure the health, safety and welfare for their employees at work and also the physical and mental health of the staff; in general the employer must:

Provide and maintain systems at work so they are safe and have no risks to health.

Make arrangements to ensure safe use, handling, transport and storage of substances.

Maintain the workplace so that is safe

Make sure that the access and exits to the workplace are safe and have no risks to health.

Provide health and safety information, supervision and instruction training.

Provide and maintain adequate welfare facilities and a safe working environment

Task 4:

Exemption clauses: