Definition of a Contract
It is an agreement between two or more parties which creates legal rights and legal duties and which the law will enforce to some extent in the event of a breach.
Parties to a Contract
The name given to a contract depends on the type of contract they are involved in. Some of the following names involved depend on the type of parties to a contract.
- Promisor: This is a person who makes a promise in a contract agreement.
- Promisee: This is the person who makes a promise when a contract agreement is made.
- Obligor: This is the person on whom a binding promise imposes a duty or obligation.
- Obligee: Obligee is the promisee who can claim the benefit of the obligation.
- Landlord or Lessor: This is a party in a contract who agrees that another party will occupy his house upon payment of an agreed amount for a given period of time.
- Tenant or Lessee: This is a party in a contract who agrees to pay an agreed amount in order to occupy the house of another party for a given period of time.
- Vendee: The party that offers to buy something in a sales contract.
- Vendor: The party who is willing to sell something in a sales contract.
- Insurer: The party that agrees in an insurance contract to insure another person’s objects.
- Insured: The party whose object was insured in an insurance contract.
Essential Elements of a Contract
1. Offer: It is a statement of a willingness to be bound on certain specific terms. It is a promise which is bound on certain specific terms and can be converted to a contract by acceptance.
2. Acceptance: This is a final and unconditional expression of assent to the terms of an offer. The offeree will accept an offer made by the offeror.
3. Valuable Consideration: A contract is valid if the gain to one party is balanced by some benefits known as consideration to the other party. The usual form of consideration is the payment of money. Consideration is simply the element of exchange in a bargain.
4. Competent Parties: the parties to a contract must possess the legal capacity to contract. That is the parties involved must be of legal age and sane.
5. Genuine Assent: All valid contracts must have mutual assent or consent. The assent or consent of any of the parties to a contract should not be obtained through fraud, undue influence, or duress.
6. Legal Object: The contract must satisfy all the necessary rules and regulations that relate to a contract. It must also satisfy the standard relating to legality and public policy.
Types of Contract
- Formal And Informal Contract: the formal contract is divided into:
(a) contract under seal
(b) contract of record
(a) A contract under seal is the one which a seal is fixed on it. An impression such as wax is made on it thus it becomes a contract under seal.
(b) A contract of record is the one acknowledged before a proper court.
An informal contract is also known as a simple contract. It involves all other contracts except contract under seal and contract of record. It is either written or oral in which the qualities and evidence found in a formal contract is lacking and it makes its execution very difficult in case of default.
2. Oral And Written Contracts: Oral contract is done through the use of spoken words which are not written down. A written contract is a contract documented down. A written contract may be formal or informal. The law requires certain documents like deeds to be accompanied by prescribed formalities in a written contract.
3. Expressed and Implied Contracts: This is a contract in which the parties involved have made oral or written declarations of their intentions and of the terms of the transactions. It is known as an expressed contract. On the other hand, if the evidence of the agreement is not shown by written or spoken words, it is known as implied because it is by acts or conducts of the parties.
4. Valid and Voidable Contracts, Void Agreements: These contracts are so-called based on their enforceability and validity. An agreement which contains the essential requirements that are binding and enforceable is known as a valid contract.
Also, an agreement may be binding and enforceable but may be rejected by one of the parties as a result of the circumstances surrounding its execution or the capacity of the other party, such a contract is called a voidable contract. For example; a contract in which one of the parties signed under duress is called voidable. A void agreement is without legal effect because it is usually incapable of enforcement.
5. Executed and Executor Contracts These are contracts classified to in terms of the extent to which they have been performed. If the contract has completely performed by all the parties and there is nothing else to be done, it is called an executed contract. An executory contract, on the other hand, is the one that has not been completely performed or carried out and in which there are still some things to be worked on.
6. Bilateral and Unilateral Contracts: A bilateral contract is one in which one promise is given in exchange for another. Each party in a bilateral contract is bound by the obligation to perform his promise and there is said to be a mutuality of obligations.
A unilateral contract is one where a party promise is not given in exchange for another, only one party is obligated to perform after the contract has been made. In this type of contract, it is only when the offeree has done something that the offeror may agree to obligate himself. In a situation, where all that is required of him when a unilateral contract arises, no mutuality of obligations exists. For instance, if one loses his property and promises to reward anyone who may find the lost property and if the property is found and returned to the offeror, his offer is accepted, a contract arises and the offeree has performed all that is required of him, therefore, no mutuality of obligations exists.