Eileen Rose D.

Abainza Professor Estelita Medina

BSBA MM 2-2D September 3, 2019

1. What is a contract?
According to Oxford Dictionary, contract is a written or spoken agreement, especially
one concerning employment, sales, or tenancy that is intended to be enforceable by law.
Another meaning by Study.com, A contract is a written or expressed agreement between
two parties to provide a product or service. There are essentially six elements of a
contract that make it a legal and binding document. In order for a contract to be
enforceable, it must contain: An offer that specifically details exactly what will be
provided.

2. Classifications of Contracts

According to FORMATION:

1. Express Contract
A contract is said to be an express contract, if the terms of a contract are expressly
agreed upon between the parties (either by words spoken or written) at the time of
formation of the contract. An express promise results in express contract. A promise is
said to be an express promise, when the offer or acceptance of any promise is made in
words.

2. Implied Contract
An implied contract is one for which the proposal or acceptance is made otherwise than
in words. Where the proposal or acceptance of any promise is made otherwise than in
words, the promise is known as implied promise. Implied contracts are inferred from the
circumstances of the case and conduct of the parties.

For example, when A takes a cup of milk in a hotel, there is an implied contract.

3. Quasi – Contract
A quasi-contract is one, which is created by law. In the quasi-contract, there is no
intention on either side to make a contract. In a quasi contract, rights and obligations
arise not by an agreement but by operations of law.

For example, where certain letters are delivered to a wrong addressee, the addressee is
under an obligation to return the letters.
CLASSIFICATION OF CONTRACTS ACCORDING TO PERFORMANCE
According to the extent of performance of contracts, contracts may be classified as
Unilateral Contract, and Bilateral Contract.

1. Unilateral Contract
It is also called as one-sided contract. In a unilateral contract, only one party has to
satisfy his obligation at the time of the formation of it, the other party having fulfilled his
obligation at the time of the contract or before the contract comes into existence.

For example, A takes a public auto to go to Mount Road. A contract comes into
existence as soon as A was dropped in Mount Road. By that time, auto man has fulfilled
his obligation, only A has to fulfill his obligation i.e. paying the auto- man.

2. Bilateral Contract
A contract is said to be a bilateral contract where the obligations of both the parties to
the contract are pending at the time of formation of the contract. In this type of contract,
a promise on one side is exchanged for a promise on the other.

For example, A promises to stitch a blouse and 0 promises to pay Rs.30. Here A
promises to stitch the blouse and 0 promises to pay. Thus each party is both a promisor
and a promisee.

CLASSIFICATION OF CONTRACTS ACCORDING TO EXECUTION

According to the execution of the contracts, contracts are classified into 2 as
Executed Contract, and Executory Contract.

1. Executed Contract
A contract is said to be executed contract when both the parties to contract have
performed their share of obligation.

2. Executory Contract
An executory contract is one, which is either wholly unperformed, or something remains
in there to be done by both the parties to contract. Sometimes, a contract may be partly
executed and partly executory.

OTHER CONTRACTS
Besides the above said classification, there are other types of contract also. Contingent
Contract is one such type.

1. Contingent Contract
Contingent contract is one, which is collateral to do or not to do something, if some event
collateral to such contract, does or does not happen. For example, A agrees to sell a
 certain piece of land to B, in case he succeeds in his litigation concerning that land. This
is a contingent contract.

The essential elements of a contingent contract are:

1. There is an uncertain event,
2. The uncertain event is collateral to the contract,
3. The performance of the contract depends upon the contingency.

Contracts of insurance, indemnity and guarantee are the commonest instances of a

contingent contract.

3. Different kinds of Contract

 Lump Sum or Fixed Price Contract Type

A lump sum or fixed price contract is the type of contract where all construction-
related activities are regulated with a total fixed price agreement.

Lump sum contracts are favored in situations when a clear scope and a defined
schedule is negotiated and accepted. For example, if it is necessary to shift the
liability to the builder and to prevent changes in orders for undetermined work,
this type of contract is best suitable for the situation. Due to present risk, a
contractor holds some percentage cost.

It is essential to consider that if the lump sum contract was signed, it would be
challenging to obtain any credit back for an uncompleted job.

 Cost Plus Contracts

Cost plus contracts cover:

- Actual cost
- Purchase
- Other expenses incurred from the construction work.

Before the negotiations begin, a specific expense amount must be included in

cost plus types of contracts. These amounts represent a percentage of the
material and labor costs, which cover the continuing costs of operation and the
contractor's profit.

Cost can be direct or indirect, and it must include all critical cost aspects of a
contract.
 Time and Material Contracts When Scope is Not Clear

Time and materials contracts are types of contracts used in a case where:

- The capacity and quantity of time and materials is undetermined, which

makes the project risky.
- The owner and the contractor are compatible with the tariff per hour or per
day, including possible additional costs during construction.

Periodically, the owner can determine a duration of the project with a contractor,
which must be performed to reduce the risk to a minimum.

The downfall of this type of contracts is that the seller can increase an indefinite
or unknown expense amount, which is the cost the buyer has to pay.

 Unit Pricing Contracts

Unit price contracts are commonly called hourly rate contracts. This type of
contract combines:

- Reimbursable expenses
- Fixed price type of contracts.

Unit pricing contracts can be adjusted during the process in which the owner
offers certain quantities and prices for the predetermined number of items.

 Bilateral Contract

Both parties involved in a bilateral contract promise to implement certain things.

 Unilateral Contract
In a unilateral contract, one party, which is the bidder, requires performance from
the other party rather than a promise. An offeree cannot be sued for:

- Abandoning the project

- Not being able to finish his or her work.

This is because he or she did not make a promise. Therefore, only the bidder is
required by law to comply.
 Implied Contracts
The contract can either be implied in fact or implied in law.

- Implied in fact contract. The joint agreement creates obligations and

promised intentions among the parties, where both are not expressed in
words. This type of contract is not articulated directly but through facts and
circumstances, which demonstrates the shared intention to achieve an
agreement.
- Implied in law contract. This is known as a quasi-contract because the
contract does not represent a real legal agreement.

 Express Contracts
During formation of the express contract, parties are forming conditions either
orally or in writing. This offer is wholly accepted with the terms of an offeree.

 Simple Contract
A simple contract is any kind of written or oral agreement. The following are not
required for a simple contract to be legally binding:

- Witnesses
- Signatures
- Seals

 Contract Under Seal

According to the traditional principles, the contract represents a legal act only if
stamped. The seal is a certainty that the legal consequences are conceivable.

 Unconscionable Contracts
An unconscionable contract is an unfair type of contract, made only in favor of
the party that is superior in the negotiations.

 Adhesion Contracts
Adhesion contracts are created by an advantageous bargaining party. They allow
the weaker side only the possibility to accept the contract or to reject it. It is also
known as a "Take it or leave it" type of deal.

 Aleatory Contracts
Aleatory contracts are based on a mutual agreement of the parties involved, and
its effects are activated under the circumstances of uncertain events, while one
or both parties accept the risk.