4 Types of Contracts You Need to Know About
Contracts are a big part of life, and not just professionally. There are express and implied contracts, and there are also bilateral and unilateral contracts. Express contracts are clearly stated in written or verbal form; they can be accepted via either method. Implied contracts are made without expressing the terms as they are nonverbal. Then there are bilateral and unilateral contracts; the distinction being the number of people involved. Unilateral contracts only require a promise from one side while bilateral contracts require both parties to make a promise. These agreements are a major part of real estate and you are likely already familiar with at least one of them. For example, you’ve probably made a unilateral contract at some point. Have you ever promised someone something in return for a favor? This is a contract in which one party (you) makes a promise.
A bilateral contract happens between two or more people. These can be personal, or business contracts and they are pretty common. Do you have any entertainment subscriptions such as Hulu or Amazon Prime? Perhaps you go to the store often. These are all examples of bilateral contracts since more than one party is consenting to what is happening. Hulu is agreeing to provide you with a service in exchange for a monthly fee, and the grocery store is agreeing to release your goods to you in return for your payment. Bilateral contracts are happening constantly, and you participate in them much more often than you might think.
Unilateral contracts only require a promise from one person to happen. A good example is a poster promising a reward for the safe return of a pet. The owner is making a unilateral contract with whoever might find their missing animal. There is no specific person that is responsible for finding the animal and returning them safely, it is simply a choice for anyone who would be willing to take on the task.
Bilateral and unilateral contracts are actually both enforceable in a court of law; this means they can also be broken if a party fails to adhere to the terms of the agreement. Perhaps you hire someone to work for your company and you have a strict no fraternization policy among staff members. By accepting employment this person is also agreeing to follow your company policies. Failing to do so is a breach of your bilateral agreement and you could opt to terminate them. In terms of a unilateral contract, let’s say you post a $300 reward for your missing puppy. If someone finds your puppy and brings it to you and you then say you can only give them $50, you have breached your unilateral contract.
Express contacts are those that are stated directly either verbally or via text and all terms are clearly laid out for both parties. They are called express contracts due to the fact that the offer, as well as the acceptance stage, are often verbal. However, they don’t have to be. Say for example that you offer someone your car for $1000 verbally, and they write back a letter stating that they agree to purchase your car for that amount. This interaction is known as an express contract since both parties are clearly expressing their stance on the agreement.
An implied contract is one that is deduced based on the behavior of all parties involved within said contract. This means that the agreement is put together without words and everything is based on assumption. There are two types of implied contracts; those implied by law and those implied by fact. A contract implied by law means that those involved are not deciding to participate in the contract, but it is set in place due to the fact that there is a law that binds them. A contract implied by fact is one that is put into action by current situations and behaviors; if you were to buy a dress from a clothing store for instance. It is implied what both parties are agreeing to without anything being stated.
The difference between express and implied contracts is that the former has terms that are clearly laid out and the latter is based upon assumptions and how those involved are acting in a particular moment in time. Since implied contracts are based upon an assumption, and assumptions can be wrong, there is no sure outcome from any given situation. Express contracts are clear, and everyone knows exactly what to expect. As you can see, we enter into contracts much more often than we think; agreements aren’t just for closing on homes. However, they are a major part of the real estate process, one that you should familiarize yourself with.