A contract is an agreement that contemplates as its object and results in an obligation for the breach of which a suit for damages may be maintained in a court of law.
The word "contract" is a word in common usage, conveying the idea of agreement. But every agreement is not a contract. It must be an agreement intending to create and that does create a legal obligation of certain characteristics. Some agreements are merely passive, and result in no obligation whatever, and some are intended to create obligations of a merely social sort, and some agreements create legal obligations of a different nature, as those connected with the marriage relation, or those attaching to holding property in trust. Those agreements which are of a contractual nature are those which, according to usually accepted standards, show forth an intention to create obligations of legal force, for the breach of which the injured party may have his legal remedy. This is no more than saying that the law has developed consequent upon a demand permitting individuals to assume obligations by making agreements with each other, and to accomplish this establishes the conditions which the agreement must meet.
The following ideas enter into the legal concept:
(1) An agreement, contemplating and resulting in
(2) An obligation
(3) Enforceable in a court of law by an award of damages and in some cases other remedies.
In every contract we must have:
1. Competent parties;
2. Offer and acceptance;
3. A legal object;
These are all considered in Part I of this book.
The broadest division of contracts is into formal and simple contracts. From other standpoints divisions may be made in order to furnish a terminology indicating the condition, state, and evidence of the contract.
We will make a classification of contracts at this time in order to get before us a general view of the subject, and to define in part the terminology hereafter to be used. To one who is just entering upon the study of the law of contracts, these terms seem strange and have little significance; yet they should receive careful consideration at this point for the purposes mentioned. Their discussion will follow in appropriate place throughout the text.
We may classify or divide contracts as follows:
(1) A classification of contracts in respect to their validity as derived from form or consideration.
a. Formal contracts, whose distinctive element of validity is form.
1. Contracts of record; a. Judgments.
2. Contracts under seal, or specialties.
b. Simple contracts, whose distinctive element of validity is consideration.
1. Written, but not under seal;
2. Oral contracts;
3. Implied contracts.
(2) A classification in respect to the manner or form of their expression.
a. Express contracts.
1. Formal contracts.
2. Contracts in writing, but not under seal.
3. * Oral contracts.
b. Implied contracts.
(3) A classification indicating state of performance.
a. Executory contracts.
1. Contracts in which one party performs an act for the promise of the other party thereafter to perform an act (executory on one side, called also unilateral).
2. Contracts consisting in their inception of promise for promise (executory on both sides, also called bilateral).
b. Executed contracts; or contracts which have been fully performed. It will be noted that a judgment is classed as a contract. But this is really a fiction, and we need not further consider it here.1
Example 1. John Doe enters into a written agreement with Richard Roe whereby John Doe undertakes to sell and Richard Roe to buy a farm for $20,000.00 upon terms stated. We have in this example a contract which is:
D. In writing.
If the contract above had the seals of the parties attached to their signatures, it would be a contract under seal instead of a simple contract.
Example 2. John Doe orders groceries from Richard Roe's store saying nothing about paying for them and Roe promises to send them over. We have in this example a contract which is:
C. Implied as to Doe's promise to pay;
D. Express as to Roe's promise to deliver.
Example 3. John Doe offers a public reward to anyone who will procure certain information for him. Richard Roe furnishes the information. Here we have an example of a contract which is accepted by the act as well as thereby performed. It is a unilateral simple contract. All contracts are two sided and in that sense bilateral, but the word unilateral signifies a contract in which one side only is executory.
1. "It is an obligation of this character which is unfortunately styled a contract of record in English law. The phrase is unfortunate because it suggests that an obligation springs from agreement, which is really imposed on the parties ab extra." Anson, Contracts, Knowlton's Am. Ed., p. 7.