Contracts may also be either "formal" or "informal." Formal contracts are those under seal or record - that is, acknowledgments of debt entered on the records of a court, and contracts in writing and under seal (all contracts under seal are written).
Informal or simple contracts are also known as "parol contracts" and include all contracts not under seal or of record. They may be in writing or oral; it is a common mistake, when "parol contracts" are mentioned, to believe that oral contracts only are meant. The chief difficulty with oral contracts arises when it is found necessary to prove their existence. The parties may actually have forgotten, or one party may be fraudulently trying to get some advantage over the other party. Much misunderstanding and dissatisfaction are likely to result from verbal contracts, and whenever possible contracts should be reduced to writing. Suppose A promises to pay B in three years $500, with interest at 6%. The promise is not in writing. If A dies it will be difficult for B to prove that the promise was ever made, unless there were others who heard it made. Or the parties may disagree over the amount of the principal or the interest, or whether the interest was to be simple or compound. The mistake may be an honest one, or one party may be trying to gain some advantage by deliberate falsification. Even witnesses may disagree - a man's memory is not as reliable as a memorandum in writing over his own signature. We do not have space here to give the rules by which the terms and existence of oral contracts must be proved. As a result of the difficulty of proving their terms and existence, what is known as the Statute of Frauds was passed in England in 1676, which statute has been adopted generally in the United States. It provides that certain contracts must be in writing, or properly evidenced in some other way, to make them valid. In most cases, however, an oral contract is just as valid as one in writing. Contracts do not have to be sealed or witnessed. The wording of written contracts may be very simple, but should state fully the intention of the parties. Even where contracts are required to be in writing, this writing may be a brief note or memorandum.
Sixty days after date I promise to pay to John Roberts Five Thousand Dollars.
In witness and confirmation whereof, I have hereunto set my hand and seal.
(Signed) James Rogers (Seal)
July 3, 1922.
Thirty days after date I promise to pay John Smith two hundred dollars, for value received.
(Signed) Ralph Richards.
This Agreement, made in triplicate, this fifteenth day of June, one thousand nine hundred and twenty-two, by and between James Harrod, of Louisville, Kentucky, of the first part, and Rex Beisel, of Cincinnati, Ohio, of the second part, Witnesseth, as follows:
First, that the said party of the first part, for and in consideration of the agreements herein stated, to be performed by the party of the second part, agrees to construct and finish in good and workmanlike manner for the party of the second part, on a lot belonging to him, known as 1109 Perry Avenue, in Cincinnati, Ohio, one wooden garage, in accordance with the plans made by Tyler Woodruff, architect, of Cincinnati, Ohio, said plans being attached to this agreement. Said garage is to be constructed of materials to be passed on by the said Tyler Woodruff before they are used. Said garage is to be ready for occupancy by the first day of August, one thousand nine hundred twenty-two.
Second, that the party of the first part further agrees that in case he shall fail to have the garage ready for use by the date above specified he will pay to the party of the second part ten dollars as liquidated damages, for such delay, for every day that the completion of this contract is delayed.
Third, that the party of the second part, in consideration thereof, agrees to pay to the said party of the first part for the same the sum of one thousand dollars, in lawful money of the United States, when the said garage is ready for occupancy. The party of the second part further agrees to pay all charges for services made by the aforementioned Tyler Woodruff in connection with the said garage.
In Witness Whereof, The parties to these presents have hereunto set their hands the day and year first above written. Witnessed by:
Stephen Cody Ira Hall
James Harrod Rex Beisel
A and B do hereby mutually agree as follows: A to (state what A promises); B to (state what B promises).
Boston, Mass., June 5, 1922. A.