Basics of ContractBasics of Contract

International Business LawInternational Business Law

• Hazem FoudaHazem Fouda

Classification of ContractsClassification of ContractsWhat are the main classification of the What are the main classification of the contracts?contracts?

1.1. Bilateral or unilateral contract:Bilateral or unilateral contract:• Bilateral contract:Bilateral contract: made by one party in return for a made by one party in return for a

promise made by another party “ both make promises”.promise made by another party “ both make promises”.• Unilateral contract:Unilateral contract: promise offer is made by one party in promise offer is made by one party in

return for the performance of a specific act by other return for the performance of a specific act by other party.party.

2.2. Executory & executed contracts:Executory & executed contracts:• Executory contract:Executory contract: it’s not fully performed by one or all it’s not fully performed by one or all

parties.parties.• Executed contract:Executed contract: it refers to contracts in which all it refers to contracts in which all

parties have completely carried out their parts of parties have completely carried out their parts of contract.contract.

3.3. Valid, Void, Voidable, & Unenforceable contract:Valid, Void, Voidable, & Unenforceable contract:

• Valid contract:Valid contract: that contains all the essential elements that contains all the essential elements of a contract “ offer, acceptance, consideration, of a contract “ offer, acceptance, consideration, competent parties, & legal purpose”.competent parties, & legal purpose”.

• Void contract: contract: it’s not legal & has no legal effect “ no it’s not legal & has no legal effect “ no party can enforce it against the other in court law”.party can enforce it against the other in court law”.

• Voidable contract: Voidable contract: it’s completely enforceable against it’s completely enforceable against all parties.all parties.

• Unenforceable contract: Unenforceable contract: it’s legal in all respects but it’s legal in all respects but fails to meet some requirements of the law “ a court will fails to meet some requirements of the law “ a court will not enforce it against any party”.not enforce it against any party”.

4.4. Formal& Informal contracts:Formal& Informal contracts:• Formal contract :Formal contract : it’s written contract prepared with it’s written contract prepared with

certain formalities.certain formalities.• Informal contract: Informal contract: it doesn’t required any particular it doesn’t required any particular

formalities “ parties are free to use any style of formalities “ parties are free to use any style of language”.language”.

5.5. Express & Implied contract:Express & Implied contract:• Express contract: Express contract: it’s one in which the agreement is it’s one in which the agreement is

specifically stated “oral or written” .specifically stated “oral or written” .• Implied contract:Implied contract: it’s one in which the parties form it’s one in which the parties form

contract from their actions.contract from their actions.• Contracts may be partially express & partially implied.Contracts may be partially express & partially implied.• QQuasi contract: uasi contract: fictional contract created by courts.fictional contract created by courts.

How an Offer How an Offer Ends?Ends?

• An offer ends when it is accepted by an offeree.

• An offer may also ends by Lapse of time, Rejection, Counteroffer, Revocation, Death or Insanity of the offeror or offeree, Illegality, and Impossibility.

Let’s talk about point of the above in some details separately.

Lapse of time:Lapse of time:If the offer contains a fixed time limit, the offer ends at that time. When no fixed time is stated, the offer ends at the end of a reasonable time.What is a “reasonable time” means, it depends upon the circumstances in each case.

Rejection:Rejection:An offer is ended by rejection when the offeree refused the offer made by the offeror. The offeree cannot later decide to accept the offer. The offer doesn’t end, however, until the offeror receives notice of the directly from the offeree.

Counteroffer:Counteroffer:A counteroffer is an offer made by the offeree to offeror the changing the terms of the original offer.The counteroffer ends the original offer and replaces it with the new offer. The two parties switch roles, if the original offferor (now the offeree) accepts the counteroffer, a legally binding agreement results.

Revocation:Revocation:The offeror has the legal right to withdraw at any time before it is accepted. Withdrawing an offer is known as revocation. Revocation is possible even though the offeror has promised to hold the offer open for a stated period. The offeror may not be able to revoke the offer, however, if an option exists.

An option is actually a contract in which the offeror agrees to hold an offer open and irrevocable for a certain time or until a certain date.

Death or Insanity:Death or Insanity:If the offeror dies or becomes insane before the offer is accepted by the offeree, the offer ends even though the offeree does not know of the offeror’s death or insanity. The death or insanity of the offeree also terminates an offer. Although death ends an offer, it does not terminate a contract already formed before the death of one of the parties.

Illegality:Illegality:An offer ends if the offer itself becomes illegal before it is accepted by the offeree.

Impossibility:Impossibility:

An offer ends if the offer becomes impossible to carry out before the offeree accepts it.