📝 Summary
Contracts are essential to ensure clarity in business and personal transactions, with formations categorized into several types. Express contracts are clearly stated agreements, either written or spoken, defining obligations—like employment or sale agreements. Express contracts arise from actions rather than spoken words, such as the expectation to pay after dining at a restaurant. Express contracts involve a promise by one party in exchange for an act, like rewarding someone for finding a lost pet. Express contracts involve mutual promises, common in employer-employee scenarios. Additionally, there are Express contracts, which need specific legal requirements, and Express contracts, which do not require such formalities but remain enforceable. Understanding these types is crucial for navigating legal agreements effectively.
Types of Contract – Based on Formation
Contracts are essential agreements that make sure everyone is on the same page when it comes to business and personal transactions. The formation of a contract can happen in various ways, leading to different types of contracts. Understanding these types is crucial for anyone looking to navigate legal agreements effectively.
1. Express Contracts
Express contracts are clearly stated agreements between parties. They can be written or spoken but must include explicit terms that outline what each party is obligated to do. For instance, when you (the buyer) agree to pay someone (the seller) a specific amount of money for a product or service, that is an express contract.

Examples of express contracts include:
- Property sale agreements
- Employment contracts
- Service agreements
Definition
Explicit: Stated clearly and in detail, leaving no room for confusion.
Example
Consider when you sign a lease agreement for an apartment, and all terms such as rent, duration, and responsibilities are stated clearly.
2. Implied Contracts
Implied contracts are agreements that arise from the actions or circumstances of the parties involved rather than from explicit words. This type of contract may not always be documented but is understood based on the behavior of the parties. For example, when you visit a restaurant and order food, both you and the restaurant implicitly agree that you will pay for the meal after consuming it.
Definition
Implicit: Understood though not directly stated, suggested or inferred from context.
Example
A good example of an implied contract is when a mechanic works on your car without a written agreement. By bringing your car in, you imply that you will pay for the service rendered.
3. Unilateral Contracts
A unilateral contract involves a promise made by one party in exchange for an act by another party. Here, only one party is legally obligated to act. A common example is a reward contract, where one person offers a reward for the return of their lost pet. The offer stands until someone returns the pet, thus fulfilling the contract.
Definition
Unilateral: Involving only one side, such that one party takes action based on a promise.
Example
If you put up a poster offering a reward for finding your lost dog, you are making a unilateral contract. If someone finds your dog and returns it, they are entitled to the reward.
4. Bilateral Contracts
Bilateral contracts are agreements involving mutual promises made by both parties. In this case, each party is both a promisor and a promisee. Most contracts fall into this category, such as a sales agreement where one party agrees to deliver goods, and the other party agrees to pay for those goods.
Definition
Bilateral: Relating to, or involving two parties or two sides.
Example
A classic example is a contract between an employer and an employee. The employer promises to pay a salary while the employee agrees to perform specific job duties.
5. Formal Contracts
Formal contracts are those contracts that must adhere to specific legal standards and formalities to be enforceable. They often require signatures, specific language, or even witness signatures. Examples include contracts relating to real estate transactions or wills.
Definition
Formalities: The strict requirements or procedures that must be followed in legal agreements.
Example
A will is a formal contract. To ensure it‚’ enforceable, it needs to be signed by the person making the will and witnessed properly.
6. Informal Contracts
Informal contracts, on the other hand, do not require specific legal formalities to be considered valid, although they can still be enforced in a court of law. Often these contracts arise in everyday situations, like you lending a friend a book with the understanding that they will return it.
Example
When you pay for a movie ticket and watch a film, you have an informal contract with the cinema agreeing to provide entertainment in exchange for your money.
Fun Fact
💡Did You Know?
Did you know that many contracts can be “oral agreements”? While not always advisable due to potential misunderstandings, they can be legally binding! However, it’s always best to have a written contract when large sums of money or significant commitments are involved.
Conclusion
Understanding the different types of contracts based on formation is paramount for anyone engaging in legal agreements, whether in business or daily life. From express and implied contracts to formal and informal contracts, knowing their characteristics and applications helps ensure that everyone fulfills their obligations and rights. Always choose the type of contract that best suits the situation to protect your interests and reduce potential conflicts.
As you continue to learn in life, remember that contracts are not just legal documents; they provide a framework for trust and mutual understanding.
Related Questions on Types of Contract – Based on Formation
What are express contracts?
Answer: Express contracts are clearly stated agreements, which can be written or spoken, outlining specific terms and obligations of each party.
What defines an implied contract?
Answer: Implied contracts arise from the actions or conduct of the parties involved rather than explicit written or spoken words.
What is the difference between unilateral and bilateral contracts?
Answer: Unilateral contracts involve a promise made by one party, while bilateral contracts consist of mutual promises where both parties are obligated.
Are informal contracts legally enforceable?
Answer: Yes, although informal contracts do not need specific legal formalities, they can still be enforced in a court of law.