How to to Understand Contracts Part III

This short course in contracts continues with more distinctions you should know. Remember, whatever business you are in you will be reaching agreements with your customers. It’s better to know how to structure them now than when it is too late on the wrong end of a court settlement.

Here are four more contract types you should understand.

Difficulty: Easy

Instructions

1. Understand what defines an express contract.
   These are stated in words, either orally or in writing. Examples could be an agreement between friends to buy a sailboat or a written agreement to buy a home.

2. Know what constitutes an implied in fact contract.
   These actual contacts are more ambiguous because the existence of such an contract has to be distilled for the behavior of the parties involved. For example, you provide goods or services to a customer. You are in business providing such goods or services so you expected to be paid. Your customer had ample opportunity to return the goods or stop your providing the services and he did not do so. An implied contract can be quite sticky. For example if you are a wedding photographer and offer to shoot an acquaintances nuptials expecting to be paid for your services you should make what you expect clear up front, or you could assume you’d be paid while your acquaintance would think she’s getting a generous wedding present. If you try to enforce your claim, you might win. If the bride flooded the courtroom with crocodile tears, you probably wouldn’t be compelled by a judge to deliver the photos for free. In either case, you’d lose a potential friend.

3. Understand what’s involved in an implied in law contract.
   A court can award monetary compensation to an aggrieved party even if no actual contract exists. Courts draw on this precedent to prevent unjust enrichment or unjust detriment. As an example, you suffer a heart attack and wake up in the hospital in intensive care. Even though you have no insurance you elect to stay. Upon being presented with a reasonable bill for saving your life, you claim that you shouldn’t have to pay it because there was not traditional offer and acceptance. In fact you even argue that you lacked capacity. A judge can rightly rule that if it hadn’t been for the hospital’s intervention you would have died and rule in favor of your being obligated to pay.

4. 
    

   Distinguish between so called formal and informal contracts.
   Checks are a formal contract to pay. They require a date, payee, amount, account number and signature, but they can be written on anything and have been, from typewriter paper to birch bark. Formal contracts have specific parameters defined by law and cover things like negotiable instruments and articles of incorporation. They must be in writing. Other contracts, whether written or oral are somewhat erroneously labeled informal contracts, but they are just as enforceable.