After successfully completing this topic, you will be able to distinguish between the following contracts
• bilateral and unilateral,
• expressed and implied,
• executory and executed, and
• formal and informal.
Bilateral contracts—A contract is bilateral or unilateral depending upon who is required to perform. A bilateral contract requires both parties to perform. For example, a contract for the sale and purchase of a house is a bilateral contract. The buyer agrees to pay the selling price, and the seller agrees to deliver a deed.
Unilateral contracts—A unilateral contract requires only one of the parties to perform. For example, an option contract is a unilateral contract. In an option contract, the optionee pays the optionor for the option to purchase (or not purchase) a property for a specified period. The optionor, in return for the cash payment, promises to sell the property to the optionee for a specified price during the option period. The optionee is not required to purchase the property, but, if called upon, the optionor is required to sell. When the optionee decides to buy, the option becomes a bilateral contract until the closing date.
Express contracts—An express contract has specific words of agreement. Express contracts are easier to enforce in the courts because the terms are clear.
Implied contracts—Implied contracts are not specific because they arise by the acts of the parties. Implied contracts often result in misunderstandings and lawsuits.
|Implied contract example,|
If your bank mistakenly credits your account for $30,000 and you withdraw the money for a car purchase, you have the obligation to repay the bank, even though there was no expressed agreement.
Also, if an owner knows a broker is working to sell his property without a formal agreement, and accepts a contract, there is probably an implied listing contract.
Executory contracts—executory contracts have not been performed because something remains to be done.
Executed contracts—Executed contracts have closed. Nothing else remains to be done.
There is some ambiguity about the term executed contracts because there are two possible interpretations
• the contract has been signed, or
• the contract has been closed.
Course questions will usually concern the classification of the contract (whether it has been closed), but the student should be able to tell by the context of the question.
Formal contracts—Formal contracts are written and signed by the parties. While the contract is often a form such as the Florida Realtors Contract for Purchase and Sale, a form is not necessary.
Parol contracts—Parol contracts are oral contracts. Oral contracts are enforceable for many purposes, but usually not for the transfer of real property.