Nature and classification

1. C H A P T E R 8
N A T U R E A N D C L A S S I F I C A T I O N
Business Law

2. Definition and Function of Contract
 Contract law is an agreement that can be enforced in court, between two or more parties.
 The objective theory of contract is not by personal or belief of any party.
 What the party said when entering into the contract
 How the party acted or appeared
 The circumstances surrounding the transaction
 Requirement of contract:
 Agreement
 Consideration
 Contractual capacity
 Legally
 Genuineness of assent
 Form

3.  Freedom of contract:
 Freedom of contract; the law recognizes everyone’s ability to enter freely into contractual
arrangements.
 Freedom from contract:
 However, illegal bargains, agreements that unreasonably restrain trade, and certain unfair
contracts made between one party with a great amount of bargaining power and other with
little power are generally not forced.
 Type of contract:
 Bilateral vs. Unilateral contract
 Express vs. Implied contract
 Quasi contracts
 Formal vs. Informal contract
 Executed vs. Executory contract
 Valid, Void, Voidable and Unenforceable contract

4.  Type of contract:
 Bilateral contract: The offer when offeree must only promise to perform, “promise for a
promise”.
 Unilateral contract: The offer when offeree can accept only when completing the contract
performance, “promise for an act”.
 Express contract: Agreement that are fully and explicitly stated in words, oral or written
form
 Implied-in-law contract: Implied from the conduct of the parties which creates and defines
at least some of the terms of the contract
 Quasi contract: Not true contract, imposed on parties by courts in the interests of fairness
and justice to avoid unjust enrichment.
 Formal contract: Require a special form to be enforceable
 Informal contract: Mutually agreed upon decision between two parties not formally
documented by an agency or witness.

5.  Type of contract:
 Executed contract: A contract that has been fully performed on both sides.
 Executory contract: A contract that has been fully performed on either side.
 Valid contract: Have an elements necessary for contract formation; agreement, legally
sufficient consideration, legal purpose and contractual capacity.
 Void contract: No contract at all, the purpose of contract is illegal or was adjudged
 Voidable contract: A valid contract, but one that can be avoided at the option of one or both
parties
 Unenforceable contract: A contract that cannot be enforced because of certain legal defenses
against it.

6. Interpretation of Contracts:
 The plain meaning rules:
 The interpretation is a writing agreement that is clearly stated in the contract, a court will
enforce it according to its plain terms. Extrinsic evidence cannot consider when the writing
contract is already clear and unambiguous as it could effect how the court interprets.
 Other rule of interpretation:
 A reasonable, lawful and effective meaning will be given to all contract terms
 A contract will be interpreted as a whole than separate specific clauses
 Separated negotiation will be given great consideration than standard
 Words will be interpreted in a common context and technical ones will be in technical
meaning
 Specific wording will be given great consideration than general language
 Written or typewritten terms prevail over preprinted terms
 A person needs to responsible for his/her own ambiguous expression
 Express terms are given the greatest weight among course of performance, course of dealing,
and custom and usage of trade.