This document discusses the definition and classification of contracts. It defines a contract as a legally enforceable agreement between two or more parties. There are several requirements for a valid contract such as agreement, consideration, capacity, legality, and form. Contracts can be bilateral, requiring promises from all parties, or unilateral, requiring an act from one party. They can also be express, written out, or implied, based on conduct. The document outlines different types of contracts and discusses how they are interpreted, focusing on interpreting the plain meaning and considering the contract as a whole.

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.