4.1 Contract Types and Required Elements

Contract Types and Required Elements

A contract is a legally enforceable agreement between competent parties to do, or refrain from doing, a legal act in exchange for consideration. On the national exam, contracts is one of the highest-weighted domains, and most questions reduce to one move: identify which essential element is present or missing, then label the contract void, voidable, valid, or unenforceable.

Memorize the six essentials. A defect in any one changes the classification, and the exam loves to delete exactly one element from a fact pattern and ask what results.

The six essential elements

Note the asymmetry: an illegal purpose voids a contract outright, while a defect in capacity or consent only makes it voidable by the protected party.

Classification systems

The exam uses three overlapping classifications, and a single contract carries a label from each.

• Bilateral vs. unilateral. A bilateral contract trades a promise for a promise — buyer promises to pay, seller promises to convey. A unilateral contract offers a promise in exchange for an act; only one party is obligated. An option is the textbook unilateral contract: the optionor holds the price open, but the optionee need not buy.
• Express vs. implied. Express terms are stated in words (written or oral). Implied contracts arise from conduct.
• Executory vs. executed. Executory means something is still left to do (a signed sales contract before closing). Executed means all parties have fully performed (after closing).

Classify a freshly signed purchase agreement: it is bilateral, express, and executory until closing, when it becomes executed.

Validity spectrum and the Statute of Frauds

Four validity labels appear on every exam:

1. Valid — meets all elements; fully enforceable.
2. Void — never a contract at all (illegal purpose, no legal object). Cannot be enforced by anyone.
3. Voidable — valid until the protected party elects to rescind (minor's contract, fraud, duress).
4. Unenforceable — valid between the parties but a court will not enforce it (an oral land-sale contract barred by the Statute of Frauds, or one past the statute of limitations).

The Statute of Frauds requires real estate transfer contracts to be in writing and signed by the party to be charged. An oral agreement to sell land is not void — it is unenforceable. That distinction is a frequent answer choice.

Void, voidable, and unenforceable — the distinction examiners love

• Void — no contract ever existed (illegal purpose, or a party adjudged mentally incompetent). Neither party can enforce it.
• Voidable — valid until the protected party chooses to disaffirm (a minor's contract, or one induced by fraud, duress, or undue influence). The innocent party may enforce or rescind.
• Unenforceable — valid in substance but a court will not compel it (an oral contract that the Statute of Frauds requires to be written, or one barred by the statute of limitations).

Classic item: a 17-year-old signs a purchase agreement. The contract is voidable by the minor, not void — the adult seller is bound while the minor may walk away.

Worked formation scenario and the Statute of Frauds

A seller signs and emails a written offer to sell a lot for $90,000, open for 48 hours. The buyer phones back, "I accept, but make it $87,000." That counteroffer terminates the original offer and becomes a new offer the seller may accept or reject — there is no contract yet because the mirror-image rule was broken.

Because a sale of real property must be in writing and signed by the party to be charged, even a fully agreed oral land-sale contract is unenforceable.

Express vs. implied, bilateral vs. unilateral

An express contract states its terms in words (written or oral); an implied contract arises from conduct (a buyer who lets a broker show homes for weeks may create an implied agency by conduct). A bilateral contract is a promise for a promise — the standard purchase agreement, where seller promises to convey and buyer promises to pay. A unilateral contract is a promise for an act: an option is the textbook example, because the seller promises to hold the price open but the optionee is not obligated to buy.

Exam cue: in an option, only one side is bound. The optionor cannot revoke during the option term, yet the optionee may simply let it expire — the hallmark of a unilateral contract that item writers test against bilateral purchase agreements.