4.2 Contract Law: Elements and Classifications
Key Takeaways
- A legal contract needs four elements: offer and acceptance, consideration, competent parties, and a legal purpose.
- In Ohio, persons 18 or older under no legal disability can contract (ORC 3109.01), but a minor admitted to bail cannot use minority as a defense to a forfeiture judgment (ORC 2937.38).
- Ohio's statute of frauds (ORC 1335.05) requires a written, signed agreement to enforce a special promise to answer for the debt or default of another person, which is the core of an indemnity or guaranty.
- A unilateral contract has only one party making an enforceable promise; a bilateral contract has promises exchanged by both parties.
- An executory contract still has obligations to perform; an executed contract has been fully performed. A pending bail bond is executory until the surety's liability ends.
Why Contract Law Matters
A single bail transaction usually involves several agreements:
- the bail bond (recognizance) in which the surety undertakes to the state to pay if the defendant defaults;
- the application and premium agreement between the agency and the defendant or indemnitor; and
- the indemnity agreement, in which the defendant and indemnitors promise to reimburse the surety for any loss.
Whether each agreement is enforceable depends on the elements and classifications below. They appear in outline section 2.2.
The Four Elements of a Legal Contract
| Element | Meaning | Bail application |
|---|---|---|
| Offer and acceptance | One party makes a definite proposal; the other agrees to its terms. A changed term is a counteroffer, not an acceptance. | The indemnitor applies for a bond on stated terms (offer); the agent agrees to write it by executing the bond (acceptance). If the agent demands more collateral, that is a counteroffer. |
| Consideration | Something of legal value exchanged by each side | The premium, plus the indemnitor's promise to indemnify, exchanged for the surety's undertaking to the court that secures the defendant's release |
| Competent parties | Parties with legal capacity: of age, mentally competent, not under a legal disability | Ohio: persons 18 or older under no legal disability can contract (ORC 3109.01). An intoxicated or mentally incapacitated signer may lack capacity. |
| Legal purpose | The contract's object must be lawful | An agreement to help a defendant hide from the court, or to pay a jailer for referrals, is void for illegal purpose. |
Capacity and Minors: An Ohio Twist
Ordinarily a minor's contract is voidable by the minor. Bail forfeiture has a special rule. Under ORC 2937.38, when a minor is admitted to bail under Chapter 2937, the minor's minority is not a defense to a judgment against the principal or surety on forfeiture, or to the sale of securities or transfer of cash bail. The indemnity agreement with the bail agency is still an ordinary private contract. The agency should have an adult indemnitor sign it rather than rely on a minor's promise.
Classifications of Contracts
Formal and Informal
- A formal contract is one whose validity depends on a special form or procedure, such as a document under seal, a negotiable instrument, or an obligation acknowledged before a court. A recognizance fits this category. ORC 2937.22(A)(3) defines it as a written undertaking to forfeit the sum set by the court if the accused defaults, and the forms in ORC 2937.44 have the parties "jointly and severally acknowledge themselves to owe the state of Ohio" a stated sum before a judge.
- An informal (simple) contract is any contract that does not require a special form. Most agency paperwork, such as a premium payment plan, is informal.
Writing requirement: Some informal contracts still must be in writing to be enforced. Ohio's statute of frauds, ORC 1335.05, bars an action on "a special promise, to answer for the debt, default, or miscarriage of another person" unless the agreement, or a memorandum of it, is in writing and signed by the party to be charged. Promises that cannot be performed within one year are also covered. This is why indemnitors sign written indemnity agreements: an oral "I'll cover it if he skips" is generally unenforceable against the indemnitor.
Unilateral and Bilateral
- In a unilateral contract, only one party makes an enforceable promise, and the other party performs an act. The classic insurance example is a policy: the insured pays the premium, and only the insurer is bound to perform in the future.
- In a bilateral contract, both parties exchange promises. A bail indemnity agreement is typically bilateral: the surety promises to post and maintain the bond, and the indemnitor promises to pay premium installments, keep the defendant in contact, and indemnify the surety.
Executory and Executed
- An executory contract still has obligations to be performed by one or both parties. A bail bond is executory while the case is pending: the surety's promise to the court is still live.
- An executed contract has been fully performed by all parties. When the court discharges the bond after the defendant appears and judgment is entered (ORC 2937.40(A)(2)), the undertaking is executed.
Exam trap: "Executing" a bond means signing it. An "executed contract" means a fully performed one. A bond the agent executed (signed) this morning is still an executory contract.
Other Contract Terms You Should Recognize
| Term | Meaning |
|---|---|
| Void | No legal effect from the start, such as a contract for an illegal purpose |
| Voidable | Valid until the party with the right to cancel (for example, a victim of fraud) chooses to avoid it |
| Unenforceable | Valid but cannot be enforced in court, such as an oral guaranty barred by the statute of frauds |
| Contract of adhesion | A form contract drafted by one side and offered "take it or leave it"; courts construe ambiguities against the drafter. Bail indemnity forms are drafted by the surety, so clear wording protects the agency. |
| Joint and several | Each obligor is liable for the full amount, and together they are liable as a group. The statutory recognizance forms use this phrasing. |
Worked Example
A father signs the agency's written indemnity agreement, pays the premium, and promises to repay the surety for any forfeiture. The agent posts a $15,000 bond.
- Offer and acceptance: application terms accepted by execution of the bond.
- Consideration: premium and promises, exchanged for the surety's undertaking that secured release.
- Competent parties: the father is an adult under no disability.
- Legal purpose: securing lawful pretrial release.
- Classification: bilateral (promises both ways), informal but written as ORC 1335.05 requires for a promise to answer for another's default, and executory until the bond is discharged.
Which list states the four elements required for a legal contract?
A 17-year-old defendant admitted to bail fails to appear, and the court proceeds to judgment on the forfeited recognizance. Can the defendant's minority be raised as a defense to that judgment?
A defendant's uncle tells the agent over the phone, 'If he skips, I'll pay whatever the surety loses,' but signs nothing. Under Ohio's statute of frauds (ORC 1335.05), what is the likely result if the surety sues the uncle after a forfeiture?
An agent executes a bail bond on Monday morning, and the defendant's trial is set for next spring. How is the surety's undertaking classified on Monday afternoon?