Business Law is the set of instructions or guidelines that commands how to start and run a business. Every Businessperson must be familiar with the particular rules and regulation for running a business.
When and how we need Business laws;
When we decide to start a business, from the decision to implementation, there are a lot of rules that should be taken care of, like a partnership or sole proprietorship. Agreements and papers needed to register a business, how to pay federal income taxes. What to do next after buying a Business? How to pay employees insurance? What are the benefits that must be provided to the employees as a Business owner? And so on.
These questions come under state, contract, employment and federal Laws.
Let’s discuss types of Contracts in Business Law –
We can classify the Contracts into four types –
Based on the Formation
It has two major categories – express contracts and implied contracts.
When the agreement between the people is done by written or in conversation; then we can say it an Express contract because this type of contract allows expressing your agreement through both written and verbal mode.
An opposite to this, when we don’t need to express any agreement, then it is called an Implied Contract. It is a kind of mutual agreement that is done between people without using words.
Based on Nature of Consideration
It can be divided into two categories, Unilateral and Bilateral.
Conditions are different in both categories. In Unilateral, only a single party makes a promise to perform any task. Whereas in Bilateral, both the parties have to perform their promises.
The similarity between these two is, in both cases, promises are yet to perform in the near future; it has not been performed as of now.
Based on Execution
It includes two types – Executed contracts and Executory contracts.
Executed Contracts refers to the performance which is already completed. Whereas Executory contracts refer to the performance which is pending for completion in the future.
There must be confusion in your mind; it seems that Bilateral and Executory contracts are same, right?
No, it is not the same; the difference between these two is, in Bilateral, contract conducts between two parties. Whereas in Executory, a contract can be conducted in more than two parties.
Based on Validity
It includes five forms of contracts. Valid, Void, Voidable, Illegal and Unenforceable contracts.
Valid Contract is legally enforceable by Law. Void Contract is the opposite. It is the contract which is not legally enforceable.
Voidable Contract merges the two different words, Void + able, i.e., Voidable. Any contract where is something wrong then it can be void.
Voidable contracts are the agreements which are having the ability to be void in the future.
Any Unlawful contract which is opposed to public policy is known as Illegal Contract.
Unenforceable Contract is a kind of contract which can’t be enforced due to some defects. When these defects are corrected, then this unenforceable contract turned into a Valid Contract.