Types of contract there are essentially two types of

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Types of contract There are essentially two types of contract: contracts under seal simple contracts.
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© Stephen Graw 2012 Contracts under seal Contracts under seal (which are normally referred to as ‘deeds’) are more formal than simple contracts. They must be in writing and they must be ‘signed, sealed and delivered’. The practice of formally ‘sealing’ and ‘delivering’ deeds (physically affixing a seal of either wax or paper to the document and then placing one’s finger on the seal and saying the words ‘I deliver this as my act and deed’) has fallen into disuse. All that is generally required now is a witnessed signature and delivery of the document to the other party — coupled with the intention that the signature will function as both signature and seal and that the document will operate as a deed. Contracts under seal are still very common — particularly when greater formality is required or where there is a problem providing consideration (consideration is discussed in greater detail later in these notes). It is because of the consideration problem that deeds are traditionally the means by which multilateral contracts (those between more than two parties) are made. Simple contracts As the name suggests, entering into a simple contract requires little formality. In normal circumstances simple contracts can be wholly written, partly written and partly oral, wholly oral or even implied from the actions of the parties. Because they can be very informal, simple contracts gain their enforceability from something other than the formality of their formation. That something is called ‘consideration’. Briefly, consideration is the price that the promisee pays for the promisor’s promise. Without consideration, the promise is not contractually enforceable. A promise that is not supported by consideration is referred to as ‘a gratuitous promise’ and the person benefiting from it is called a ‘volunteer’. Gratuitous promises are not enforceable except in honour, and agreements arising out of gratuitous promises are often referred to simply as ‘gentlemen’s agreements’ — agreements that cannot be enforced in a court of law. 3.1.5 Factors affecting validity of contracts The required form By law, various contracts have to be in a particular form before they become enforceable. Some still have to be under seal (that is, they must be entered into by deed) but that is now very rare. The two most important contracts that must still be entered into under seal are: contracts that are not supported by consideration — they can only be enforced if they are made under seal; and contracts appointing someone (an agent) to enter into contracts under seal on your behalf. Agents cannot enter into contracts under seal on behalf of their principals unless their authority to do so has also been given under seal.
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