- All the laws encompassing and stating how the business should be formed, organized, and managed or run is business law.
- The uniform rule of conduct applies to every kind of business that also applies to different types of contracts in business law.
- The Indian Contract Act of 1872 is the most crucial branch of commercial business that is the foundation for the business superstructure. There are two parts in the contract act that deals with different types of contract in business law.
- There are various kinds of legal procedures and documents which regulate the working and management; for this purpose, company lawyers are hired to provide sufficient information and guidance to the relevant requirements.
What is a business contract?
A business contract is formed to enforce laws and obligations in the workplace, trade, commerce, etc. The agreement is required to maintain regulatory standards for the organization.
The components of a valid contract are:
- An offer that is proposed by one party and accepted by the other party in the form of an agreement/contract.
- The consideration is to have a legally binding obligation. It means the parties show mutual consent to form legal relations through a contract.
- The parties entering into a contract are legally competent to do so, meaning that they are not insolvent.
- The terms and conditions are not out of legal policies and provisions. It should be acceptable by law.
Type of Contracts in Business Law.
In a broad sense, the type of contract in business law can be divided into three categories. They are:
- Contracts are made based on the mode of formation.
- Contracts are made based on performance.
- Contracts are made based on Enforcement/validity.
There are various types of contracts in business law as per division. These are as follows:
1. Based on the mode of formation
- Express contract: The proposal given or acceptance of the proposal/promise is agreed upon in words. Then it is known as an express contract. The two parties interact and decide the terms and conditions with the obligations that must be adhered to while making this type of contract in business law.
Some clauses and points are spoken and discussed, while some may be in written form and drafted with the help of a company lawyer.
- Implied contract: The type of contract in business law which is existing in nature but is not necessarily written or spoken. The parties have a binding legal obligation that is based on the duties, responsibilities, and circumstances.
Implied contracts are further classified into two parts implied- in – fact contracts and implied-in-law contracts.
- Quasi-contract: It is one of the types of contract in business law where the parties have no obligations and enter into an active agreement. A quasi-contract is used by a party who has possession related to another party’s property.
These types of contracts in business law are legally binding and may not have any previous documentation. The contract is designed to retrieve fair outcomes from the business structure.
- E-contracts: These types of contracts in business law are signed digitally. The parties can arrange to make one without meeting each other in person. Electronic contracts are enforceable if they adhere to every condition and requirement of the Indian Contracts Act 1872.
Some parties may hold a dominant position over other parties. The Indian evidence act 1872 and The Information Technology Act 2000 have some provisions which provide the necessary information on the regulatory standards for such contracts.
2. Based on performance
- Executed contracts: These types of contracts in business law are signed to form a contractual relationship between the two parties. The parties show their mutual consent to follow every obligation stated in the agreement as per law provisions. There is a distinct difference between the execution date and the effective date.
- Executory contract: The type of contract in business law where parties have a mutual understanding of their roles but do not fulfill the necessary objectives or obligations are executory contracts. It is based on a future consideration or promise provided in the agreement.
- Partly Executed and partly executory contract: In this type of contract in business law, one party has fulfilled their obligations and duties. The other party is yet to comply with its obligations. The process can cause litigation if not handled properly; taking online legal advice related to such matters may help both parties.
- Unilateral contract: These types of contracts in business law are generally unilateral/one-sided. The obligations and duties are fulfilled by only one party.
- Bilateral contract: It is a two-sided contract where both parties have to fulfill their obligations and promises. They come to terms and conditions with their agreement and act accordingly.
3. Based on Enforceability/ validity
- Valid contract: These contracts are entered and presumed valid only if they abide by the legal provisions of the Contract Act.
- Void contract: This type of contract in business law cannot be enforced in a court of law for any kind of litigation or unfulfilled obligations. The rights and risks are exercised accordingly by the parties.
- Voidable contract: This is a contract where one party can legally avoid their roles and duties or have the authorization to do so. The right is gained if a party proves the use of fraud, coercion, or undue influence.
- Illegal contract: Contract that is not legal as per law are called illegal contracts. They are void and cannot be enforced. Any criminal activity or fraudulent intent used in a contract is an illegal contract.
- Unenforceable contract: The type of contract in business law that are under the terms and conditions of the law but contains drafts and technical faults are unenforceable contract.
A different set of rules and regulations are required for an organization to perform productively and stay safe from coercion. Different agreements and contracts can be enforced to claim the needed benefit and safeguard their interests as per the law provisions. The parties may seek online legal advice for settlements and mitigation. The drafting can be done with the help of a professional lawyer online.