The article is written by Ansruta Debnath, a law student at National Law University Odisha. This article talks about the different characteristics of express contracts.

This article has been published by Sneha Mahawar.

Introduction

What are express contracts

Contracts can be of a variety of types and can be formed in a variety of ways. The most common method of forming legally binding contracts is express contracts. 

An express contract is a written or oral agreement that has been completely laid out. This contract involves at least two parties making legal obligations to each other to fulfil set/specified parameters. According to the law, they agree to be legally bound by these agreements.

This contract necessitates all parties’ joint purpose to be bound by the agreement. It necessitates that the terms be written in such a way that both parties and those responsible for contract enforcement can understand them. There must be a firm offer, unconditional acceptance, and some means of payment in the contract. Furthermore, during the contracting procedure, both sides must provide something to the other. It’s possible that the gift will be monetary, but it’s not always the case.

Examples of express contracts

The following are some examples of express contracts:

Oral express contracts 

  1. A tells on the phone to B that A wants to sell their car. B informs A that he agrees to A’s offer and wants to buy that car. An express contract is then formed.
  2. Person A sends a text from his phone to Person B, proposing to sell their bike for a cost of Rs. 10,000/-. Person B calls the first person and agrees to the terms of the promise.
  3. Suppose you list your computer for sale on an online website. A prospective buyer meets with you, negotiates and both of you come to an agreement that you would sell that computer for X amount of money to them. The sale then takes place. This is an oral express contract.

Written express contracts

  1. Where a landlord presents ‘A’ with a preprinted lease on the apartment that “A” wants and if he agrees to the terms and signs it, then it is an express, written contract.
  2. Another example is when you sign an employment contract. That has all the information related to your employment and when it is presented to you, that is an express offer. The moment you sign it, that is an express acceptance. 
  3. Signing a contract agreement with a contractor for renovating your kitchen is another example of a written express contract.

Required components of an express contract 

Offer

For a contract to be formed, there must be an offer to enter into a contract. 

Acceptance

The offer when accepted by the party to whom the offer was made to is called acceptance. Acceptance of the offer will complete the contract.

Consideration

All contracts must have consideration. This is the embodiment of quid pro quo, i.e., someone does or does not do something for some benefit.

Object

The contract must be for some object or obejctive. Or else, there will be no basis of the contract. 

Capacity

Parties to a contract must have the capacity to contract. According to Indian law, people who do not have the capacity to contract are minors, those of unsound mind and those who have been specifically disqualified by law.

Foundation of an express contract

Express offer

Proposals or offers are made into contracts, and such proposals or offers are accepted. Proposals and their acceptance can be explicit or implicit. A proposition stated in words constitutes an express offer, according to Section 9 of the Indian Contract Act of 1872. As a result, an express contract is formed by the use of words, either verbally or in writing. For example, A might ask B if he wants to sell his house for X dollars. This is an example of an express offer.

Express acceptance

By replying, “I agree to sell the house to you for X dollars”, B agrees to A’s express offer. This will be a valid express acceptance and as a result, an express contract will be formed. As can be clearly seen, the conditions of the deal are therefore explicitly defined in an express contract. B might also have accepted A’s offer by simply nodding his head. But that would have been an implied acceptance and not an express one. 

Absolute acceptance

The acceptance given should be absolute and unqualified. The core of an express contract is that the parties have agreed to be legally bound by the contract’s provisions in a clear, unambiguous, and unequivocal manner. If there is any doubt about whether a person accepted or rejected a contract, you may not be dealing with an express contract, and the agreement may not be classified as such by a court.

Essentials of an express contract

Section 10 provides for certain essentials as follows, which all contracts must fulfil to be considered valid: 

  1. There must be free consent between the parties involved.
  2. The parties must be competent to contract.
  3. The consideration and object of the contract should be lawful.
  4. The contract must not be declared void under the law.

These essentials when present makes an express contract valid. Other than these essentials, certain other things also need to be fulfilled for the contract to be recognized by the courts. Firstly, there must be a meeting of the minds of the parties involved. This means that the parties involved must agree on the same things in the same sense. For example, suppose person A sees a clock belonging to B, and wants to buy it. The clock is actually metal but because of its design, it seems wooden. A, believing it’s a wooden clock, offers to buy it and B agrees. In this situation, B knows that it is a steel watch and believes he is selling the same while A believes he is buying a wooden clock. In the very object of the subsequent contract, there is no meeting of the minds and this is thus, not a valid contract.

Another example of a contract that lacks sufficient agreement is when the terms are not clearly defined and open to interpretation. In a valid express contract, the terms of the contract should be unambiguously expressed. Because the definition of a “desirable amount” is subjective and open to interpretation, there is no contract if someone offers to buy a house for a “desirable amount” and the owner of the house agrees. 

An important point to remember is that a valid contract gets formed only when there is an intent to create legal relations. Otherwise, it remains simply an agreement and cannot be enforced by law. To that effect, in an express contract, the intent to enter into legal relations must be clearly expressed. 

Difference between express contracts and implied contracts

The fundamental difference between express and implied contracts is the manner in which they are formed. While express contracts are made through words, implied contracts are formed by actions, gestures etc. (that is, anything other than words, either spoken or written). An implied contract is formed when the parties’ actions lead them to believe that a contract exists. They are not written and arise as a result of the parties’ circumstances. They do, however, include one party benefiting from another’s conduct or the knowledge that the parties have reached an agreement.

Implied contracts are likewise recognised under Section 9. It states that any offer (or acceptance) made without using words is considered an implied offer (or acceptance). The actions, gestures, and other activities of the parties concerned form the basis of an implied contract. In an auction, for example, the customer’s raising of the numbered paddle is an implicit offer, and the auctioneer’s final bang of the gavel when a commodity is sold signifies that the offer is accepted. As a result, this is a case of an implied contract.

The court must look at the language or words used in the contract while it is being created or drafted unless they do not represent the intention accurately. If a term is not expressed, it will be implied only if the will result in the contract’s business efficacy. An express term of a contract will always take precedence over an implied term. In the case of Luxor Ltd. Vs Cooper (1941) On behalf of the defendants, the plaintiff agreed to provide prospective purchasers for the sale of two theatres in exchange for a £10,000 commission. The defendants refused to execute the deal after providing prospective buyers, claiming that the arrangement was made with unapproved corporate personnel and hence was ultra vires (outside the director’s and company’s authorities). While the agreement may be ratified, the Court determined that the fact that all of the directors had a personal interest in the transaction rendered any attempt at ratification null and void.

The Court determined that there was no agency agreement because the agent was not instructed to find a buyer for the cinema despite being promised a reward if he did. This argument concerns the agent approaching the principal rather than the principal asking for the agent’s services. Furthermore, the contract specified that the arrangement was subject to contract, removing the right to commission if the deal did not go through. The House of Lords came to the conclusion that there could be no implied term since it imposed a negative commitment in which precise words could not be defined.

Are e-contracts express or implied contracts

The term ‘electronic contract’ refers to a contract that is made through e-commerce, with the parties rarely meeting in person. It refers to electronic commercial transactions that are undertaken and completed. A consumer using an ATM machine to withdraw money is an example of an electronic contract.

E-contracts can be both express and implied. When the terms are clearly stated, then the contract will be express. But in situations like when you click on a link for a product to buy it, it is implied that you will have to pay for it. 

Difference between express contracts and quasi-contracts

Quasi-contracts are a type of contract wherein obligation is imposed by law. For example, when a person is a finder of lost goods, there is some degree of obligation that is imposed on them to find the owner of the goods. In essence, a contract is formed without there being any intention to enter into a contract. This is the place where quasi-contracts become different that express contracts. In express contracts, through the clear expression of offer and acceptance, there must be absolute intention to enter into a contract and create legal relations. On the other hand, quasi-contracts are formed irrespective of contracts.

An example of an express contract involving a celebrity divorce

Michelle Marvin claimed that she and actor Lee Marvin “got into an oral agreement” in October 1964 that they would pool their earnings and share equally in any property they gained while living together. Michelle also stated that she and Lee had agreed to portray themselves as husband and wife to the general public despite not being married. Michelle would also act as Lee’s companion, homemaker, cook, and housekeeper, among other things.

Michelle gave up her flourishing job as an artist shortly after signing this explicit contract with Lee in order to devote herself full-time to Lee. Lee had committed to cover Michelle’s financial needs for the rest of her life in exchange. Michelle claimed that she kept her end of the bargain during her time with Lee, which lasted from October 1964 to May 1970.

The couple had earned a small wealth during this time, including Motion Picture rights worth over $1 million. Michelle, on the other hand, alleged in May 1970 that Lee had forced her to leave his home. He continued to support her financially until November of 1971, after which he refused. Michelle subsequently filed a lawsuit, requesting that the court rule on her rights in light of the express contract and her separate property. She also requested that the court set up a constructive trust for half of the property she had accumulated throughout her relationship with Lee.

The trial court granted Lee’s move to dismiss after a hearing. Michelle subsequently filed an appeal, claiming that she and Lee had reaffirmed their express agreement after Lee’s divorce from his first wife was finalised. Michelle’s application was dismissed by the trial court, and she appealed the decision.

The Court ultimately decided that the trial court erred in allowing Lee’s request for dismissal, and that the provisions of the couple’s express contract were not unconstitutional, but rather provided as “a legitimate basis upon which the trial court can render declaratory relief.”

Conclusion

A contract in which the parties directly exchange a mutual pledge to be bound by specified obligations and expressly establish their purpose and readiness to be legally committed to carrying out their responsibilities is known as an express contract. The way they are formed distinguishes an express contract from an implicit contract. While an express contract is made when the parties indicate their wish to be bound by the contract, implicit contracts are formed when the parties’ conduct is assessed without regard to their intent.

Overall, express contracts are the easiest contracts to make. They are also more desirable as it relies on clear words which are less open to interpretation when compared to actions and gestures. Express contracts are thus, most easy to enforce in courts, because of all their above-mentioned characteristics. 

References


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