To convert business promises in to an agreement business need to form a valid legal contract to avoid any future grievances. Different types of agreements are formed in a contract such as Trade, Employment, Import, Export, etc. By forming a formal contract all conditions of contract are transparent and each party exactly know their responsibilities as well as their rights which referred as Terms of Contract.

Contracts can be an oral or a written contract. Compared to a written contract, oral contracts are difficult to prove as they ate one person’s words against another, while written contracts consist of Terms of contracts which can be challenge in court of law if not being comply accordingly. To strengthen oral contracts, evidence and witnesses are important to verify that the terms of contract were agreed.

Business contracts are formed with extensive negotiation to overcome any future problems and also to make its terms transparent. Some contracts are automatically renewed at the time of maturity such as Mobile phones contract and few contract renewed with mutual consent considering the product or services are maintained as per agreed terms of the contract.

Contracts should be transparent, clear and understandable what need to be done as per agreed terms and condition tabulated.



The following are the most popular classification of contracts.

Express Contract

In express of contract both parties make the contract terms either orally or in writing at the same time of its creation. The essence of this contract is that there should be a definite offer that’s is accepted by the offeree.

Implied Contracts

The contracts are implied in law and the contracts that are implied in fact are called implied contracts. An ideal implied contract consists of responsibilities drawn from a mutual agreement. It also consist intent to promise, which have not been expressed in words.

Contracts implied in law cannot be labelled as implied contracts as a contract implied in law lacks the requisites of a true contract. Contract implied in law can be used the term quasi-contract.

“Implied contracts are as binding as express contracts” (

Bilateral and Unilateral Contracts

In Bilateral contract two parties exchange mutual promises to each other for performing an act as per agreed terms or forbidden an act as per agreement. If a buyer promise to buy a service or a product on a certain price and seller promise to deliver it in a agreed time is an example of Bilateral contract.

In Unilateral contract, promises are made by one party to perform an agreed act in return of the act of other party. For example if a lost item need to be searched and a reward of £50 has been offered then the person who is going to perform the search of lost item have to accept the offer and will be bonded in a contract as performance which is searching a lost item in this agreement. The offeree may do as requested in the contract or may refrain from acting.

Unconscionable Contracts

This type of contract is one-sided contract in favour of the party who is in power. It is unjust and unduly contract. This kind of contract cannot be accepted by a person who is in his state of mind and has a decision making power and no fair and honest person would construct this kind of contract and also enter into this type of contract.

Distance selling contracts

Distance contracts usually made between the consumer and the supplier when consumer commit to buy a product or services online, by phone and by mail order, which does not require physical existence of both party. is the perfect example of buying product online and when you complete the purchase you are required to check terms and conditions before completing the purchase and the terms mentioned are the legal contract between you and It is required by the buyer to view and read terms condition very clearly and then accept them and enter into a contract with In case of non-internet means such as phone or mail order, suppliers are bound to provide document consisting of terms either by post or by email before it can be signed and executed.

It is required by the seller to inform buyers clearly about the product and services and also in some cases allow then a cooling off period specially when a services has been acquired.

Written contracts

After negotiation when two or more parties agreed to the terms of contract then the oral all terms and condition written for form a valid legal contract. The advantages of a written contract that it’s provide clear, transparent and understandable conditions to all parties hence its minimise the ambiguity and future grievances. If a parties breach any condition then there will be a legal protection to the contract and action will be taken against the breach of contract with penalties or cancellation of the contract. (Depending on terms and conditions of the contract).

Oral Contracts

Oral contracts are formed when one person make verbal promise for an act in return of the promise of an act from the other party. Many times oral contracts are ambiguous and are words against other person’s words. For example if a party offer to sale a car for £1000 and the other part offer £900 and the seller accept this offer then buyer and seller both enter into a oral contract for this sale. It is important that both parties should know and clear for their deal and the way they closing deal. Once oral contract established and promises are made then it should be documented and also generate other related documents such as Receipt etc.


Following are the essential elements of a legal contract:


All parties want to enter into a valid legal contract should satisfy the mandatory requirement such as Age which must be over 18, sound and healthy mental conditions. A person below the age limit can only enter into a contract with their parental approval and he only can enter into a contract which is legally necessary suck as Student Loan.

Intention to create legal relations

No contract can be formed without the intention to enter in an agreement and then a contract hence it is requires that the parties intend to forma legally valid contract and willing to form legal relations and also clearly understand the agreement and its consequence in case any future dispute, and its terms before entering into a legally binding contract.

If in any contract parties does not want to be legally pound then this must be addressed in the contract’s terms that the contact is not to be legally enforceable.

Invitation to treat

Invitation to treat is a simple statement to offer to accept to form a contract with willingness and after negotiations. It is an action which may attract other party to make an offer to form a contract. The difference between accept an offer and accept the Invitation to treat is that in accepting an offer create a binding contract while accepting Invitation to treat is actually creating and offer.


Offer is the basic and important element of a valid contract. A contract can be formed when there should be a sure, clear offer for a service or product. For example an organisation request for 10 Security card for their factory and security agency offer £1000 per month to provide 10 Security guards. In this case services required are Security Guards and the offer is £1000. Upon acceptance of this offer requested organisation and the security agency will enter into a valid contract.

An offer will lapse when the time frame for acceptance of an offer expired or the proposed offer has been withdrawn etc.


Acceptance can only be made when an Offer has been received and acceptance is for exactly what has been offered without any conditions which means in simple words “Offer must be accepted exactly”.

If offer has been accepted conditionally or and new terms are been suggest then this will be regarded as counter offer which can be accepted or rejected. Parties can negotiate for many offers and counter offers to decide the best interest of their business before entering into a legally binding contract. The negotiation process facilitate to design and implement terms and condition of the contract.

Acceptance of an offer can be made verbally, in writing or by an action which may clearly indicate the acceptance of an offer. Acceptance should be made in accordance with the method mentioned in the offer for it to be effective.


Express term

Express terms refer to all terms and conditions should be documented and clearly and in detailed stated to form a valid legal contract. In a valid contract one party is offered an action or proposes the list of action need to be taken and other party approve and accept this offer to enter into a legally binding contract.

Implied term

Implied terms are stated in the contract to protect the consumer rights. These terms come in effect by exercising intentions or by some relationship amongst the parties form the establishment of a valid contract. For example implied terms state that by getting a benefit other party will pay the value of benefit in terms of a benefit or payment etc. Few implied terms are mandatory to include in the contract considering the nature of the business and protection of consumer rights.

Conditions and Warranty

A contract comprises of terms of contract and the important terms are come under the head of Conditions and less important terms called as Warranties. Conditions are main terms and without this contract are not complete and parties cannot enter into a contract unless they agreed on these terms and accept them. Conditions are to be considered very seriously during the construction of a contract and their consequences also need to be considered before making it into effect, a wrong party or wrong act of contact will make contract as void.

Warranties provide monetary and loss protection and at the same time the party that is at fault will solely bear monetary loss and ultimately have to suffer. It is important that before making a decision either party should consider all circumstances, seriousness, consequences and also the intentions in the contract. A contract is legal binding for both parties and both parties are equally responsible for a contract.

Time Scale

Times Scale is very important for project based contract. It describes the deadline and the work need to be completed in the given time frame for a project. There are penalties and other fines may be outlined in the contract to recover the time loss of the project. Usually project contacts are performance based and if a contractor or supplier is not performing as their time scale then a contact may be cancelled and damages will be recovered as per contract terms.

Exclusion Terms

The exclusion terms in the contract are those which create an exclusion from responsibility for a party when something go wrong in the performance of the contract. The exclusion terms usually referred as “Exclusion Clause”. For example, an exclusion from Liability for damage to the pavement/driveway from the raw material supplier when they are delivering concrete material the site for construction purposes with the builder. Legally exclusion clauses are viewed as unfair by the courts and have tried to limit their application. In case of dispute courts will interpret the actual implications of exclusion clauses but when a contract is signed all parties are bound by the exclusion clauses in the contract.