An express contract is any legally enforceable exchange of promises. It may either be in writing, verbal, or both. However, written documents have many benefits over verbal contracts, including being easier to establish its existence in court. The agreement clearly states the terms and conditions by which the contracting parties would be bound.
Every contract must have seven essential elements in order to be legally enforceable — offer, unconditional acceptance, a meeting of the minds, consideration, capacity, legality, and free will. Express agreements are fundamentally different from implied contracts in the way that express agreements specify every detail, and there is an explicit acceptance to the terms of such contract, but in the case of implied contracts, there is no explicit spelling out of terms, but the existence of the contract is merely implied, based on the facts of the situation and the law.
Express Contract Definition
According to Wex Law Dictionary, the definition of an express contract is as follows:
“An express contract is an exchange of promises in which the terms by which the parties agree to be bound are declared either orally or in writing, or a combination of both, at the time it is made.”
What Is an Express Contract?
An express agreement explicitly mentions the terms of the agreement, either verbally or in writing. On the other hand, implied contracts, which are of two types (implied in fact and implied by law), do not explicitly state the terms of the agreement. The distinguishing factor here is the explicitness of the terms and conditions of the agreement. Contracts that are implied in fact are similar to express contracts; they have all the elements of an express agreement, but the terms are not explicitly mentioned, they are inferred from the circumstances of the agreement.
However, contracts that are implied by law do not have the elements of an express contract and do not involve any formal agreement. It protects those who have been unlawfully disadvantaged by another party when there was no formal agreement.
Who Takes the Express Contract? – People Involved
Any two or more people or legal persons can enter into a contract, so long as they are legally competent to do so. The following circumstances would render an individual legally incompetent to contract:
- The intoxication of any kind that would obstruct the exercise of free will
- Enemy aliens
- Mentally unsound/insanity.
Purpose of the Express contract – Why Do You Need It
The purpose of an express contract is to:
- Lay down the terms and conditions that the contracting parties would be bound by in an explicit manner, either in writing or verbally.
- Make both parties aware of their rights as per the contract.
- Make it easier to establish the existence of a contract in court.
Contents of the Express Contract – Inclusions
An express contract should contain the following elements:
- Offer: The contract should make an offer or a promise that one party makes in exchange for the performance of the other contracting party.
- Mutual acceptance: In response to the offer made by the first contracting party, the other must accept the terms of it unconditionally and wholly as per the agreement.
- Meeting of the Minds: For a contract to be valid, there must be a common understanding of the offer and the terms and conditions it involves.
- Capacity: A contract cannot be entered into with someone who is incapable of contracting or giving consent. The law establishes that infants, minors, insolvents, the mentally unsound, enemy aliens, and those under the influence of intoxicants do not have the capacity to contract.
- Consideration: A contract must have consideration, even if it is only nominal in nature. Any contract that has no valid consideration is deemed invalid and is not enforceable in court.
- Legality: The object of the agreement must be legal, and any document that claims to govern any illicit activity that the law does not recognize as lawful cannot be enforced in a court of law. For instance, A drafts an agreement with B whereby B is entrusted with the responsibility of murdering C, and the agreement satisfies all other requirements of an enforceable contract by including terms that express B’s responsibilities, the consideration to be paid to B, and there is a meeting of the minds. Such an agreement satisfies most elements of a legally enforceable contract except that of legality; this contract is illegal, and A cannot enforce it in court.
- Free Will: A contract that is entered into with a party who does not, in part or in whole, will to enter into such a contract is deemed void and cannot be enforced in a court of law. Such a situation can arise from coercion with or without malicious intent, misrepresentation, fraud, or the unjust use of force to have the party give its consent to the agreement.
How to Draft the Express Contract?
The procedure to draft an express contract:
- Mention the effective date of the agreement, that is, the date on which the agreement will come into effect. This is a standard inclusion in every contract.
- Mention the date on which the agreement ends, if it is intended to last only for a specific period of time. Examples of contracts where this clause would be applicable include lease agreements, rental agreements, commissioning a worker for a specific period.
- Identify the contracting parties with their names and addresses. If one or more parties involved is a company, its legal form and registration data must also be mentioned along with its name and address.
- Establish the relationship between the parties.
- Detail the scope of the object of the agreement.
- A clause that lays down the terms of remuneration must be included. It must specify the mode of payment and the exact amount to be paid in figures and words. This clause will satisfy the requirement for consideration. If there is no actual consideration, a nominal consideration must be mentioned.
- Provisions for termination of the contract must be made such that the circumstances under which the agreement may be terminated are clearly expressed.
- The agreement must state the name of the jurisdiction that will govern the document and any disputes that arise from it.
- Have the parties and witnesses to the contract sign it to signify acceptance of terms.
The terms of the contract must be negotiated such that it is mutually beneficial and agreeable to both parties, in order to avoid dissatisfaction that could possibly lead to disputes. The interests of all parties must be kept in mind while framing the document, and none of them should be significantly disadvantaged or nourished at the expense of the other. All contracting parties must enter into the contract at their own free will and without coercion of any sort.
Benefits & Drawbacks of the Express Contract
The benefits of having an express contract:
- Gives a clear overview of the terms and conditions involved, avoiding ambiguity and miscommunication.
- Safeguards the interests of both parties.
- Makes legal recourse a viable option, should a dispute arise.
- It makes enforcement of the contract easier.
The drawbacks of having an express contract:
- The legal costs of framing the agreement must be borne by the parties.
- Negotiations can take time.
What Happens in Case of Violation?
In case the terms of the contract are breached by either party, the aggrieved party can resort to the legal resolution of the dispute, either by arbitration or conventional dispute resolution methods. Depending on how the agreement suggests disputes should be handled, the parties might be required to amicably settle the dispute internally or by alternate dispute resolution methods(1) before going to court. It is always preferable to settle the disputes internally before resorting to taking the matter to court, as this avoids the often high legal costs that are involved.
An express contract is any contract that clearly spells out the terms of the agreement, either verbally or in writing. An express contract is different from an implied contract in the way that in an implied contract, the terms are not explicitly spelled out either verbally or in writing, but they are simply inferred from the circumstances of the agreement. Most contracts today are express and in the written form in order to avoid the hassle of having to prove the existence of an implied contract(2).
It is important to keep in mind that contracts that are implied in fact are treated the same way as those that are express. Contracts that are implied by law are treated differently because they do not have any of the elements of an express contract, yet a legal dispute may arise. The seven elements of a valid contract — offer, unconditional acceptance, a meeting of the minds, consideration, capacity, legality, and free will — must be kept in mind while framing an express agreement.