How can contracts be classified?

Contracts can be classified in various ways to identify their nature and legal implications. The classification of contracts as bilateral or unilateral, executed or executory directly pertains to the timing and manner in which obligations are fulfilled under the agreement.

Bilateral contracts involve mutual promises between two parties, where each party agrees to fulfill obligations to the other. This is the most common type of contract seen in commercial practice, as it encompasses most transactions where two parties are involved. On the other hand, unilateral contracts involve a promise from one party that is contingent upon the performance of an act by another party. For example, a reward for finding a lost item is a unilateral contract because only one party makes a promise, and the offer is fulfilled upon the action of another.

Additionally, contracts can be categorized as executed or executory based on the status of the fulfillment of the contract's terms. An executed contract has been completely fulfilled by all parties, while an executory contract has obligations that are still outstanding and need to be completed in the future. This classification is essential for understanding the contractual rights and responsibilities at any given point in time.

This classification system is significant for legal clarity and for parties to understand their rights and obligations, which can influence negotiations, enforcement, and remedies in case