Executed and Executory contract:
There are many types of contracts. On the basis of the extent to which contracts have been performed, they may be classified into two types: 1) executed contracts, and 2) executory contracts.
What are “executed contracts”?
An executed contract is a contract where both the parties to the agreement have fulfilled their respective obligations under the contract. For example, A agrees to sell his book to B for $20. A delivers the book to B and B pays $20 to A. It is an executed contract since nothing remains to be done by either party under the contract.
Mostly what happens in executed contracts is that the promises are made and then performed immediately. Purchase and sale of goods & services are usually included in this category. The date of execution of the contract is never in question because it is mostly always instantaneous.
What are “executory contracts”?
On the other hand, an executory contract is a contract where both the parties to the contract have still to perform their respective obligations. For example, A agrees to sell a book to B for $30. Now, if the book has not been delivered by A and B has not paid the price, the contract is executory. This is so because there remains something to be done under the contract on both sides. They are also called future contracts as they will be completed on a future date.
Using a lease agreement between a lessor and a lessee as an example, a lease cannot meet all of the criteria immediately. Instead, they must be met gradually. Another example is when a person decides to provide people with consultancy services. When the month begins, the person will eventually receive a set amount of money as a fee. Because the person must still keep his or her promise, the contract is not executed and is thus an executory contract.
Partly executed and partly executory
It may be important to note that a contract can sometimes be partly executed and partly executory. It happens when only one of the parties has performed his obligation. In the example given above, if A has delivered the book to B but B has not paid the price, the contract is executed as to A and executory as to B.
Unilateral and bilateral contracts
On the basis of the extent of execution, a contract can also be classified as unilateral or bilateral. A unilateral contract is one in which only one party has to perform his obligation, the other party had fulfilled his part of the obligation at the time of the formation of the contract itself. For example, A buys a ticket from the conductor and is waiting in the queue for the bus. The contract is created as soon as the ticket is purchased. The other party is now to provide a bus wherein he could travel.
On the other hand, a bilateral contract is one in which the obligations on the part of both the parties are outstanding at the time of the formation of the contract. The consideration is to pass from one party to the other after the making of the contract. Here, each party is a promisor as well as a promisee. For example, A and B agree that from next month onwards, A shall teach B communication skills and B promises to pay $500 per month to A.
You might also like:
More from contract law: