Types of Contracts Based on Performance

Contracts based on Performance are defined as contracts where the activity of discharging obligations by the concerned parties is considered. Executed Contracts and Executory Contracts are the major classifications of Contracts when studied concerning performance. Executory Contracts can be further classified as Unilateral Contracts and Bilateral Contracts.

Types of Contracts Based on Performance

I. Executed Contracts

Executed Contracts are defined as those contracts where every party related to the contracts has fulfilled their respective and agreed obligations, as specified in the agreement. To be considered as an Executed contract, the contract is to be verified whether the obligation has been carried out exactly how it was supposed to be carried out. Under the Executed Contract, the parties have fulfilled their agreed promises and duties. Generally, the buying and selling of goods or services fall under the category of executed contracts as the seller provides the goods to the buyer and the buyer pays for the goods. The contract executes at the time when both parties have discharged their legal obligations.

For example: A shopkeeper sells his goods in cash. Yasmin visited the shop purchased 1 KG of flour, and paid in cash. The following contract is executed where the shopkeeper has provided the flour and Yasmin has paid the price for the goods purchased. The time of execution will be when Yasmin pays the price for goods purchased and the contract is executed instantly.

II. Executory Contracts

Executory Contracts are defined as the contracts where both the parties in a contract are yet to perform their agreed obligations and duties. Executory Contracts also constitutes the time agreements or deadlines mentioned in the provisions of contract. In an executory contract, the consideration acts as a reciprocal promise or obligation. Such consideration is to be performed in the near future and therefore, these contracts are described as executory contracts as one of the party is still required to act. A lease agreement is most popular type of executory contract which prevails in business. In a lease agreement, the time duration is mentioned and the conditions in the agreement will be fulfilled in near future and they are performed and fulfilled over a period of time. Further, Executory Contracts can be further classified into two types, Unilateral and Bilateral Contracts.

A. Unilateral Contracts

Unilateral contracts are defined as one sided contract, in which one party has already performed their duty or obligation and the other party to contract is still required to fulfill their obligation. Under unilateral contracts only one party vows to perform their duty. The agreement is open to anyone who wishes to vow the same and enter into the contract with other party.

For example, An entertainment company declares a prize money of ₹20,000 for a quiz contest. (a unilateral contact has already been initiated by the company, declaring prize money) and anyone who successfully wins the quiz contest by following the set of provision guided by the company can claim this prize money and the contract will get executed.

B. Bilateral Contracts

Bilateral Contracts are the most common binding agreements one can observe in practical business environment. Bilateral contracts are defined as those contracts where promises made by both parties lack discharge of obligation, both parties to contract are yet to fulfill there obligation. Bilateral contracts are two sided and are mutual contracts. Here one promise is made in exchange of another promise, as there is mutuality of obligation.

For example, A property owner agrees to sell his property to another party. Here a bilateral contract has taken place, as property owner will be giving his property and the other party will pay him the consideration.