What Is the Difference between a Formal Contract and a Simple Contract

Contracts are essential legal documents that help establish the terms and conditions of an agreement between two parties. Contracts are legally binding and serve as proof of the agreement between the parties involved. However, not all contracts are created equal. There are two types of contracts, namely formal contracts and simple contracts. In this article, we will discuss the difference between a formal contract and a simple contract.

Formal Contract

A formal contract is a legal agreement between two or more parties that is written and executed in a formal manner. This type of contract involves complex legal language, extensive negotiations, and formalities. It is commonly used in business settings, where the stakes are high, and parties involved require a high degree of certainty and protection.

Formal contracts are usually comprehensive and cover the entire scope of the agreement, including terms and conditions, payment terms, and any other relevant provisions. They are drafted by legal professionals, who ensure that the language used is legally binding and enforceable.

Formal contracts require both parties to sign and date the document, which is then legally binding. In some cases, formal contracts may also require notarization or witnesses to prove that the parties involved signed the document voluntarily and were fully aware of the terms of the agreement.

Simple Contract

A simple contract, on the other hand, is a basic agreement between two or more parties that is not written in a formal manner. This type of contract is often used for day-to-day transactions or agreements that do not require extensive negotiations or complex language. Simple contracts are typically used for small-scale transactions such as buying or selling goods or services.

Simple contracts are usually less formal and less comprehensive than formal contracts. They do not require the intervention of legal professionals and can be drafted by the parties involved. However, simple contracts must still meet the basic requirements for a legally binding agreement, including the offer and acceptance of the terms of the agreement and consideration (something of value exchanged between the parties).

In general, simple contracts are not required to be signed in a formal manner, but simply require the agreement of both parties. Verbal agreements can also be considered simple contracts, provided they meet the basic requirements for a legally binding agreement.

Conclusion

The main difference between a formal contract and a simple contract is the level of formality and complexity involved in drafting and executing the agreement. Formal contracts are more complex and require the intervention of legal professionals to draft and execute the agreement. Simple contracts, on the other hand, are less formal and less comprehensive and can be drafted by the parties themselves. Both types of contracts, however, must meet the basic requirements for a legally binding agreement, including the offer and acceptance of the terms of the agreement and consideration.


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