Executed and Executory Contracts

The contract is judged to have been fulfilled once the task or performance has been completed. Contracts that have been successfully implemented by law are referred to as fulfilled contracts. An executed contract is the name given to this type of agreement. An executory contract requires that the obligations of the parties be carried out over time rather than immediately.

What are "executed contracts"?

When one, both, or all of the parties to a contract have performed the act or used the forbearance provided for in the contract, the contract is said to have been executed. In essence, it means that all necessary contracts have been completed. Hence, the transaction was completed.

Example: Leonard purchases a cup of coffee from the neighbourhood coffee shop. She pays the barista in cash in exchange for the coffee. So, it can be argued that this contract has been executed. Each party has fulfilled their obligations under the contract.

In the majority of successfully completed transactions, promises are made and then immediately kept. Purchasing products and/or services typically falls under this heading. Since it usually occurs instantly, there is no question as to when the contract was executed.

What are executory contracts?

The consideration in an executory contract is either a promise to execute or an obligation. The term "executive contract" refers to agreements where the consideration can only be fulfilled at some point in the future. Here, it is impossible to instantly fulfil the pledges of consideration.

Example: A lease is the best illustration of an executory contract. The terms of a lease cannot all be met right away. These are carried out gradually. In a similar vein, imagine Leonard choosing to tutor some students in physics. He receives Rs. 2500 at the beginning of each month. Yet, in this instance, the contract is not carried out because Leonard still needs to keep her word. As a result, such a contract is executory.

Types of Executory Contracts

There are two types of executory contracts −

• Unilateral Contract &

• Bilateral Contract

Unilateral Contracts

These contracts are one-sided, as their name would imply. It typically manifests when a single person makes a promise that is open and available to everyone who desires to or is able to fulfil it. The commitment will only be kept if the contract has been completed.

Bilateral Contracts

A bilateral contract, on the other hand, involves two parties. It is a typical sort of contract that is most frequently encountered and known. Here, the terms of the agreement are accepted by both parties, and as a result, a contract is formed. Hence, it is sometimes referred to as a reciprocal contract.

In bilateral agreements, the time frame for carrying out the contract has typically been agreed upon by both sides. Consider the sale agreement for a house as an illustration. The buyer makes a down payment and commits to paying the remaining amount at a later time. In exchange for the agreed-upon sale price, the seller transfers ownership of the property to the buyer and promises to produce the title. It is a bilateral agreement.

Essential elements of an executory contract

An executory contract must include the following elements in order to be legal −

• Offer and acceptance

• Intent to create a legal obligation

• Consideration

• Competent to contract

• Free consent

• The object of the contract

• Not void-ab-intio

Difference between an executed contract and an executory contract

Different forms of contracts exist, one of them is based on performance. This type is determined by whether the contract is complete or still needs to be completed. In light of this, executed contracts and executory contracts are known as such.

Executed Contract	Executory Contract
Contracts that have been signed by the parties and are now enforceable are said to have been executed. After a contract is signed, it is usually enforceable. The parties shall then be required to perform their respective obligations as set forth in the Agreement.	Executory contracts are ones that include a future deadline for completing the terms. Nonetheless, both contracts are regarded as being completed once they are signed. Both parties must then adhere to the terms of the agreement in order to fulfil their legal duties.
Promises are frequently made, followed by fulfilment, immediately after a completed contract is signed. That frequently happens when buying products or getting services. The date of execution of the contract is typically immediate, ensuring clarity.	Completion of Executory contracts depends on the future fulfilment of the promises and obligation.
For instance, someone would purchase a cup of coffee from a coffee shop, and they would pay cash for the beverage. Hence, a contract has been carried out.	For instance, someone entered into a contract where he will receive the title of land after he makes payment on 2/03/2024.

Conclusion

Franchise agreements, long-term supply agreements, and other legal documents are examples of executory contracts. A contract that has expired, a sale that has been completed, a promissory note, a single purchase order, etc. typically do not fall under the category of executory contracts. Exclusive licencing and perpetual licencing may not always be viewed as executable contracts but rather as finalised allocations of rights or territory. Any continuing duties of the parties must be taken into consideration in order to evaluate whether an agreement is executory.

Executory contracts are nonetheless enforceable in court even if their conditions are not promptly carried out. It is essential that you fulfil all of your contractual commitments as stated in the contract. In general, using these contracts is advantageous, especially when buying expensive things. In this situation, paying for goods gradually rather than all at once is more convenient for customers.

Frequently Asked Questions

Q1. What is an example of an executory contract?

Ans. An established illustration of an executory contract is a lease on real estate. Renters anticipate having a place to live and having it maintained.

Q2. Where is a contract executed?

Ans. The location of contract execution is typically specified in the actual contract. There may be circumstances, nonetheless, in which the law does not specify the location of contract execution. In these situations, the location where the acceptor signed the contract serves as the contract execution location.

Q3. Who executes a contract first?

Ans. Whoever signs an agreement first doesn’t matter, is the succinct response. A contract requires mutual assent from both parties in order to be enforceable (this is known as "mutual assent").

Q4. Can a voidable contract be executed?

Ans. An unenforceable agreement or other legal document cannot be upheld in court. A void contract cannot be enforced because it violates a law or a public principle. A voidable agreement, on the other hand, can be upheld if both parties agree to continue adhering to its conditions.