Clear agreements that protect respective interests and avoid legal pitfalls are critical for successful business relationships. 

You can use express contracts to implement unambiguous and legally enforceable agreements. 

In this blog, we will go into detail about express contracts and how they differ from implied contracts. We will also consider real-world examples, important contract elements, related challenges, and how contract automation can help you overcome the shortcomings of manual contract management. 

What is an Express Contract?

An express contract is a legal agreement between two or more parties explicitly stated verbally or in writing.

All constituent elements, including terms, clauses, definitions, and attachments, are laid out in black and white. Therefore, the parties entering into the contract are fully aware of their rights and obligations.

Valid express contracts are enforceable and legally binding: if one party fails to fulfil its obligations, the other party can take legal action to compel performance or seek damages. The exact remedial actions parties can take due to a breach of contract vary depending on a number of factors, including the type of breach, contract terms, and the legal jurisdiction and governing law.

Most of the contracts businesses enter into are express contracts. However, these are not the only types of business contracts you will encounter.

Express vs implied contracts

Another common type of business contract are implied contracts, wherein the terms, conditions, and other details are not explicitly stated; rather they are implied by the actions of the parties involved. 

To better understand the difference between the two contract types, let’s consider a few implied contract examples:

• A business consults with an IT expert on a case-to-case or ad-hoc basis. Even though there is no written contract, the continued business relationship implies a contract whereby suitable compensation is paid for services rendered.
• You regularly outsource work to a freelancer. Each time you assign a task, the freelance completes it even though there is no written contract. This implied contract is based on your established working relationship, and the freelancer continues to get paid at the agreed-upon rate.
• A trucking company regularly uses the services of an automobile workshop for maintenance and repairs. An implied contract exists based on past interactions and mutual understanding, wherein the workshop provides the requisite services and the trucking company provides the payment. 

Do You Need to Put Express Contracts in Writing? 

As long as the terms and conditions are explicit and clear, the express contract can be 

• Put in writing
• Agreed upon verbally, or 
• Be a combination of both.

However, there is no doubt that it is easier to enforce written contracts. This is because a written document is tangible proof of an agreement.

A drawback of verbal contracts is the human propensity to forget. Disputes and misunderstandings can arise if either party forgets critical contract terms or relevant details. Having contracts in writing is a simple and practical way of avoiding these issues.

Furthermore, depending on the law in your country, you must put specific contracts in writing. In the US, for example, the Statute of Frauds requires that the following types of contracts must be in writing to be enforceable:

• Contracts governing the sale or purchase of land
• Agreements involving sales of goods equal to or exceeding $500 in value
• Contracts with a duration exceeding one year

Therefore, before entering into a contract, you must check the local contract laws and regulations. 

Express Contract Examples

Now let’s go over a few examples of express contracts.

Employment contract

An employment contract is a written agreement between an employer and an employee.

The contract outlines the terms of employment. Key elements of the contract include detailed job responsibilities, salary, benefits, work hours, termination conditions, and confidentiality agreements.

Example: A contract between a new CEO and a Fortune 500 company that includes the contract duration, compensation, perks and benefits, incentives, board membership, and other relevant clauses. 

Lease agreement

A lease agreement is a written contract between the owner of a property and a tenant renting the property.

The contract outlines the terms of the lease and includes the rental amount, lease duration, responsibilities for maintenance, security deposit, and conditions for termination.

Example: An auto manufacturer signing a 10-year lease for a large industrial warehouse. 

Sales contract

A sales contract outlines the terms and conditions for the sale of goods or services.

Important elements of sales contracts include the description of goods and/or services, price, delivery terms, payment terms, warranties, and return policies.

Example: A legal automation SaaS entering into a sales contract with a global supplier of EV batteries. 

Service agreement

A service agreement is a contract between a service provider and a client. 

The contract outlines the terms of the service to be provided and covers the scope of work, payment terms, service duration, performance standards, and confidentiality clauses.

Example: A business entering into an agreement with an Internet service provider for a fast and reliable broadband Internet connection.

Elements of Express Contracts

The main elements of express contracts are the same as for all valid contracts:

• Offer: A party must make an offer to another party, such as a business offering consulting services to a potential client
• Acceptance: The party receiving the offer must accept it and agree to enter into a legally binding agreement
• Consideration: This is the value that both parties gain from the agreement, e.g. a business improving its business processes via consulting and the business consultant receiving suitable compensation for services rendered
• Mutual Agreement: The contracting parties must have a mutual understanding and agreement on the contract's terms and agree to be bound by them.
• Capacity: The parties entering a contract must have the legal capacity to do so. For example, if a minor or an unauthorized employee signs off on a contract, it will not be legally valid.
• Legality: The contract must comply with the relevant laws and regulations. E.g. contracts signed in a US state must comply with federal as well as local laws and regulations. Contracts concerning illegal activities are not enforceable.

With these elements in place, an agreement becomes legally binding. Without these elements, it remains a simple agreement, which is not enforceable. You can use contract automation software to manage contract elements and ensure enforceability.

Express Contract Management Challenges

Manual contract management poses multiple challenges for businesses of all sizes. 

Managing a high volume of contracts with detailed and specific terms 

Each business contract contains numerous clauses and terms. Managing contracts is complex, as missing a single clause or error can render a contract null and void. 

When you manage a high volume of contracts manually, this complexity is multiplied many times over. When you add stringent timelines and client pressure into the mix, it becomes an explosive mixture, ready to cause havoc at any moment.

Missing essential clauses or errors leading to legal disputes or financial losses

Imagine a 100 million dollar contract with strict penalties for non-performance. Can you take any risks with such a contract? Obviously not. But how can you make sure that your team doesn't miss a single one of the thousand or so clauses and terms?

Extremely difficult, right? You have to engage extra resources, and check and recheck multiple times. Even after spending all that extra time and money, you will carry fear in the back of your mind. 

Non-compliance with laws and regulations leading to contract invalidation

Non-compliance with relevant laws and regulations can render contracts unenforceable.

How do you prevent that from happening?

Do you engage legal to check every clause of each new contract you work on? Or is there a better way of getting things done?

Maintaining a fine balance between over-customization and over-standardization

Each business deal, and the associated contract, is unique.

Creating a contract from scratch for every deal is highly inefficient. You can use different approaches to improve the efficiency of contract generation.

One approach is to create highly tailored contracts for each agreement to address the specific needs and risks. However, this approach is time-consuming and difficult to manage.

Another approach is to use generic, standardized contracts. This approach can streamline the process and reduce administrative burden, but fail to address unique circumstances and associated risks.

Therefore, maintaining a balance between over-customization and over-standardization is important. Relying on manual processes to maintain this balance is possible, but highly inefficient and error-prone. 

What is the solution to all these challenges? 

Contract automation is the answer you are looking for! You will need to create templates for the different types of contracts you work on. No doubt this is a time- and resource-intensive task. 

Once a template is ready, you customize it as needed, and generate a high volume of contracts in almost no time. For each template, include vetted clauses so you will only have to engage legal to review new clauses and terms. 

As Albert Einstein said: "Make everything as simple as possible but no simpler."

Contract automation with Docupilot can help you do just that. 

Suggested read:

Essential Elements of Valid Contracts

Uncover the key components that make a contract legally binding, ensuring your agreements are enforceable and protect your interest

How Can You Create and Manage Express Contracts with Docupilot?

Follow this step-by-step process to create express contracts with Docupilot.

Step #1: Log in to Docupilot

Log in to Docupilot with your credentials.

Step #2: Create or Upload a Template

Click on the ‘Create Template’ button. 

Now, you have three options:

• Click on ‘Online Builder’ to create a template from scratch
• Click on ‘PDF’ or ‘DOCX’ to upload an existing template in the respective file format
• Click on ‘Pick From Gallery’ to use a template from the Docupilot library

Once your template is loaded, you can add static and dynamic content, and apply formatting. 

Static content includes text, images, and tables. 

Use merge fields to add dynamic content, which is content that is always changing in your document. The format for merge fields is {{company_name}}, {{client.name}}. To fill these fields, you must connect your template to the relevant data source(s). 

Step #3: Generate the Express Contract

Once a template is ready, you can test it by clicking the ‘Test’ button.

Docupilot will render a preview of your template, which you can review and edit if required. 

Once satisfied with the template, you can generate the contract, deliver it to the client, or store it online. 

Conclusion 

Manual contract management is highly inefficient. This is especially true when you must manage a large volume of contracts while ensuring you include all essential clauses and relevant information.

Contract automation with Docupilot solves the inefficiencies of manual contract management: once contract templates are ready, you can streamline express contract generation, save time and money, close deals faster, and build a roster of satisfied clients. 

‍Sign up today for a no-questions-asked 30-day free trial, and experience the power of this powerful contract automation platform.