§ 1.5 Formal and Informal Contracts

Contracts have commonly been classified in several ways that must here be given some consideration. The descriptive terms in common use must be considered and defined. One such classification is expressed by the terms formal contract and informal contract. The distinction between formal and informal contracts was one of the great organizing distinctions prior to the twentieth century. Today, the distinction is only rarely noted and is not of great importance.

A formal contract is one, the legal operation of which is dependent upon the form in which it is made, the mode of expression, and not upon the sufficiency of the consideration that is given in return for it, or upon any change of position by the promisee in reliance upon it. An informal contract, on the other hand, is one the legal operation of which does not depend upon the form in which it is made or the mode of expression; most of such contracts depend for their legal validity upon the presence of a sufficient consideration given in return for the promise, but others are enforceable without any consideration given in return, for various reasons, all of which must be discussed in great detail hereafter in dealing with the subject of consideration and with other reasons for enforcement of promises. Informal contracts have very commonly been called ''simple'' contracts also; and certain kinds of formal contracts have been described as ''specialties.''

Among the contracts that are commonly classified as formal in character are contracts under seal, recognizances, negotiable instruments, documents of title and letters of credit. Stipulations in open court may properly be classified as formal contracts. In addition, statutes in some jurisdictions permit the making of some kinds of contracts without consideration, provided the contract is expressed in a signed writing. To the discussion of contracts under seal, an entire chapter must hereafter be devoted. The law applicable to negotiable instruments, documents of title and letters of credit is so special in character and so extensive in amount, that they are commonly treated as independent subjects. It could not be stated and explained with any fullness in less than one large volume. Attention is called throughout this work, however, to many of the instances in which the law of negotiable instruments is different from that which is applicable in the case of other kinds of contracts. A recognizance is usually, if not always, a formal acknowledgment of indebtedness, made in the presence of a court, or before a magistrate who is authorized to take such acknowledgment, or by means of a document filed with a clerk of court as a part of the record of a pending litigation.n1 Primarily, today they are employed to secure the provisional release of persons under arrest and are generally discussed in connection with bail bonds.n2 In some jurisdictions the term may have still other uses. In early English history the recognizance seems to have played a much more important part than it does at present in the United States. The taking of recognizances was authorized by certain statutes, one of which was known as the Statute of Merchants. The mayors of certain towns in which various staple commodities were bought and sold were authorized to take such recognizances. A recognizance so taken was often called a Statute Merchant or a Statute Staple. In legal effect it conclusively established the existence of the indebtedness, and it enabled the creditor very easily to obtain legal remedies for the collection of a debt.n3

Legal Topics:

For related research and practice materials, see the following legal topics:

Contracts LawTypes of ContractsGeneral OverviewContracts LawNegotiable InstrumentsGeneral OverviewContracts LawTypes of ContractsContracts Under Seal

FOOTNOTES:

(n1)Footnote 1. An example of a recognizance in a criminal case is to be found in State of Maine v. Chandler, 79 Me. 172, 8 A. 553 (1887) . The court said: ''It is an obligation of record founded upon contract, and entered into by the recognizors upon certain conditions, upon the breach of which the recognizance became forfeited, and an absolute debt of record, in the nature of a judgment, was created, and upon which scire facias properly lies for the recovery of the forfeiture.''

In Smith v. Collins, 42 Kan. 259, 21 P. 1058 (1889) , the court said: ''A recognizance is a debt confessed to the state which may be avoided upon the conditions stated. At common law the forfeiture of the recognizance was equivalent to a judgment.''

A recognizance acknowledged in open court need not be signed unless a statute expressly so requires. McNamara v. People, 183 Ill. 164, 55 N.E. 625 (1899) . At common law a recognizance could be enforced by an action of debt or by a writ of scire facias. Green v. Ovington, 16 Johns. 55 (N.Y.1819) ; Bodine v. Commonwealth, 24 Pa. 69 (1854) ; McNamara v. People, supra.

(n2)Footnote 2. In the Federal system such recognizances are known as ''personal appearance bonds.'' 18 U.S.C.A. § 3142(b).

(n3)Footnote 3. Concerning recognizances the Restatement of Contracts (Second) § 6, comment c, states: ''A recognizance is an acknowledgment in court by the recognizor that he is bound to make a certain payment unless a specified condition is performed. They are in use chiefly to secure, first, the attendance in court at a future day of the recognizor, or, second, the prosecution of an action, or, third, the payment of bail.''

A bail bond is not ordinarily a recognizance. State v. McGuire, 42 Minn. 27, 43 N.W. 687 (1889) ; People v. Barrett, 202 Ill. 287, 67 N.E. 23 (1903) .

A recognizance entered into by an infant has been held to be enforceable. State v. Weatherwax, 12 Kan. 463 (1874) .

There is a definition of recognizance in Miller v. Cross, 73 Conn. 538, 540, 48 A. 213, 214 (1901) . In the following cases the validity and the enforcement of recognizances were involved:

Conn. - Knibbs v. Knibbs Constr. Co., Inc., 25 Conn.Sup. 253, 202 A.2d 248 (1964) ; Grillo v. Cannistraro, 147 Conn. 1, 155 A.2d 919 (1959) ; New Haven v. Rogers, 32 Conn. 221 (1864) ; Mix v. Page, 14 Conn. 329 (1841) ; Goodwin v. Dodge, 14 Conn. 206 (1841) ; Darling v. Hubbell, 9 Conn. 350 (1832) .

Ill. - People v. Clinnin, 12 Ill.App.2d 446, 139 N.E.2d 609 (1957) .

Md. - Albrecht v. State, 132 Md. 150, 103 A. 443 (1918) .

N.Car. - Tar Heel Bond Co. v. Krider, 218 N.C. 361, 11 S.E.2d 291 (1940) .

Pa. - Hamilton v. Harida, 280 Pa.Super. 45, 421 A.2d 396 (1980) .

R.I. - State v. Vinal, 113 R.I. 426, 325 A.2d 81 (1974) .

Vt. - In re Zera, 137 Vt. 421, 406 A.2d 396 (1979) .

See further Ch.10.