Future Business Leaders of America (FBLA) Business Law Practice Exam

What type of contract is formed through mutual agreement and explicitly stated terms?

1. Oral contract

2. Implied contract

3. Express contract

4. Unilateral contract

The correct answer is: Express contract

A contract formed through mutual agreement and explicitly stated terms is known as an express contract. This type of contract is characterized by clear, definitive terms laid out in words, whether spoken or written, that indicate the agreement between parties. The explicit nature of the terms allows all parties involved to understand their obligations and rights, which can minimize disputes and enhance enforceability. In contrast, an oral contract, while it can be an express contract if the terms are explicitly communicated verbally, does not cover the written component that is often preferred for clarity and legal standing. An implied contract arises from the actions or conduct of the parties rather than explicit statements, meaning terms are not clearly stated and depend on the context of the situation. A unilateral contract involves one party making a promise in exchange for a specific action by another party, which does not involve mutual agreement of the same nature found in express contracts. Therefore, the distinct characteristic of an express contract is its explicit terms, making it the correct answer.