What Is the Difference between Executed and Executory Contracts

Contracts are legally binding agreements between two or more parties that highlight the responsibilities, obligations, and expectations of each party. Contracts can be categorized into two main types: executed and executory contracts. Understanding the difference between these two types of contract is essential in any business, as it can impact the legal rights and obligations of the parties involved.

Executed contracts are agreements in which both parties have fulfilled their obligations under the contract. In simpler terms, an executed contract is a contract that has been completed. Once the obligations have been met, the contract is considered legally binding and enforceable. For example, a contract for the sale of goods is considered executed once the buyer has paid for the goods and the seller has delivered the goods.

On the other hand, executory contracts are agreements where one or more parties are yet to fulfill their obligations under the contract. In other words, it is a contract that is still in progress and not yet completed. For example, a construction contract is an executory contract until the completion of the project.

An executory contract can be either unilateral or bilateral. A unilateral contract means that one party has an obligation to perform, while the other party has no obligation until the first party performs their duty. An example of a unilateral contract is a reward contract, where an offer is made to anyone who performs a specific task.

A bilateral executory contract, on the other hand, means that both parties have obligations to perform. A typical example of a bilateral contract is an employment contract, where the employer has an obligation to pay the employee, while the employee has an obligation to perform the work assigned.

In summary, an executed contract is a contract that has been completed and fully performed by both parties, while an executory contract is a contract that is still in progress, with one or more parties yet to fulfill their obligations. Understanding the difference between these two types of contracts can significantly impact the legal status of the parties involved, and it is crucial for businesses to be aware of these distinctions in order to protect their interests.