3. Assignments—transferring rights.
4. Releases—extinguishing rights.
It often happens that an agreement is of a mixed nature, and so falls within two or more of these classes at the same time. Thus the sale of a specific chattel is both a contract and an assignment, for it transfers the ownership of the chattel and at the same time creates an obligation to pay the price. So a lease is both a grant and a contract, for it creates real and personal rights at the same time. In all such cases the agreement must be classed in accordance with its chief or essential operation, its other effects being deemed subsidiary and incidental.
A frequent result of the difference between law and equity, and between legal and equitable rights and ownership, is that the same agreement has one effect in law and another in equity. In law it may be a mere contract, and in equity an assignment or a grant. Thus a written agreement for the sale of land is in law nothing more than a contract, imposing upon the seller a personal obligation to execute a conveyance under seal, but not in itself amounting to a transfer of the ownership of the land. In equity, on the other hand, such an agreement amounts to an assignment. The equitable ownership of the land passes under it to the purchaser forthwith, and the vendor holds the legal ownership in trust for him. Similarly a contract to grant a legal lease or mortgage or servitude is itself the actual grant of an equitable lease, mortgage, or servitude. For it is a maxim of Chancery that equity regards that as already done which ought to be done.
§ 124. Void and Voidable Agreements.
In respect of their legal efficacy agreements are of three kinds, being either valid, void, or voidable. A valid agreement is one which is fully operative in accordance with the intent of the parties. A void agreement is one which entirely fails to receive legal recognition or sanction, the declared will of the parties being wholly destitute of legal efficacy. A voidable agreement stands midway between these two cases. It is not a nullity, but its operation is conditional and not absolute. By reason of some defect in its origin it is liable to be destroyed or cancelled at the option of one of the parties to it. On the exercise of this power the agreement not only ceases to have any efficacy, but is deemed to have been void ab initio. The avoidance of it relates back to the making of it. The hypothetical or contingent efficacy which has hitherto been attributed to it wholly disappears, as if it had never existed. In other words, a voidable agreement is one which is void or valid at the election of one of the parties to it. A lease determinable on notice or on re-entry for breach of covenant is not for that reason voidable; because, when determined, it is not destroyed ab initio, but merely from then onwards.[[312]]
Void and voidable agreements may be classed together as invalid. The most important causes of invalidity are six in number, namely, (1) incapacity, (2) informality, (3) illegality, (4) error, (5) coercion, and (C) want of consideration.
1. Incapacity. Certain classes of persons are wholly or partially destitute of the power of determining their rights and liabilities by way of consent. They cannot, at least to the same extent as other persons, supersede or supplement the common law by subjecting themselves to conventional law of their own making. In the case of minors, lunatics, and convicts, for example, the common law is peremptory, and not to be derogated from or added to by their agreement. So the agreements of an incorporated company may be invalid because ultra vires, or beyond the capacity conferred upon it by law.
2. Informality. Agreements are of two kinds, which may be distinguished as simple and formal. A simple agreement is one in which nothing is required for its effective operation beyond the manifestation, in whatever fashion, of the consenting wills of the parties. A formal agreement, on the other hand, is one in which the law requires not merely that consent shall exist, but that it shall be manifested in some particular form, in default of which it is held of no account. Thus the intent of the parties may be held effective only if expressed in writing signed by them, or in writing authenticated by the more solemn form of sealing; or it must be embodied in some appointed form of words; or it must be acknowledged in the presence of witnesses, or recorded by some form of public registration; or it must be accompanied by some formal act, such as the delivery of the subject-matter of the agreement.
The leading purpose of all such forms is twofold. They are, in the first place, designed as pre-appointed evidence of the fact of consent and of its terms, to the intent that this method of determining rights and liabilities may be provided with the safeguards of permanence, certainty, and publicity. In the second place their purpose is that all agreements may by their help be the outcome of adequate reflection. Any necessary formality has the effect of drawing a sharp line between the preliminary negotiations and the actual agreement, and so prevents the parties from drifting by inadvertence into unconsidered consent.