§ 123 The Classes of Agreements
Agreements are divisible into three classes, for they either create rights, or transfer them, or extinguish them. Those which create rights are themselves divisible into two subclasses, distinguishable as contracts and grants. A contract is an agreement which creates an obligation or right in personam between the parties to it. A grant is an agreement which creates a right of any other description; examples being grants of leases, easements, charges, patents, franchises, powers, licences, and so forth. An agreement which transfers a right may be termed generically an assignment. One which extinguishes a right is a release, discharge, or surrender.
As already indicated, a contract is an agreement intended to create a right in personam between the contracting parties. No agreement is a contract unless its effect is to bind the parties to each other by the vinculum juris of a newly created personal right. It commonly takes the form of a promise or set of promises. That is to say, a declaration of the consenting wills of two persons that one of them shall henceforth be under an obligation to the other naturally assumes the form of an undertaking by the one with the other to fulfil the obligation so created. Not every promise, however, amounts to a contract. To constitute a contract there must be not merely a promise to do a certain act, but a promise, express or implied, to do this act as a legal duty. When I accept an invitation to dine at another man’s house, I make him a promise, but enter into no contract with him. The reason is that our wills, though consenting, are not directed to the creation of any legal right or to any alteration of our legal relations towards each other. The essential form of a contract is not: I promise this to you; but: I agree with you that henceforth you shall have a legal right to demand and receive this from me. Promises that are not reducible to this from are not contracts. Therefore the consent that is requisite for the creation of rights by way of contract is essentially the same as that required for their transfer or extinction. The essential element in each case is the express or tacit reference to the legal relations of the consenting parties.
Taking into account the two divisions of the consensual creation of rights, there are, therefore, four distinct kinds of agreements:—
1. Contracts—creating rights in personam.
2. Grants—creating rights of any other kind.
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.