a contract that depends on fulfilling one parties' obligations before the parties can continue onto the next stage.
Indivisible Contract Details
A contract is an agreement signed by at least two parties, enforceable by law. This, therefore, means that an indivisible contract is enforceable by law. However, not all agreements qualify as contracts. So what makes a contract indivisible? The details of an indivisible contract include at least two consenting parties and usually one task or project that one or both parties need to complete.
These two parties agree on certain terms that each must fulfill to make the agreement valid. Agreements or contracts that have a lump sum attached to them are classified as indivisible contracts. One party must make a payment to the other party, who will, in turn, allow the other party to carry out their part of the contract.
If one party defaults on their obligations, they are in breach of contract. The contract can only be enforced once the said party fulfills their side of the agreement. Usually, one party has to do this to get the process or task started or completed.
Indivisible Contract Example
The most common example of an indivisible contract is found in the construction industry. A client, let's call him Sam, approaches a construction company to help him build his family home. Usually, the company will draw up a contract that lays down the obligations of Sam and the construction company's obligations.
Some of the parties to the contract from the construction company may include an architect, structural engineers, contractors, electricians, etc. Each of these professionals has a part to play, as is stipulated in the contract. Since building has various stages, Sam is obligated to make a payment before each stage commences.
Before Sam can receive the architectural drawings, he has to make a payment for this service. As the construction progresses, depending on the agreement with the construction company, Sam will have to make a payment before each process begins. If Sam defaults on payment or delays the payment, the progress of that particular phase of the construction will halt until he makes payment.
Types of Indivisible Contract
Contracts that fall under the category of indivisible contracts typically have to follow the rules listed above. They must be legally binding and require the parties involved to fulfill their obligations.
The most common type of indivisible contract is one between a store and a producer of goods. The store signs a contract with the producer to provide a variety of goods to their location periodically. Similarly, clauses in the contract obligate the store owner to make payment either they receive the goods or when the vendor delivers them to the store.
Construction contracts, as mentioned before, are also indivisible contracts. Anything that requires a down payment or deposit before someone can receive a service is an indivisible contract as well.
Indivisible Contract vs. Divisible Contract
These two contracts, as implied in their names, are opposites. An indivisible contract has obligations that need to be fulfilled before the project is finished. You cannot divide this contract into parts.
A divisible contract can be divided into different parts. Parties can fulfill these parts even if others remain void. It is also similar to an installment contract.