Classification of Contracts

Contracts types may be classified into different categories depending upon their (i) Enforceability, (ii) Mode of Creation and (iii) Extent of Execution.Contracts types

1. Classification of Contracts on the basis of Validity

A). Valid contracts: An agreement which has all the essential elements of a contract is called a valid contract. A valid contract can be enforced by law.

B). Void Contract[Section 2(j)]: A void contract is a contract which ceases to be enforceable by law. A contract when originally entered into may be valid and binding on the parties. It may subsequently become void.

Following are some of such contracts:

  1. A contract becomes void by supervening impossibility or illegality (sec 56).
  2. A voidable contracts becomes void,when the party,who had the option to void it,decides to repudiate the contract.
  3. A contingent contract to do or not do something on the happening of an event becomes void when the event becomes impossible (sec 32).

C). Void Agreement: According to Sec 2(g)‘an agreement not enforceable by law is said to be void.’Thus,a void agreement is one which is deficient in essentials so as to be destitute of legal effects. Such an agreement is taken to be non-existent and is a nullity in its effects.

D). Voidable Contract[Section 2(i)]: An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of other or others, is a voidable contract. If the essential element of free consent is missing in a contract, the law confers right on the aggrieved party either to reject the contract or to accept it. However, the contract continues to be good and enforceable unless it is repudiated by the aggrieved party.

E). Illegal Agreements: An agreement is illegal if it is forbidden by law; or is of such nature that, if permitted,would defeat the provisions of any law or is fraudulent; or involves or implies injury to a person or property of another, or court regards it as immoral or opposed to public policy. These agreements are punishable by law. These are void-ab-initio.

2. Contracts types On the basis of Formation

A). Express Contracts: Where the terms of the contract are expressly agreed upon in words at the time of formation, the contract is said to be express contract.

B). Implied Contract: The Contracts where there is no expression are called implied contracts. Sitting in a Bus can be taken as example to implied contract between passenger and owner of the bus.

C). Quasi Contract: In case of Quasi Contract there will be no offer and acceptance so, Actually there will be no Contractual relations between the partners. Such a Contract which is created by Virtue of law is called Quasi Contract. Sections 68 to 72 of Contract Act read about the situations where court can create Quasi Contract.

  • When necessaries are supplied(Sec. 68)
  • When expenses of one person are paid by another person (Sec. 69).
  • When one party is benefited by the activity of another party (Sec. 70).
  • In case of finder of lost tools (Sec. 71 ).
  • When payment is made by mistake or goods are delivered by mistake (Sec. 72).

3. Contracts on the basis of Performance

A) Executed Contract: An executed contract is one in which both the parties have performed their respective obligation.

B). Executory Contract: An executory contract is one where one or both the parties to the contract have still to perform their obligations in future. Thus, a contract which is partially performed or wholly unperformed is termed as executory contract.

C). Unilateral Contract: A unilateral contract is one in which only one party has to perform his obligation at the time of the formation of the contract, the other party having fulfilled his obligation at the time of the contract or before the contract comes into existence.

D): Bilateral Contract: An agreement to become a contract has to satisfy certain conditions. These conditions are known as essentials of contract. Section 10 of the Act states that all agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object and are not expressly declared to be void. The essential of a valid contract are as under:

  • Offer and Accepatance
  • Legal Relationship
  • Lawful Consideration
  • Free Consent
  • Lawful Object
  • Certainty
  • Possibility of Performance
  • Agreements not Declared to be Void