Types of Contracts

UNIT 1

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 TYPES
On the basis of Formation,
On the basis of Nature of Consideration,
On the basis of Execution and
On the basis of Validity.

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 Types of Contracts on the basis of
Formation
Express Contracts: The Contracts where there is expression
or conversation are called Express Contracts. For example:
A has offered to sell his house and B has given acceptance.
It is Express Contract.
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.
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.

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 QUASI
Sec. 68: When necessaries are supplied
Sec. 69: When expenses of one person are paid by another
person.
Sec. 70: When one party is benefited by the activity of
another party.
Sec. 71: In case of finder of lost tools.
Sec. 72: When payment is made by mistake or goods are
delivered by mistake.
Example: A case on this occasion is Chowal Vs Cooper. In this case
A`s husband becomes no more. She is very poor and therefore not
capable of meeting even cost of cremation. B, one of her relatives,
understand`s her position and spends his own money for
cremation. It is done so without A`s request. Afterwards B claims
his amount from A where A refuses to pay. Here court applies Sec.
68 and creates a Quasi Contract between them.

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 Types of Contracts on the basis of
Nature of Consideration
Bilateral Contracts - If considerations in both directions
are to be moved after the contract, it is called Bilateral
Contract.
Example: A Contract has got formed between X and Y on 1st Jan, According
to which X has to deliver goods to Y on 3rd Jan and Y has to pay amount on
3rd Jan. It is bilateral contract.
Unilateral Contracts - If considerations is to be moved
in one direction only after the Contract, it is called
Unilateral Contract.
Example: A has lost his purse and B is its finder. There after B
searches for A and hands it over to A. Then A offers to pay Rs.
1000/- to B to which B gives his acceptance. Here, after the Contract
consideration moves from A to B only. It is Unilateral Contract

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 Types of Contracts on the basis of
Execution
On this base Contracts can be classified into
two groups. namely, Executed and Executory
Contracts.
If performance is completed, it is called
executed contract.
In case where contractual obligations are to
be performed in future, it is called executor
contract.

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 Types of Contracts On the basis of
Validity
On this base Contracts can be classified into 5
groups. namely
Valid,
Void,
Voidable,
Illegal and
Unenforceable Contracts.

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 Valid: The Contracts which are enforceable in a
court of law are called Valid Contracts. Certainty,
free consent, two directional consideration,
fulfillment of legal formalities, legal obligations,
lawful object, capacity of parties, possibility of
performance, etc.
Void: A Contract which is not enforceable in a
court of law is called Void Contract. If a Contract
is deficient in any one or more of the above
features
Voidable: A Contract which is deficient in only
free consent, is called Voidable Contract. That
means it is a Contract which is made under
certain pressure either physical or mental.
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 Illegal: If the contract has unlawful object it is
called Illegal Contract.
Example: There is a contract between X and Z
according to which Z has to murder Y for a
consideration of Rs. 10000/- from X. It is illegal
contract.
Unenforceable: A contract which has not
properly fulfilled legal formalities is called
unenforceable contract. That means
unenforceable contract suffers from some
technical defect like insufficient stamp etc.

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 DISCHARGE OF CONTRACT
The termination of the contractual
relationship is called discharge of contract.
rights and and liabilities created by law under
contract has been finished

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METHODS TO/ MODES OF DISCHARGE
THE CONTRACT
Discharge of Contract by Performance
Discharge of Contract by Mutual Agreement
or Consent
Discharge by Lapse of Time
Discharge by Impossibility of Performance
Discharge by Operation of Law

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 Discharge of Contract by Performance
This is the best way of bringing the contract to
an end. person fulfill his/her obligation at the
time when he/she has promised to perform it.
The performance can be of two types.
1. Actual Performance
2. Attempted Performance

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 Actual Performance - In actual performance the parties to a contract have
actually performed their promises.
Illustration : On Monday Mala offered to sell her car for rupees thirty
thousand to Sweetie and Sweetie agreed to buy the car and pay in cash by
Friday evening. On Friday evening Sweetie paid rupees thirty thousand in
cash to Mala and Mala gave the car to Sweetie. Thus the contract came to
an end by discharge of contract.
Attempted Performance - In attempted performance one party offers to
perform what he/she had promised but the other party no longer wants
him/ her to perform.
Illustration : On Monday Mala offered to sell her car for rupees thirty
thousand to Sweetie and Sweetie agreed to buy the car and pay in cash by
Friday evening. On Friday Sweetie refused to buy the car. Hence this was
an attempted performance. The promisor Mala offered to execute her
promise but Sweetie refused to buy the car. Thus Mala can sue Sweetie for
breach of contract.

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 Discharge of Contract by Mutual
Agreement or Consent
Parties agreeing to terminate a contract can
discharge the contract without performance.
There are various ways by which the old
contract can be replaced by a new one

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 1 Novation:
In this the parties to a contract agree to substitute the
existing contract with a new one. The new contract is
brought about by either changing the contract between the
same parties or by changing the parties in the same
contract.
changing the contract -Eg: Yogita offered to keep Sunita as
her maid for rupees two thousand on a monthly basis.
Sunita accepted the offer and promised to start work from
the first day of the next month. Sunita met with an accident
and injured her leg. a little persuasion from Yogita, Sunita
decided to join as maid after two months
changing the parties - It was decided that Sunitas sister
Punita would replace her and would join as maid from the
first day of the next month
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 2 Alteration:
In this the parties agree to make some changes in
one or more terms of the contract. By doing so
the old contract is discharged and the parties are
bound by the changed contract.
Illustration - Yogita offered to keep Sunita as her
maid for rupees two thousand on a monthly basis.
Afterwards Sunita felt that the emoluments were
too low and that she would not like to work at
such low rates. Yogita decided to increase the
emoluments by rupees five hundred.

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 3 Rescission
In this the parties decide to terminate the
contract before the contract is discharged by
performance.

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 4 Remission:
Remission means acceptance by the promisee of a
lesser fulfillment of the promise made by the promisor
Eg: Yogita offered to keep Sunita as her maid for rupees
two thousand on a monthly basis. Sunita accepted the
offer and promised to start work from the first day of
next month. Sunita worked for a month and at the end
of the month Yogita paid Sunita rupees fifteen hundred.
This was less than the amount initially promised by
Yogita. Sunita accepted the reduced emoluments
without any complaint.

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 5 Waiver:
In this case the promisee entitled to claim performance
from the promisor might waive the performance. He
no longer wants the promisor to execute his/her
performance and therefore the promisor is no longer
under any obligation to perform his/her promise.
Illustration
Yogita offered to keep Sunita as her maid for rupees
two thousand on a monthly basis. Sunita accepted the
offer and promised to start work from the first day of
next month. The very next day Yogita forbade Sunita
from working as a maid. Thus Sunita is no longer under
any obligation to perform her promise.

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 Discharge by Lapse of Time
A contract is to be performed within a reasonable
period. If the contract is not performed within that
period then the contract comes to an end and no legal
action can be taken by the promisee after that.
Illustration: Jhankar took a loan of rupees ten thousand
from Gurmeet on first January 2005. She was to repay
the loan with interest on first January 2006. Gurmeet
went to the United States in October 2005 and Jhankar
did not repay the loan money on first January 2006 to
Gurmeet. Three years elapsed and Gurmeet did not
take any legal action against Jahnkar for non-payment
of the loan. Thus the debt became time barred.

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 Discharge by Operation of Law
1 Death
2 Insolvency
3 Merger: In this case the contract giving inferior rights to a person
merges into a superior right. The contract giving the inferior right is
discharged and is replaced by the one giving superior right.
Illustration: Ragini mortgaged her gold bangles and took
rupees two lakh from Shambhu. She promised to pay
Shambhu rupees two lakh with interest within two years.
Two years expired and Ragini was unable to pay the money.
Hence Shambhu, who was a bailee under the contract
became the owner of the gold bangles.
4 Unauthorized Material Alteration: Any alteration made in a
contract by one party without informing the other party or without
the consent of the other party will make the contract void. The
contract will no longer be enforceable in a Court of law.

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 Discharge by Impossibility of
Performance
1 Initial Impossibility
2 Subsequent Impossibility

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 Modes of Discharge Including Breach
and its Remedies
The breach of contract means to break the
contract or not to act upon the contract.
When any party fails to perform its duties in a
lawful contract it is called breach of contract.
The injured party has a right to take action
against the party who has failed to perform
his part of contract.

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 1. Claim for Damages :-
i. Special Damage :-
Example :- If the machinery of any factory arrives late and due to this
reason one party suffers a loss or profits it is called special damage.
ii. General Damage :- If injured party suffers a loss due to non
performance of the contract it is called general damage. The
injured party can recover from the guilty party the ordinary
damages suffered by him.
iii. Exemplary Damages :- These damages are awarded in order to
punish the guilty party for the breach of contract and not to
compensate the loss of the injured party.
Iv. Nominal Damages :- When the injured party suffers no loss the
contract may award him nominal damages to recognize his right.

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 2. Suit For Injunction

Injunction means the order of the court. It

may be used to prevent any wrongful act. In
case of contract it is used to prevent that act
which is involved in breach of contract.
Example :- Suppose Mr. Yuvraj a film producer
contracts with Miss. Neha to sign in his movies
for ten years and not to sign in any other film.

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 3. Specific Performance

A degree of specific performance is an order of the

court. It is usually granted in those contracts related to
house, land and plot.
In some cases compensation to pay. So court may issue
the degree of specific performance and can compel to
defaulter party the performance of contract.
Example :- Mr. Tipu agrees to sell his house to Mr. Amir,
who agrees to purchase. But due to some reasons Mr.
Tipu commits breach . At the suit of Mr. Amir court
may ask Mr. Tipu to carry out the contract.

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 4. Recession (decline) Of The Contract

For the breach of contract it is an equitable remedy. When

one party of the contract commits breach and other party
may rescued the contract that he may get free from all its
obligations for the performance of contract. Due to such
recession and non performance injured party is entitled to
get compensation for the damages and loss.

Example :- Mr. Sanjay pledges the defence savings

certificates to Mr. Panday and get loan. But Mr. Sunjay does
not return the loan. Mr. Panday may file a suit for recession
of the contract responsibility to return the defence savings
certificates on payment.

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 5. Quantum Merit :-

It means "So much as deserves" we can explain it by the

following example :

Example :- Suppose Mr. Ali entered into contract with Mr.

Shawn that they will construct one room jointly. Mr. Ali will
construct the wall while Mr . Shawn will build the roof. Now
Mr. Ali completes his job but Mr. Shawn fails to build the
roof of the room. Now in this case Mr. Ali is entitled to
receive the award according to his work done by him. This
claim of Mr. Ali will be called a claim of "Quantum Merit."
The court will award to Mr. Ali keeping in view the work or
services performed by him.

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