TYPES OF CONTRACT

Classification of contracts

Enforceability Performance Formation

1. ValidContract 1. UnilateralContract 1. ExpressContract

2. VoidContract 2. Bilateral contract 2. Impliedcontract
3. Voidablecontract 3. Executedcontract 3. Quasicontract
4. Unenforceable 4. Executorycontract
contract
5. Illegalcontract
Classification based on Enforceability

Valid Contract – An
agreement enforced by law
is a valid contract. An
agreement becomes a valid
contract when it fulfils all
the essentials of a contract
as laid down in section10.
 Example

• If A offers B to sell his house for Rs 3 Lakhs. B

agrees to buy the house for this price. It is a valid
contract.
• A agrees to sell a car to B. if it fulfills all the essentials
of a contract, it is a valid contract. If A fails to deliver
the car, B can sue him and if B fails to pay, A can sue
him.
Classification based on Enforceability

Void Contract –the word void

means not binding in law. Section
2(j)defines “A contract which
ceases to be enforceable by law
becomes void, when it ceases to
be enforceable.” It means a void
contract is not void from
beginning. It is valid contract
when it is made but subsequently
it becomes void due to certain
reasons.
 Reasons of becoming void
• Impossibility of performance
• A agrees to sell his house to B after two days. The house is
burnt next day. The contract becomes void.
• Subsequent illegality
• A agrees to sell 100 bags of wheat to B. before delivery the
government bans private trade in wheat. The contract becomes
void.
• Rejection of a voidable contract
• A forcefully buy B’s car for Rs. 20000. The contract is voidable
at the option of B. B may accept or reject it. If B rejects it
becomes void.
• Impossibility of depending event
• A contracts to give Rs. 1 Lac to B, if B gets admission in Hailey
college, B fails to get admission. The contract becomes void.
Classification based on legal effects

Voidable contract – An
agreement which is enforceable
by law at the opinion of one or
more of the parties there to but
not at the opinion of the other
or the others is a voidable
contract. A voidable contract
remains to be good till it is
avoided by the part entitled to
do so.
 Example

• If the consent of the party was caused by

coercion, the contract is enforceable at the
option of the party whose consent was not
free.
• A compels B to sell his car at gunpoint. The
contract is made by coercion and is voidable at
the option of B.
Classification based on enforceability

Unenforceable contract
– An unenforceable
contract is one which
cannot be enforced in a
court of law because of
some technical defects
such as absence of
writing, registration,
requisite stamps etc.
 Example
• When the promissory not is under –
stamped, the agreement therein becomes
unenforceable because of that technical
defect.
• A borrows Rs. 1 billion from B and makes
a pronote on a Rs. 10 stamp paper. It is
unenforceable because pronote is
undervalued.
Classification based on enforceability

Illegal Contract – An
illegal agreement is one
which criminal in nature
or which is immoral or
which is against public
policy.
 Example
• A contract to commit dacoity is an illegal
contract.
• A gives money to B, a smuggler to buy smuggled
goods. The agreement is illegal and the money
cannot be recovered.
Classification based on Performance

Unilateral contract – A
unilateral contract is one
in which only one party
has to fulfill his obligation
at the time of the
formation of the contract
and the other party
having fulfilled his
obligation at the time of
the contract or before
contract comes into
existence.
 Example
• Amina permits a coolie to put his luggage to a
carriage. The contract comes into existence as
soon as the coolie puts the luggage. So Amina
has only to fulfill hispart.
• A promises to pay Rs. 1000 to any one who finds
his lost bag. B finds the bag and returns A. it is a
unilateral contract which comes into existence
when the bag is found.
Classification based on Performance

Bilateral Contract – A
bilateral contract is one
in which the obligation
on the part of both the
parties to the contract
are outstanding at the
time of the contract.
 Example

• A promises to paint a picture in return for

which B promises to Rs 1000.
Classification based on Performance

Executed Contract – If
both parties of a
contract have
performed their
respective obligation,
contract is known as an
executed contract.
 Example
• Ahmed contracts with Bilal to buy a house for
Rs 1,00,000. Ahmed paid Rs. 1,00,000 to Bilal.
Bilal executed the sale deed and delivered its
possession.
Classification based on Performance

Executory contract – An
executory contract is
one in which both
parties have not yet
performed their
obligations either
wholly or in which there
remains something to
be done on bothsides.
 Example
• A agrees to paint a picture for B for Rs. 500. A
has not painted the picture and B has not
paid theprice also.
Classification based on Formation

Express contract – If the

terms of a contract are
expressly agreed upon
(whether orally or in
writing) at the time of
the formation of the
contract, the contract is
said to be an express
contract.
 Example
• C writes to A “ I am willing to sell my car to
you for Rs 50,000”. A accepts C’s offer by
another letter.
Classification based on Formation

Implied contract – An
implied contract is one
which is inferred from
the act or conduct of
the parties or course of
dealings between them.
 Example
• A went into a restaurant and had a cup of tea.
It is an implied contract and A will pay for cup
of tea.
• M, a shoe shiner starts polishing the shoes of W
in his presence, and W allows him to do so, it is
an implied contract.
 Classification based on Formation
Quasi Contract – Under
certain circumstances,
law itself creates legal
rights and obligations
against the parties. These
obligations are known as
quasi contracts. It is
created by law and it only
resembles a contract.
.
 Example
• Ali , a tradesman leaves goods at Sajid’s
house by mistake. Suppose Sajid treats the
goods as his own, then Sajid is bound to pay
to Ali a reasonable price for the goods.
• A finds lost goods of B. A is bund to return
the goods to B.
• Types of contract