Classification of Contracts

Classification of Contract According

to Enforceability

According to enforceability contracts are classified in three

major categories.

1. Valid Contract:
A valid contract is one which is enforceable by law. An
agreement becomes enforceable by law when it fulfils all the
essentials of a valid contract.

2. Void Contract:
The term void means not binding in law. Section 2(j) of Contract
Act states, “A contract which ceases to be enforceable by law
becomes void when it ceases to be enforceable”.
 Classification of Contract According
to Enforceability

Contract becomes void under following circumstances:

 Impossibility of Performance.
 Subsequently illegality.
 Rejection of voidable contract.
 Impossibility of depending event.

Obligation of Parties in a void contract:

In a void contract, both the parties are not legally responsible
to fulfil the contract. In void contract the party who has
received any benefit is bound to return it to the other party.
 Classification of Contract According
to Enforceability

3. Voidable Contract:
Section 2(i) of Contract Act states, “An agreement which
is enforceable by law at the option of one or more of the
parties thereto but not at the option of the other or others is
a voidable contract”.

A Contract becomes voidable under following situations:

a. When the consent of one or more of the parties to a

contracts obtained by coercion, undue influence or
fraud.
 Classification of Contract According
to Enforceability

b. When one party promises to do something for the

other party for consideration but the other party
prevents him from performing his promise, the
contract becomes voidable at his option.

c. When a party to the contract promises to perform an

obligation within a specified time but fails to
perform the same within the fixed time, the
contract becomes voidable at the option of the
aggrieved party.
 Classification of Contract
According to Enforceability
Obligation of Parties in voidable contracts:
In a voidable contract following are the obligation of parties
to the contract:
 It becomes a valid contact if it is not rejected by the
aggrieved party within a reasonable time.
 The law gives an option to one of the parties to avoid it.
 The party entitled to cancel the contract is not bound to
cancel. If the entitled party confirms the contract, the other
party remains bound to perform.
 The aggrieved party can get damages from the other party.
 If one party has received some benefit, he must return it other.
 Classification of Contract
According to Enforceability

Burden of proof:

The burden of proof in a voidable contract lays

with the aggrieved party, it means that the party
who claims that his consent was not free has to
prove it in the court.

If he fails to prove, the contract remains valid.

 Classification of Contract
According to Formation

According to formation contracts are classified in two

categories
1. Express Contract:
Express contract is a contract which is made by use of words
spoken or written. When such a contract is formed, there is
no difficulty in understanding the rights and obligations of
the parties. (Sec. 8)
2. Implied Contract:
An implied contract are made without a word spoken or
written. It arises from the acts or conduct of parties and in
the course of dealings or circumstances. (Sec. 9)
 Classification of Contract According
to Performance

According to performance contracts are classified in two

categories:
1. Executed Contracts:
A contract is called executed when both parties
completely fulfil their obligations. It means that nothing
remains to be done by either party under the contract.
2. Executory Contracts:
An executory contract is a contract that has not yet been
fully performed or fully executed. It is a contract in
which both sides still have important performance
remaining.
 Classification of Contract According to Parties

According to parties contacts are classified in two

categories:
1. Unilateral Contracts:
Its a one sided contract. A unilateral contract is a
contract created by an offer that can only be
accepted by performance.
2. Bilateral Contracts:
It is known as two sided contract. In this type of
contract both the parties exchange mutual promises.
 Classification of Contract According to Parties

Example:
C promises to paint a picture for B and B
promises to pay Rs. 5000 to C. It is a bilateral
contract.