The Indian Contract Act, 1872

Types Of Contracts

On what basis are contracts classified?

Contracts are classified on the basis of:

    • Enforcement
    • Mode of creation
    • Extent of execution
    • Liability
What are the different types of contracts based on enforcement?
    • Valid Contract – A valid contract is enforceable by law and it fulfils the essential elements of a contract.
      Example: A agrees to sell 500 kg of Basmati rice to B at Rs. 60 per kg.
    • Void Contract – Any contract which is not enforceable by the court of law is known as a void contract. A contract may be void because it does not fulfill one or more essential elements of a contract.

Example: A asks B to steal the money from the ING Vysya Bank and told that he will be paid Rs. 5 crore for the same.

  • Voidable Contract – It is a valid contract which may be or may not be executed at the discretion of the parties.
    Example: A by means of fraud makes M sign a document by which M was to transfer all his property to A.
  • Unenforceable Contract – A valid contract that is not enforceable in the court of law due to some technical defect, one or more parties cannot be sued on it.
    Example: An agreement which is required to be stamped will be unenforceable if the same is not stamped at all or is under stamped.
  • Unlawful Contract – Any contract that is formed upon an illegal agreement, which shall not be enforceable in court.
    Example: A asks B to steal the money from the ING Vysya Bank and told that he will be paid Rs. 5 crore for the same.
What are the different types of contracts based on the mode of creation?
  • Express Contracts – This is a type of contract wherein all the elements of the contract will be specifically stated. In an express contract, the agreement of the parties is expressed either in written or oral.
    Example: A says to B ‘will you purchase my bike for Rs.20,000?” B says to A “Yes”.
  • Implied Contracts – The terms of the contract are not expressed in writing or oral form but are presumed from the actions, circumstances or conduct of one or more parties to the contract.
    Example: A stops a taxi by waving his hand and takes his seat. There is an implied contract that A will pay the prescribed fare.
  • Quasi Contracts: These contracts are formed by the order of the court and not by agreement of the parties. These contracts are formed to deal with conflicts that may arise between the parties.
    Example: If Mr. A leaves his goods at Mr. B’s shop by mistake, then it is for Mr. B to return the goods or to compensate the price. In fact, these contracts depend on the principle that nobody will be allowed to become rich at the expenses of the other.
What are the different types of contracts based on extent of execution?
  • Executed Contracts: Contracts that has been fully performed by the parties and whose terms and conditions have been fulfilled.
    Example: A contracts to buy a car from B by paying cash, B instantly delivers his car.
  • Executory Contracts – These are contracts made between two parties in which the terms are yet to be fulfilled.
    Example: D agrees to buy V’s cycle by promising to pay cash on 15th July. V agrees to deliver the cycle on 20th July.
What are the different types of contracts based on extent of liability?
  • Unilateral Contracts – These contracts are one sided contracts as in only one party is involved and makes a promise in exchange for an act.
    Example: A wants to get his room painted. He offers Rs.500 to B for this purpose B says to A “if I have spare time on next Sunday I will paint your room”. There is a promise by A to pay Rs 500 to B. If B is able to spare time to paint A’s room. However there is no promise by B to Paint the house. There is only one promise.
  • Bilateral contracts – Agreement between two parties or groups in promise to do something in exchange.
    Example: A offers to sell his fiat car to B for Rs.1,00,000 on acceptance of A’s offer by B, there is a promise by A to Sell the car and there is a promise by B to purchase the car there are two promise.
What is a contingent contract?
The enforceability of a contingent contract depends on the occurrence of a certain event or fact. Contract of insurance, guarantee are a few examples of contingent contract. Example: A contract to pay B Rs.10,000 if B house is burnt
What is an oral contract?
When one party makes a proposal via words, symbols or gestures to another party, which when accepted becomes a valid oral contract.

Oral contract is not of great evidentiary value as the agreement is understood through the word of mouth and obtained via second hand knowledge.

What is an E-Contract?
E-Contract is any contract which is formed by negotiation of two or more parties through the use of electronic means.
All E-Contracts should fulfill the essential conditions of a valid contract under the Indian Contract Act, 1872. They are legally recognized under the Information Technology Act, 2000

In A Nutshell

  • There are three categories of contracts based on- 1. Enforcement 2. Mode of creation 3. Extent of execution
  • Under the category of enforcement there are five types of contracts namely – 1.Valid contract 2. Void contract 3. Voidable contract 4. Unenforceable contract 5. Unlawful contract
  • Under the category of mode of creation there are three types of contracts namely – 1. Express contract 2. Implied contract 3. Quasi contract
  • Under the category of extent of execution there are four types of contracts namely – 1. Executed contract 2. Executory contract 3. Unilateral contract 4. Bilateral contract
  • The enforceability of a contingent contract depends on the occurrence of a certain event or fact.
  • When one party makes a proposal via words, symbols or gestures to another party, which when accepted becomes a valid oral contract.
  • E-Contract is any contract which is formed by negotiation of two or more parties through the use of electronic means. They are legally recognized under the Information Technology Act, 2000.

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