Introduction :
Sectio 2(h) of the Indian Contract Act Defines Contract as "An agreement enforceable by law is a contract." Section 10 of the Indian Contract Act, 1872, says that All agreements are contracts if they are made by the free consent of the parties. Contracts may be Classified according to their Validity, Formation or Performance.
A contract is based on an agreement. An agreement becomes a contract when all the Essential elements of a Valid Contract are satisfied. If one or more of these elements is/ are missing, the contract is either voidable, void, illegal or unenforceable.
Void Agreement and Void Contract
a) Void Agreement:
According to Section 2(g) of the Indian Contract Act 1872, An agreement not enforceable by law is said to be void. Avoid Agreement does not create any legal rights or obligations.It is void-ab initio, i.e. an agreement with a minor or an agreement without Consideration.
b) Void Contract:
Section 2(j) of the Indian Contract Act, 1872 says that A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.
c) Voidable Contract:
Section 2(i) of the Indian Contract Act, 1872 defines Voidable Contract as "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." This happens when the essential element of free consent in a contract is missing. When the Consent of a party to a contract is not free, it is caused by coercion, undue influence, misrepresentation or fraud the contract is voidable at his option.
Example: A promises to sell his house to B for $ 5000, A's Consent is obtained by use of force. The Contract is Voidable at the option of A.
(See... Difference between Void Contract and Voidable Contract )
A contract becomes voidable in the following two cases
i) When a person Promises to do something for another person for a consideration but the other person prevents him from performing his promise, the contract becomes voidable at his option (Section 53 of Indian Contract Act 1872)
Illustration:
A and B contract that B shall execute certain work for A for a thousand rupees. B is ready and willing to execute the work accordingly, but A prevents him from doing so. The contract is voidable at the option of B; and, if he elects to rescind it, he is entitled to recover from A compensation for any loss which he has incurred by its non-performance.
ii) When a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before a specified time and fails to do such thing at or before a specified time, and fails to do such thing at or before a specified time, the contract or so much of it as has not been performed becomes voidable at the option of the promisee. (Section 55 of ICA para 1)
d) Illegal agreement :
An Illegal Contract is one, which is immoral or against Law. An Illegal Contract is void and also a Crime under Section 120A ( Criminal Conspiracy ) of the Indian Penal Code. It is not only void but also an offense. All illegal agreements are void but all void agreements or contracts are not necessarily illegal.
Example: A borrows $ 500 from B and enters into a contract with an alien to import prohibited goods, B knows the purpose of the loan. The transaction between A and B is Collateral to the main agreement. It is illegal since the main Agreement is illegal.
e) Unenforceable Contract :
An unenforceable contract is one which cannot be enforced in the Court of Law because of some technical defect such as absence of writing or where the remedy has been barred by lapse of time. The Contract may be carried out by the parties concerned but in the event of breach or repudiation of such a contract, the aggrieved party shall not be entitled to the legal remedies.
Contracts may be classified to according to the mode of their formation as follows :
a) Express Contract :
If the terms of a contract are expressly agreed upon (Whether by words spoken or written ) at the time of formation of the Contract, the Contract is said to be an express Contract. According to Section 9 of the Indian Contract Act, " A Contract in which the terms are stated in words (Written or Spoken) by the Parties is said to be express. An expressed promise results in expressed contract.
b) Implied Contract :
An Implied Contract is one which is inferred from the acts or conduct of the parties or course of dealing between them. It is not the Result of any expressed promises or promises by the parties but of their particular acts. It may also result from a continuing course of conduct of the parties. According to Section 9 of the Indian Contract Act 1872 where the proposal or acceptance of any promise is made otherwise than in words, the promise is said to be implied. An implied promise results in an implied Contract.
Example :
c) Quasi Contract :
Strictly speaking, a quasi-contract is not a contract at all. A contract is intentionally entered into by the parties. A quasi-contract, on the other hand, is created by law. It resembles a contract in that a legal obligation is imposed on a party who is required to perform it. It rests on the ground of equity that "a person shall not be allowed to enrich himself unjustly at the expense of another. "
Example:
'A' a tradesman, leaves goods at B's house by mistake. B treats the goods as his own. B is bound to pay A for the goods.
a) Executed Contract:
An executed Contract is one in which both the parties have performed their respective obligations.
Example:
A agrees to paint a picture for B for $100. When A paints the picture and B pays the price. i.e., when both the parties perform their obligations, the contract is said to be performed.
But there are some cases in which even though a contract may appear to be completed at once, its effects may still continue. For example - when a person buys a bun for a penny and subsequently breaks his teeth on a stone in it, he has a right to recover damages from the seller. (See case on this topic... Chaproniere vs. Mason, 1905 21 T.L.R.633)
b) Executory Contract:
An Executory Contract is one in which both the parties have not yet performed their obligations.
Example: A agrees to paint a picture for B for $100. in this example A has not painted the picture and B has not paid the price.
c) Partly Executory, Partly executed:
A Contract may sometimes partly executed and partly executory. Thus if in the above example B has paid the price to A and A has not yet painted the picture the contract is executed as to B and executory as to A.
d) Unilateral Contract:
A unilateral contract is one in which only one party has to fulfill his obligation at the time of formation of the contract, the other party having fulfilled his obligation at the time of the contract or before the contract comes into existence.
Example:
A permits a railway coolie to carry his luggage and place it in a carriage. A contract comes into existence as soon as the luggage placed in the carriage. But by that time Coolie already performed his obligation. Now only A has to fulfill his obligation i.e., pay the reasonable charges to the Coolie.
e) Bilateral Contract :
A bilateral Contract is one in which both the parties have yet to perform their obligation.
See also...
1) What is Consideration and what are Kinds of Consideration?
2) What are the cases in which Injunction can be refused?
3) Rights and Duties of Agent (Agency: Indian Contract Act,1872)
4) Difference between Sub-Agent and Substituted-Agent
5) Kinds of Agents
Sectio 2(h) of the Indian Contract Act Defines Contract as "An agreement enforceable by law is a contract." Section 10 of the Indian Contract Act, 1872, says that All agreements are contracts if they are made by the free consent of the parties. Contracts may be Classified according to their Validity, Formation or Performance.
Classification of Contract :
1. Classification According to Validity :
A contract is based on an agreement. An agreement becomes a contract when all the Essential elements of a Valid Contract are satisfied. If one or more of these elements is/ are missing, the contract is either voidable, void, illegal or unenforceable.
Void Agreement and Void Contract
a) Void Agreement:
According to Section 2(g) of the Indian Contract Act 1872, An agreement not enforceable by law is said to be void. Avoid Agreement does not create any legal rights or obligations.It is void-ab initio, i.e. an agreement with a minor or an agreement without Consideration.
b) Void Contract:
Section 2(j) of the Indian Contract Act, 1872 says that A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.
The privy council in MohriBibi Vs Dharmadas Ghose, (1903 30 IA Cal. 539) laid down that, "a contract entered into with a minor is void ab initio for example not enforceable.
Section 24 to 30 and 56 of the Indian Contract Act,1872 lay down the provisions relating to the agreements which are declared void as stated below...
i) Agreement of which consideration and objects are unlawful in part (Section 24).
ii) Agreements without consideration.(Section 25).
ii) Agreement in restraint of marriage (Section 26).
iii) Agreement in restraint of trade (Section 27)
iv) Agreement in restraint of legal proceedings (Section 28)
v) Ambiguous / uncertain agreement ( Section 29 ).
vi) Wagering agreements (Section 30) and
vii) Agreements to do impossible Acts (Section 56).
c) Voidable Contract:
Section 2(i) of the Indian Contract Act, 1872 defines Voidable Contract as "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." This happens when the essential element of free consent in a contract is missing. When the Consent of a party to a contract is not free, it is caused by coercion, undue influence, misrepresentation or fraud the contract is voidable at his option.
Example: A promises to sell his house to B for $ 5000, A's Consent is obtained by use of force. The Contract is Voidable at the option of A.
(See... Difference between Void Contract and Voidable Contract )
A contract becomes voidable in the following two cases
i) When a person Promises to do something for another person for a consideration but the other person prevents him from performing his promise, the contract becomes voidable at his option (Section 53 of Indian Contract Act 1872)
Illustration:
A and B contract that B shall execute certain work for A for a thousand rupees. B is ready and willing to execute the work accordingly, but A prevents him from doing so. The contract is voidable at the option of B; and, if he elects to rescind it, he is entitled to recover from A compensation for any loss which he has incurred by its non-performance.
ii) When a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before a specified time and fails to do such thing at or before a specified time, and fails to do such thing at or before a specified time, the contract or so much of it as has not been performed becomes voidable at the option of the promisee. (Section 55 of ICA para 1)
d) Illegal agreement :
An Illegal Contract is one, which is immoral or against Law. An Illegal Contract is void and also a Crime under Section 120A ( Criminal Conspiracy ) of the Indian Penal Code. It is not only void but also an offense. All illegal agreements are void but all void agreements or contracts are not necessarily illegal.
Example: A borrows $ 500 from B and enters into a contract with an alien to import prohibited goods, B knows the purpose of the loan. The transaction between A and B is Collateral to the main agreement. It is illegal since the main Agreement is illegal.
e) Unenforceable Contract :
An unenforceable contract is one which cannot be enforced in the Court of Law because of some technical defect such as absence of writing or where the remedy has been barred by lapse of time. The Contract may be carried out by the parties concerned but in the event of breach or repudiation of such a contract, the aggrieved party shall not be entitled to the legal remedies.
2.Classification according to formation:
Contracts may be classified to according to the mode of their formation as follows :
a) Express Contract :
If the terms of a contract are expressly agreed upon (Whether by words spoken or written ) at the time of formation of the Contract, the Contract is said to be an express Contract. According to Section 9 of the Indian Contract Act, " A Contract in which the terms are stated in words (Written or Spoken) by the Parties is said to be express. An expressed promise results in expressed contract.
b) Implied Contract :
An Implied Contract is one which is inferred from the acts or conduct of the parties or course of dealing between them. It is not the Result of any expressed promises or promises by the parties but of their particular acts. It may also result from a continuing course of conduct of the parties. According to Section 9 of the Indian Contract Act 1872 where the proposal or acceptance of any promise is made otherwise than in words, the promise is said to be implied. An implied promise results in an implied Contract.
Example :
- There is an implied contract when 'A' gets into a public bus,
- There is an implied contract when 'A' takes a cup of tea in a restaurant.
c) Quasi Contract :
Strictly speaking, a quasi-contract is not a contract at all. A contract is intentionally entered into by the parties. A quasi-contract, on the other hand, is created by law. It resembles a contract in that a legal obligation is imposed on a party who is required to perform it. It rests on the ground of equity that "a person shall not be allowed to enrich himself unjustly at the expense of another. "
Example:
'A' a tradesman, leaves goods at B's house by mistake. B treats the goods as his own. B is bound to pay A for the goods.
3.Classification Accordin to Performance
a) Executed Contract:
An executed Contract is one in which both the parties have performed their respective obligations.
Example:
A agrees to paint a picture for B for $100. When A paints the picture and B pays the price. i.e., when both the parties perform their obligations, the contract is said to be performed.
But there are some cases in which even though a contract may appear to be completed at once, its effects may still continue. For example - when a person buys a bun for a penny and subsequently breaks his teeth on a stone in it, he has a right to recover damages from the seller. (See case on this topic... Chaproniere vs. Mason, 1905 21 T.L.R.633)
b) Executory Contract:
An Executory Contract is one in which both the parties have not yet performed their obligations.
Example: A agrees to paint a picture for B for $100. in this example A has not painted the picture and B has not paid the price.
c) Partly Executory, Partly executed:
A Contract may sometimes partly executed and partly executory. Thus if in the above example B has paid the price to A and A has not yet painted the picture the contract is executed as to B and executory as to A.
d) Unilateral Contract:
A unilateral contract is one in which only one party has to fulfill his obligation at the time of formation of the contract, the other party having fulfilled his obligation at the time of the contract or before the contract comes into existence.
Example:
A permits a railway coolie to carry his luggage and place it in a carriage. A contract comes into existence as soon as the luggage placed in the carriage. But by that time Coolie already performed his obligation. Now only A has to fulfill his obligation i.e., pay the reasonable charges to the Coolie.
e) Bilateral Contract :
A bilateral Contract is one in which both the parties have yet to perform their obligation.
See also...
1) What is Consideration and what are Kinds of Consideration?
2) What are the cases in which Injunction can be refused?
3) Rights and Duties of Agent (Agency: Indian Contract Act,1872)
4) Difference between Sub-Agent and Substituted-Agent
5) Kinds of Agents
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