Kinds of Contracts

                                                                 Kinds of contracts

There are 5 kinds of contracts on the basis of validity it may be classified as follows -

1) Valid contract.

2) Void contract.

3) Voidable contract

4) Unenforceable contact.

5) Illegal contract.

1. Valid Contract - section 2(h)  and 10 )

A contract is said to be valid if it can be enforceable in the court of law.  According to section 2(h) of Indian Contract Act 1872 , "an agreement enforceable by law is a contract therefore to constitute contract " . Therefore to constitute a Contract -

A) There must exist an agreement. and

B) The agreement should be enforceable by law.

A contract to be enforceable, it must contain the constituents enshrined in Section 10 of the Indian Contract Act 1872. According to Section 10 of the Act, a contract it said to be valid, if two or more competent parties freely consented to  enter into an agreement not declared void with a lawful object for a lawful consideration .

Section 10 runs as follows

All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.

Nothing herein contained shall affect any law in force in India, and not hereby expressly repealed, by which any contract is required to be made in writing or in the presence of witnesses, or any law relating to the registration of documents.

Every contract is an agreement but every agreement is not a contract. An agreement  becomes a contract when the following conditions are satisfied....

a) There is some consideration to contract .

b) The parties are competent to contract .

c)their consent is free.

d) There object it heir lawful.

2 .Void Contract (Sec 2(g))

"A Contract which is not enforceable by law is said to be void contract" . Void contract is an agreement without any legal effect and is void ab initio or it becomes void subsequently. According to Section 2(G) of the Indian Contract Act 1872. "An agreement not enforceable by law is said to be void".

Eg... Contract with a minor.

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...

a) Agreement of which consideration and objects are unlawful in part (Section 24).

b) Agreements without consideration.(Section 25).

c) Agreement in restraint of marriage (Section 26).

d) Agreement in restraint of trade (Section 27) 

e) Agreement in restraint of legal proceedings (Section 28)

f) Ambiguous / uncertain agreement ( Section 29 ).

g) Wagering agreements (Section 30)  and

h)  Agreements to do impossible Acts (Section 56).

Illustrations

1) A promises to obtain for B an employment in the public service, and B promises to pay 1000 rupees to 

A.  The agreement void, as the consideration for it is unlawful.

2) A promises B to drop a prosecution which he has instituted against B for robbery and B promises to restore the value of things taken.  The agreement is void as its object is unlawful.

3 .Voidable contract (Section 2(I)

Voidable contract is something different and peculiar. One of the parties  to the contract alone with have an option to repudiate / challenge  / cancel the contract. If it is challenged,  it may be declared void.  If it is not changed it may be allowed  to constitute as valid .

Section 2(i) 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."

Example

A contract entered into out of coercion, undue influence , fraud, misrepresentation, mistake etc, it is said to be voidable . According to Section 19 of the Indian Contract Act 1872.

When consent to an agreement is caused by coercion, fraud or  misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused. A party to a contract, whose consent was caused by fraud or misrepresentation may, if he thinks fit insist that the contract shall be performed.  and that he shall be put in the position in which he would have been if the misrepresentation made had been true.

Therefore , in case of voidable contract, one party has an option to avoid the contract, while the other party has no such option to avoid the contract.

4) Unenforceable contract...

An Unenforceable contract is a contract, which is valid for all practical purposes until and unless its validity is challenged/  questioned. It cannot be enforced due to some Technical defect. It can be enforced in future after the technical defect is removed.

Example -

  When a contract remains unenforceable for want of registration, it becomes  enforceable in future after 

registration.

5) Illegal Contract -

An  illegal contract is one which is immoral or against law. An illegal contract is void  and also crime under section 120-(A) ( criminal conspiracy) of the Indian Penal Code . It is not only void but also an offence . However every void contract is not  illegal.

Example -

A and B enter into an agreement to commit an illegal act ( e.g to carry on some business or to undertake some work Forbidden by law)  or a legal act by illegal means ( for example... admission into Engineering/ medicine ignoring/ violating the rules/  merit) .