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Types or Kinds of Contracts. Contracts may be classified into different categories on the basis of enforceability , performance and formation.
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Types or Kinds of Contracts • Contracts may be classified into different categories on the basis of enforceability, performance and formation. • Kinds of contracts from the point of view of Enforceability: From the point of view of enforceability a contract may be valid, voidable, void, unenforceable or illegal. • Valid contract: An agreement enforceable by law is a valid contract. An agreement becomes enforceable by law when all the essential elements of a valid contract are present. • Voidable contract: A contract which can be put to an end at the option of one party to the contract is a voidable contract. If the consent of a party to the contract is not free, then such a party may avoid or put an end to the contract by filing a lawsuit in the court. The contract is voidable at the option of the party whose consent is not free. Until it is avoided or rescinded by the party entitled to do so by exercising his option to that effect, it is a valid contract.
Types of Contracts contd.. • Void Contract: A void contract is not a contract at all. It is an agreement which is not recognized or enforceable by law. A contract may be void from the very beginning (ab initio), e.g. an illegal agreement; or it may subsequently become void due to some reasons, e.g. destruction of the subject matter of the contract. Section 13 of the Contract Act, 2000 provides a list of various circumstances where a contract will be void. • Unenforceable Contract: An unenforceable contract is one which is valid in itself, but is not capable of being enforced in a court of law because of some technical defects such as absence of writing, registration etc., or time barred by the law of limitation. • Illegal or Unlawful Contract: An illegal contract is not a contract at all. It is void from the very beginning. An illegal contract is an agreement concluded to do something that is against or contrary to law. All illegal agreements are void, but all void contracts are not illegal. For example, an agreement with a minor is void as against him/her but not illegal. Similarly, an agreement the terms of which are uncertain is void but such an agreement is not illegal.
Types of Contracts contd.. • Kinds of contracts from the point of view of formation or creation: From the point of view of formation or creation, a contract may be express or implied. • Express Contract: Where both the offer and acceptance constituting an agreement enforceable at law are made in words spoken or written, it is an express contract. For example, A offers B that he offers to sell his motorcycle for Rs. 30,000 and B in reply informs A that he accepts the offer, there is an express contract. • Implied Contract: A contract that comes into existence on account of act or conduct of the parties is an implied contract. An implied contract is not made in words. In a continuous course of dealing, the acts or conduct of the parties may give rise to implied contracts. For example, A goes and stands in front of B, a shoe polisher, and B starts polishing the shoes of A without being asked by A, but stands there. If A does allow B to do so, then the law implies that A agrees to pay for the services of B, and there comes into existence an implied contract between them. (see the English case Upton Rural District Council v. Powell).
Types of Contracts contd.. • Constructive or quasi contract (indirect contract): Such a contract does not arise by virtue of any agreement, express or implied between the parties but the law infers or recognizes a contract under certain special circumstances. For example, obligation of a finder of lost goods to return them to the true owner or liability of a person to whom money is paid under mistake to repay it back cannot be said to arise out of a consent, but these are very much conversed under quasi contracts. Section 11 of the Contract Act, 2000 lists five different circumstances where law will assume that an indirect or quasi contract exists. • Kinds of contracts from the point of view of their performance or execution: From the point of view of performance or execution, a contract may be unilateral, bilateral, executed, executory or contingent. • Unilateral contract: A unilateral contract is an one-sided contract where only one party has to perform his/her obligation. Generally after the formation of a unilateral contract, only one party remains liable to perform his/her obligation because the other party has already performed his/her obligation by doing some act.
Types of Contracts contd.. • Bilateral contract: A bilateral contract is a two-sided contract in which both the parties have to perform their respective obligations. • Executed contract: When a contract has been completed performed, it is called an executed contract. For example, in case of cash sales, the contract is executed at the time of its formation. • Executory contract: Executory contract is that where under the terms of a contract something remains to be done by the parties. • Contingent contract: If the performance of a contract is subject to certain condition or the happening or non-happening of a future event, then such contract is called a contingent contract. No obligation arises in such contracts if the condition is not met or the future event to which the contract is subjected does not happen.
Types of Contracts contd.. • Other kinds of contracts: There are other types of contracts as well, such as simple and special contracts and general and standard form contracts. • Simple and special contracts: Simple contract may be verbal, written or implied by conduct; but the special contract must fulfill the formal requirements prescribed by law, such as a deed for sale of immovable property. • General and standard form contracts: In general contracts, parties bargain the terms and conditions of the contract and reach a mutual agreement. However, in a standard form contract, general no mutual bargain takes place. When a large number of contracts have got to be entered into by a person, from a practical point of view and for the sake of convenience, a standard form for the numerous contracts may be used. An insurance policy, shares or a aeroplane ticket are few examples of such standard form contracts. In view of the unequal bargaining power of the two parties, the courts and the legislature have evolved certain rules to protect the interest of the weaker party.The standard form contracts are also called adhesion contracts.