Do you want to know the types of contract? Congratulation here you can! Here in this post we are going to know all types of contract, basis of their classification, mode of creations, legal application of these different kinds of contract.
A contract is an agreement entered into between two or more person/parties/organisation subject to certain term and condition, for a lawful consideration, to do or perform certain things.
Enforceability, extent of execution and mode of creation of contract are the main basis in which we can divide the types of contract. Enforceability of contract is defined in Indian contract act 1872.
Here we divide contract on the basis of enforceability, mode of creation, extent of execution:-
Types of contact on the basis of enforceability
A contract is said to be valid if it can be enforceable in the Court of Law. Section 2(h) of the Act define “an agreement enforceable by law is a contract’’ In a valid contract both parties of the contract legally binding himself for perform the consideration of his own part.
valid contract is most important contract from all the types of contract
Therefore to constitute a contract there must be-
An agreement + enforceability by law
Here in this regard we have to look into section 10 of the India Contract Act, 1872. Section 10 says that “a contract is said to be valid, if two or more competent parties agreeing freely consented to enter into an agreement, for a lawful consideration and lawful object, and are not hereby expressly declared to be void.
Example:- Ramesh, owner of a car express and propose his intention to sell his car to Mahesh for a consideration of 1 lakh, Suresh accept his (Ramesh) proposal to buy Ramesh car for an agreed amount of 1 lakh. This is a valid contract.
A voidable contract is legally enforceable at the option of one party only. Voidable contract is something different and peculiar. Aggrieved party to the contract have an option to repudiate/ challenge/ cancel the contract.
Section 2(i) of the Indian Contract Act,1872 defines “ an agreement which is enforceable at the option of the one or more parties thereto but not at the option of other or others, the contract is said to be voidable.
Example:- A contracts involve coercion, undue influence, fraud, misrepresentation, mistake etc., is said to be voidable.
Agreement void, if considerations and abject unlawful in part- if any part of a single consideration for one or more object, or any one or any part of anyone of several considerations for a single object, is unlawful, the agreement is void. (Section 24 of the Indian Contract Act, 1872)
In general sense, a contract which is ceases to be enforceable by law become void when it is ceases to enforceable by law.
Section 24-30 deal with void contract. These are the agreement which are declared to be void by the Act
- Agreement of which consideration and object unlawful in part (Section 24)
- Agreement without consideration (Section 25)
- Agreement in restrain of marriage (Section 26)
- Agreement in restrain of trade (Section 27)
- Agreement in restrain of legal proceedings (Section 28)
- Agreement void for uncertainty (Section 29)
- Agreement by way of wager (Section 30)
Example:- 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 Void as initio’’ Void as initio is laten word which means void form the begging
unenforceable contract is a valid contract and having good substance but it cannot be enforced by the court of law because of sum fundamental fault/ absence of written document/ time barred by the law of limitation or registration. Unenforceable is usually used in discrepancy to voidable or void (void ab initio)
Example:- contract for prostitution under English law. Prostitution under English law is not a crime but both soliciting a prostitute and living off the earning of a prostitute is a crime.
An illegal contract is one which is immoral or against the law. An illegal contract is void and also a crime under section 120(a) of the Indian Penal Code. It is not only void but this is an offence also. However, every void contract is not illegal.
This types of contract is punishable offence
Example:- contract for killing any person, contract to harm any property of any person, contract that is immoral or opposed to public policy.
Types of contact on the basis of mode of creation
A contract is said to be expressed contract if the term and conditions of the contract are expressed openly by word of written. Here in this regard section 9 of the Indian Contract Act,1872 state that if the proposal or acceptance is made by word, the premises is said to be expressed.
Example:- contract in the form of written document, contract in the form of expressed in word.
Implied contract is contract which come into existence by the implication of law. Implied contract is a contract which is other than in written or oral form. A contract implied in fact and implied in law both are called implied contract.
Here section 9 of the Indian Contract act deal with expressed and implied contract. This section says that in so for as such proposal or acceptance is made in otherwise than in word written of expressed, the promise is said to be implied.
Example 1:- If a bus operator running bus on road and offer you to take his service, if you accept his offer and take the service of bus this is called implied contract.
Example 2:- A coolie at railway platform pick up the luggage of Manoj to be carried out of the railway station, without being asked by the Mohan, and Mohan allow to do that, this is an implied contract.
Indian Contact Act does not define the term quasi contract but Chapter v of the act deal with quasi contract in the form of creation resemble those created by law.
Quasi contract is not a contract but its looks like a contract. A quasi contract does not come into existence by any agreement (either in righting or oral or in any other form) infect its come into existence due to any special law.
The law create and enforce legal right and obligation in relation to quasi contract. In this contract no parties to contact in intended to create legal obligation but due to Court of law they are bound to perform his part of obligation.
Four type of contact are treated as quasi contract-
- Claim for necessary supplied to person incapable of contracting, or on his account.(Section 68)
- Reimbursement of person paying money due by another, in payment of which he is interested.(Section 69)
- Obligation of person enjoying benefit of non-gratuitous act.(Section 70)
- Responsibility of finder of goods (Section71)
- Liability of person to whom money is paid, or thing delivered, by mistake or under coercion (Section72)
On the basis of extent of execution
When both the parties to the contract already performed his part of obligation the contract is said to be executed contract. In executed contract both parties to the contract discharge his part of liability. Sale purchase of goods and service on cash basis are mostly executed contract.
Example:- sale of grocery my the grocer on cash basis.
Executory contact:- A contract is said to be executor, when one or both the party to the contract are not performed his part of consideration, which is need to be performed.
This obligation/consideration may be performed in future. When both party to the contract discharge his part of obligation executor contract turn into executed contract.
Example:- sale of grocery my the grocer on credit basis.
Unilateral contract is one sided contract. In this contract one party to the contract already performed his part of obligation but the opposite party still need to discharge his part of obligation. In unilateral contract promisee is not bound to perform because he gave no promise from his side.
Example:- Ramesh give an advertisement in the newspaper about his missing son, and offer to give 50000 reward money to whom, who find his missing son and bring him home. Mohan find his missing son and bring him back to home. This is an unilateral contract, where Mohan has performed his obligation and Ramesh still need to discharge his obligation in form of pay 50000 to Mohan.
Bilateral contract is an enforceable contract. In a bilateral contract obligation is outstanding from the both side. This contract is based on reciprocal promise. This is called reciprocal promise because both parties are promisor and acceptor in itself.
Example:- John offer to see his land to Jenifer for an amount of 5 lakhs, Jenifer accept the proposal and make payment in part to John and promise to pay rest of the money after 15 days. John transfers the position of the land and promise to execute the sale deed in receipt of rest money. This is a bilateral contract.
Here is some other types of contract-
- Fixed price contract
- Time and material contract
- Lump sum contract
- Cost reimbursement contract
- Tacit contract