Classification of Contracts

CONTRACT OR CLASSIFICATION OF CONTRACTS: validity, formation,

KINDS OF enforceability or
their
Contracts may be classified on the basis of
pertormance or excution.

Classification on the basis of Validity: enforceable by lavw and which satisfies all
for
1. Valid contract: Avalid contract is an agreement
Contract Act. Eg. A offers to sell his car to B
conditionsof section l0 of the ndian
the
and B agrees to buy the car for the same price.
Rs. 1.50,000
which is enforceable by law at the option of
agreement agreed to sell his
Voidable contract [Section 2)]: "an the other. Eg. A
but not at the option of
2.
of the parties there to, force.The contract is
Oe or ore
15.000. The consent of Awas obtained by use of element of
Motor Cycle to Bfor Rs. voidable when the essential
Generally, acontract becomes
\odable atthe option of A. becomes voidable under following two cases:
Contract
fre consent is not present. A consideration, but
person promises to do something for another person for a
1. When a
him from performing his promise, the contract becomes
the other person prevents 53).
voidable at the optionof the former (Section
perform an obligation within a specified time but fails to
2. When aperson pronmises to becomes voidable at the option of
perform the same within the fixed time, the contract
the promisee (Section 55).
Legal effects of Voidable Contract:
entitledtodo
Avodable contract continues to be valid and binding tillit is avoided by the party SO. Ifhe
sO. It may be notedthat the party entitledto avoid the contract may or may not do
so desires, he may elect to be bound by it.
to bevoid
3. Void agreement: Section 2(g) *an agreement not enforceable by law is said
wagering
agreement". Exanmples of void agreements are: An agreement with a minor; Opposed
A to
agreement: An agreement in restraint of legal proceedings; An agreement marriage.
public policy: An agreement in restraint of trade; An agreement in restraint of
LEGAL EFFECTS OF VOID AGREEMENT:
valid
Avoid agreement is void ab initio, i.e. a
all
void right from the very beginning. It is not: at
contract it does no ereate any legal obligation.
4. Void contract: Section 2() a contract which ceases to be enforceable by law becomes
void, when it ceases to be enforceable". (i.e.. which is valid originally but becomes void
subsequently). Eg. On Ist December, A agreed to sell his car to B for Rs. 1,25,000. It was
agreed that the car was to be delivered on 15th December after making full payment. But on
14th December, the car was destroyed in an accident. In this case, the contract between A
and B becomes void on the destruction of the car.
A contract becomes void under the following circumstances:
1. By impossibility (Section 56)
2. By subsequent illegality (Section 56)
3. By impossibility of contingent event (Section 32)
Legal effect of oid Contract:
A void contrcat is perfectly valid and binding on the contacting parties until it becomes void.
5. Illegal or unlawful agreement: According to Section 23 illegal or unlawful agreement is
defined as one whose object is forbidden by law, immoral and opposed to public policy.
Examples of illegal agreements are: An agreement to commit murder; assault or robbery;
An agreement to make a gift in consideration of illegal intercourse etc.

On the basis of their formation or mode of creation:

1. Express contract: Section 9 defines express contract as one where the proposal or acceptance
of any promise is made in words, spoken or written. An express promise results in express
contract. Eg. A wrote a letter to B that he offers to sell his car for Rs. 90,000 and B replies
to A over phone that he accepts the offer. It is an express contract.
2. Implied contract: Section 9 defines implied contract as one, which is inferred from the acts
Hotel, and took
or conduct of the parties or course of dealings between them. Eg. A went to a
cup of coffee.
a cup of coffee. In this case, there is an implied contract that he willpay for the
It is an obligation
3. Quasi contract or Constructive contract: It is not at all a contract.
refer chapter 13
which the law creates in the absence of any agreement. (For more details
of this book)

On the basis of their performance or execution:

the contract
1. Executed contract: An executed contract is one in which both the parties to
toB for Rs. 1,25,000.
have performed their respective obligations. Eg. Aagreedto sell his car
executed contract.
B paid the price and A delivered the car. It is an
the contract
2. Executory contract: An executory contract is one in which both the parties to
date
have not yet fulfilled their obligations. Eg. A promises to sell goods to B on a specified
4
 and B promises to pay the price to Aon a specified date. Here, the obligations of both th
parties remain outstanding. It is an example of executory contract.
3.
Unilateral contract: Acontract in which only one party has yet to discharge its obligation
Eg. The promise to give a reward to a person who finds out a lost thing forms a unilatera
contract when thing is actually found out.
4.
Bilateral contract: Acontract in which boththeparties have yet to perform their obligation
Eg.A promised to paint a picture for B, and B promised to pay Rs. 1000 to A. It is a bilatera
Contract as there is exchange of promises, and obligations of both the parties are outstanding.
DIFFERENCES BETWEEN VOID AGREEMENT AND VOID CONTRACT
Points of Difference Void Agreement Void Contract
1.Void abinitio It is Void ab initio It is not void ab initio
2.Validity It is never results in a valid It was a valid Contract at
contractat all the time of formation.
Void Agreement V/s Voidable Contract:
Points of difference Void Agreement Voidable Contract
1.Void ab initio It is Void ab initio i.e. Void It is not void ab initio. It becomes
from the very beginning. It has void only when the aggrieved
no legal effect party(i.e. whose consent is
obtained by misrepresentation,
fraud etc) chooses to avoid it.
2.Existence of In this case no contract comes A valid contract comes into
contract into existence existence and remains valid till it
is avoided by the party who is
entitled to do so.
3.Title to the goods A third party cannot acquire A third party acquires a valid title
any title to the goods obtained to the goods obtained under a
under a void agreement as it voidable contract. However, the
has no legal effect. goods must have been obtained
before the contract is avoided.
4.Compensation If one party fails to perform If aparty rightfully avoids to the
his obligation, the other party contracts, he can claim
is not entitled to any
compensation from the other party
compensation from him. for loss suffered by him.
QUESTIONS
Explain the different kinds of contract.
2. Distinguish between void agreement and voidable contract.
48