Types of contract under the Indian Contract Act, 1872

TYPES OF CONTRACT UNDER INDIAN CONTRACT ACT 1872

This article titled types of contracts based on creation, validity, execution, and liability.

ON THE BASIS OF THE CREATION

  • Expressed contract – A contract made by a word spoken or written. The first part of section 9 of the Indian contract act 1872 deals with promises which are expressly made. Contracts arising from expressly made promises are called express contracts.

According to Section 9 “Insofar as the proposal or acceptance of any promise is made in words, the promise is said to be express”. Thus contracts entered into between the parties by words, spoken or written, are known as express contracts.

Example: A says to B ‘will you purchase my bike for Rs.20,000?” B says to A “Yes”.

  •  Implied contract– The second part of Section 9 of the Act deals with implied contracts. It says “insofar as such proposal or acceptance is made otherwise than in words, the promise is said to be implied.” Thus contracts entered into between parties by their conduct are called implied contracts.

The terms of the agreement are not expressed in written or oral form but are inferred from their conduct.

Example: A stops a taxi by waving his hand and takes his seat. There is an implied contract that will pay the prescribed fare

  • Quasi-contract- Quasi-contract is the contract that is created neither by the word spoken nor written nor by the conduct of the parties but these are created by the law.

Example: If Mr. A leaves his goods at Mr. B’s shop by mistake, then it is for Mr. B to return the goods or to compensate the price. These contracts depend on the principle that nobody will be allowed to become rich at the expense of the other.

  • E contract- An e-contract is a contract made through the digital mode.

Example: Via Internet

ON THE BASIS OF VALIDITY

  •  Valid contract– An agreement enforceable by the law is a contract (Section 2(h)). To be enforceable it has to satisfy the requirements under Section 10 of the Indian Contract, 1872. They are:
  • There is some consideration for it.
  • The parties are competent to contract
  • Their consent is free.
  • Their object is lawful
  • Void contract-  A void agreement is not enforceable at the option of either party. Section 2(j) of the Act speaks about a valid contract that subsequently becomes void. “A contract which ceases to be enforceable by the law becomes void when it ceases to be enforceable”.
     When both parties to an agreement are:-

Under a mistake of facts [20]

Consideration or object of an agreement is unlawful [23]

Agreement made without consideration [25]

Agreement in restrain of marriage [26]

Restraint of trade [27]

Restrain legal proceeding [28].

Agreement by the wage of wager [30]

  • Voidable contract 2(i): An agreement that is enforceable by law at the option of one or more parties but not at the option of the other or others is a voidable contract.

Result of coercion, undue influence, fraud, and misrepresentation.

  • Unenforceable contract-  It is good in substance, but because of some technical defect, one or both parties cannot be sued on it. These defects may be the absence of writing, registration, time-barred by the law of limitation, etc.
  • Illegal contracts– Section 23 of the Act describes some condition’s when an agreement may be unlawful or illegal. A distinction has to be made between void contracts and illegal contacts. Agreements whose object or consideration is forbidden by law are called illegal contracts. In the case of void agreements, the law may merely say that if it is made, the courts will not enforce it. Thus all illegal agreements or contracts are void, but all void agreements are not illegal.

ON THE BASIS OF EXECUTION

  • Executed contracts-  In an executed contract both parties have performed their promises under a contract.

Example: A contracts to buy a car from B by paying cash, B instantly delivers his car.

  • Executory contract- In an Executory contract both parties are yet to perform their promises.

Example: A sells his car to B for Rs. 2 lakh. If A is still to deliver the car and B is yet to pay the price, it is an executory contract.

  • Partly executed and partly executory contract- In a partly executed and partly executory contract, one party has already performed his promise and the other party has yet to execute his promise.

Example: A sells his bike to B. Though A has delivered the bike, B has yet to pay the price. For A, it is an executed contract, whereas it is an executory contract on the part of B since the price has yet to be paid.

ON THE BASIS OF LIABILITY

  • Bilateral contract- A Bilateral contract is one where the obligation or promise is outstanding on the part of both parties. It is also known as a two-sided contract.

Example: A promises to sell his car to B for Rs. 1 lakh and agrees to deliver the car on the receipt of the payment by the end of the week. The contract is bilateral as both the parties have exchanged a promise to be performed within a stipulated time.

  • Unilateral contract- A unilateral contract is also known as a one-sided contract. It is a type of contract where only one party has to perform his promise.

Example: A promises to pay Rs. 1000 to anyone who finds his lost cellphone. B finds and returns it to A. From the time B found the cellphone, the contract came into existence. Now A has to perform his promise, i.e. the payment of Rs. 1,000.

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