Types of Contracts

In connection with contracts, there are four types of classifications. Types of contracts in
contract law are as follows;
1. On the basis of Formation,
2. On the basis of Nature of Consideration,
3. On the basis of Execution and
4. On the basis of Validity.

Types of Contracts on the basis of Formation

On this base Contracts can be classified into three groups, namely Express, Implied,
Quasi Contracts.

Express Contracts: The Contracts where there is expression or conversation are called
Express Contracts. For example: A has offered to sell his house and B has given
acceptance. It is Express Contract.

Implied Contract: The Contracts where there is no expression are called implied
contracts. Sitting in a Bus can be taken as example to implied contract between
passenger and owner of the bus.

Quasi Contract: In case of Quasi Contract there will be no offer and acceptance so,
Actually there will be no Contractual relations between the partners. Such a Contract
which is created by Virtue of law is called Quasi Contract. Sections 68 to 72 of Contract
Act read about the situations where court can create Quasi Contract.
 Sec. 68: When necessaries are supplied
 Sec. 69: When expenses of one person are paid by another person.
 Sec. 70: When one party is benefited by the activity of another party.
 Sec. 71: In case of finder of lost tools.
 Sec. 72: When payment is made by mistake or goods are delivered by mistake.

Example: A case on this occasion is Chowal Vs Cooper. In this case A`s husband
becomes no more. She is very poor and therefore not capable of meeting even cost of
cremation. B, one of her relatives, understand`s her position and spends his own money
for cremation. It is done so without A`s request. Afterwards B claims his amount from A
where A refuses to pay. Here court applies Sec. 68 and creates a Quasi Contract between
them.

Types of Contracts on the basis of Nature of Consideration

On this base, Contracts are of two types. Namely Bilateral Contracts and Unilateral
Contracts.

Bilateral Contracts: If considerations in both directions are to be moved after the

contract, it is called Bilateral Contract.

Example: A Contract has got formed between X and Y on 1st Jan, According to which X
has to deliver goods to Y on 3rd Jan and Y has to pay amount on 3rd Jan. It is bilateral
contract.
Unilateral Contract: If considerations is to be moved in one direction only after the
Contract, it is called Unilateral Contract.

Example: A has lost his purse and B is its finder. There after B searches for A and hands
it over to A. Then A offers to pay Rs. 1000/- to B to which B gives his acceptance. Here,
after the Contract consideration moves from A to B only. It is Unilateral Contract.

Types of Contracts on the basis of Execution

On this base Contracts can be classified into two groups. namely, Executed and
Executory Contracts. If performance is completed, it is called executed contract. In case
where contractual obligations are to be performed in future, it is called executor
contract.

Types of Contracts On the basis of Validity

On this base Contracts can be classified into 5 groups. namely Valid, Void, Voidable,
Illegal and Unenforceable Contracts.

Valid: The Contracts which are enforceable in a court of law are called Valid Contracts.
To attain Validity the Contract should have certain features like consensus ad idem,
Certainty, free consent, two directional consideration, fulfillment of legal formalities,
legal obligations, lawful object, capacity of parties, possibility of performance, etc.

Example: there is a Contract between X and Y and let us assume that their contract has
all those above said features. It is Valid Contract.

Void: A Contract which is not enforceable in a court of law is called Void Contract. If a
Contract is deficient in any one or more of the above features (Except free consent and
legal formalities). It is called Void Contract.

Example: there is a Contract between X and Y where Y is a minor who has no capacity to
contract. It is Void Contract.

Voidable: A Contract which is deficient in only free consent, is called Voidable

Contract. That means it is a Contract which is made under certain pressure either
physical or mental. At the option of suffering party, a voidable contract may become
either Valid or Void in future. For example: there is a Contract between A and B where B
has forcibly made A involved in the Contract. It is voidable at the option of A.

Illegal: If the contract has unlawful object it is called Illegal Contract.

Example: There is a contract between X and Z according to which Z has to murder Y for
a consideration of Rs. 10000/- from X. It is illegal contract.

Unenforceable: A contract which has not properly fulfilled legal formalities is called
unenforceable contract. That means unenforceable contract suffers from some technical
defect like insufficient stamp etc. After rectification of that technical defect, it becomes
enforceable or valid contract.

Example: A and B have drafted their agreement on Rs. 10/- stamp where it is to be
written actually on Rs. 100/- stamp. It is unenforceable contract.
When an agreement is enforceable at law, it becomes a contract. Based on
validity, there are several types of contract, i.e. valid contract, void contract,
illegal contract, etc. Void contract and voiadable contract are quite commonly
miscontrued, but they are different. Void Contract, implies a contract which
lacks enforceability by law, whereas Voidable Contract, alludes to a contract
wherein one party has the right to enforce or rescind the contract, i.e. the party
has to right to put the contract to end.

Before entering into a contract, the parties must be aware of the types of
contract, which may be helpful in understanding their rights and duties. So,
take a read of this article, in which we have provided the fundamental
differences between void contract and voidable contract.

Definition of Void Contract

A void contract is a contract which is not enforceable in the court of law. At the
time of formation of the contract, the contract is valid as it fulfills all the
necessary conditions required to constitute a valid contract, i.e. free consent,
capacity, consideration, a lawful object, etc. But due to a subsequent change in
any law or impossibility of an act, which are beyond the imagination and
control of the parties to the contract, the contract cannot be performed, and
hence, it becomes void. Further, no party cannot sue the other party for the
non-performance of the contract.

The contract becomes void due to the change in any law or any government
policy for the time being in force in India. Along with that, the contracts which
are opposed to public policy also ceases its enforceability. Contracts with
incompetent persons are also declared void like minor, persons of unsound
mind, alien enemy or convict, etc.

Definition of Voidable Contract

Voidable Contract is the contract which can be enforceable only at the option
of one of the two parties to the contract. In this type of contract, one party is
legally authorized to make a decision to perform or not to perform his part.
The aggrieved party is independent to choose the action. The right may arise
because the consent of the concerned party is influenced by coercion, undue
influence, fraud or misrepresentation, etc.

The contract becomes valid until the aggrieved party does not cancel it.
Moreover, the party aggrieved party has the right to claim damages from the
other party.
Key Differences Between Void Contract and Voidable Contract

The major differences between void contract and voidable contract are as
under:

1. A contract which lacks enforceability is Void Contract. A contract which

lacks the free will of one of the parties to the contract is known as
Voidable Contract.
2. Void Contract is defined in section 2 (j) while Voidable Contract is
defined in Section 2 (i) of the Indian Contract Act, 1872.
3. A void contract was valid at the time when it is created, but later on, it
becomes invalid. Conversely, the voidable contract is valid until the
aggrieved party does not revoke it within stipulated time.
4. When it is impossible, for an act to be performed by the parties, it
becomes void, as it ceases its enforceability. When the consent of the
parties to the contract is not free, the contract becomes voidable at the
option of the party whose consent is not free.
5. In void contract, no party can claim any damages for the non-
performance of the contract. On the other hand, the aggrieved party can
claim damages for any loss sustained.

Examples

 A promises B to sell his horse after one month to B for Rs. 50,000.
Before the completion of one month, the horse died. Now, the contract
becomes void as the contract cannot be performed, i.e. the object on
which the parties agreed is no more, so there is an impossibility of
performance of the contract. This type of Contract is known as Void
Contract.
 X says to Y, that he should sell his new bungalow to him at a nominal
price otherwise, he will damage his property and Y enters into a contract
due to fear. In this situation, the contract voidable as the consent of Y is
not free, so he has the right to avoid the performance of his part. As well
as he can claim for any damages caused to him.