The contract can be classified into the following four categories:
1- According to enforceability:
According to enforceability, a contract can be divided in to the following types,
a- Valid contract:
In a valid contract, all parties are legally responsible for the performance of the contract. If one of the parties breaches the contract, the other party can enforce it through the court of law.
Example:
S agrees to sell his car to T. if it fulfills all the essentials of a contract, it is a valid contract. If S fails to deliver the car, T can sue him and if T fails to pay, S can sue him.
b- Void contract:
The word void means not binding in law. Section 2(i) defines “A contract which ceases to be enforceable by law becomes void. When it ceases to be enforceable.” It means that a void contract is not void from the beginning. It is valid contract when it is made but subsequently it becomes void due to certain reasons.
Obligation of parties:
In void contract both the parties are not responsible to fulfill the contract act. Under this contract the party who has received any benefit is bound to return it to the other party.
A contract becomes void under the following circumstances:
i- Impossibility of performance:
A contract becomes void due to impossibility of performance. A contract becomes void before when it becomes impossible to be performed b any party due to any reason. (Sec.56)
Example:
A agrees to sell his house to R after four days. The house is burnt or destroyed in a bomb blast next day. The contract becomes void.
ii- Subsequent illegality:
A contract becomes void my subsequent illegality. A contract may become illegal before performance due to certain reasons. (Sec.56)
Example:
A agrees to sell 200 bags of rice to C. before delivery the government bans private trade in wheat. The contract becomes void.
iii- Rejection of a voidable contract:
A voidable contract becomes void when the party whose consent is not free rejects the contract. (Sec.19)
Example:
A forcibly buys the car of B for Rs 400,000. The contract is voidable at the option of B. B may accept or reject this contract. If B rejects the contract it becomes void.
iv- Impossibility of depending event:
The performance of a contingent contract depends upon the happening or not happening of a certain events. It becomes void when that event does not happen. (Sec.32)
Example:
A contract to give Rs 5 lac to N, if N gets admission in AWKUM. N fails to get admission. The contract becomes void.
c- Void agreement:
An agreement not enforceable by law is said to be void. The void agreement does not create legal obligation among the parties. An agreement which is void from the beginning is void ab-initio. In void agreement, there is absence of one or more than one essentials of valid contract except free consent. An agreement with minor and an agreement without consideration is void from the beginning. (Sec.2(g)).
Obligation of parties:
In void agreement, the party who has received any advantage is bound to restore it to the party from which he received it. Both the parties are not responsible for the performance of the agreement.
Example:
A promises to buy a dog from S for Rs 20,000. The dog was dead before the contract. The parties were unaware. The agreement is void.
d- Voidable contract:
“An agreement which is enforceable by law at the option of one or more of the parties thereto but not at the option of the other or others, is a voidable contract.” (Sec.2 (i)).
A contract is voidable when consent of one of the parties is not free. It is a valid contract until it is avoided by the party having the right to avoid it. If the party decides to confirm it, it remains valid. A contract becomes voidable under the following circumstances:
A- A contract becomes voidable when the consent of one or more of the parties to a contract is obtained by coercion, undue influence, misrepresentation or fraud. (Sec. 15-18).
Examples:
A compels D to sell his car at gunpoint. The contract is made by coercion and is voidable at option of D.
A deceives F by stating that his factory produces 200 kg of sugar on the daily basis and induces F to buy it. The contract is voidable at the option of F.
B- When one party promises to do some thing for the other party but the other party prevents him from performing his promise, the contract becomes voidable at his option. (Sec. 53).
Example:
A contract to paint the house of B. A is ready to paint but B prevents him form doing so. This contract is voidable at the option of A.
C- When a party to the contract promises to do a certain thing with in a specified time, but fails to do it, then the contract becomes voidable at the option of the promisee. If time is essence of the contract. (Sec.55).
Example:
A contract to paint the house of L with in two weeks. A, does not come with in the specified time. The contract is voidable at the option of L.
Obligation of parties:
The following are the obligations of the parties:
- It is a valid contract for both the parties if it is not rejected by the party having right to reject.
- The law gives an option to one of the parties to avoid it.
- The part entitled to cancel the contract is not bound to cancel. It he confirms it, the other party remains bound to perform.
- The aggrieved party can get damages from the other party.
- If one party has received some benefit, he must return it to the other.
Burden of proof:
The burden of proof lies on the plaintiff i.e the aggrieved party. It means that the party, who claims that his consent is unfree, has to prove in the court of law. If he fails to prove, the contract remains valid.
e-Unenforceable contract:
An unenforceable contract is that contract which can not be enforced in a court of law because of some technical defects such as absence of writing, registration, requisite stamp etc. when these defects are removed, the contract can be enforced.
Example:
A borrows Rs 3 billions from S and makes a pronote on an Rs 10 stamp paper. It is unenforceable because pronote is undervalued.
Obligation of parties:
In an unenforceable contract, the parties may perform the contact. But in case of breach of such contract, the aggrieved party Is not entitled to legal remedies.
f-Illegal agreement:
An agreement is illegal when its performance is forbidden by any law. Such an agreement can never become a contract. An agreement is illegal and void if it is forbidden by law or is of such a nature that if permitted, it would defeat the provisions of any law or is fraudulent or involves injury to the person or property of another or the court regards it as immoral or opposed to public policy. (Sec.23).
Example:
A, gives money to W, a smuggler, to buy smuggled goods. The agreement is illegal and the money can not be recovered.
Obligation of parties:
The parties to the agreement are not responsible to perform their promises. There is punishment for the parties according to law.
2. According to formation:
According to formation, a contract has the following three kinds,
a- Express contract:
Express contract is one which is expressed in words spoken or written. When such a contract is formed, there is no difficulty in understanding the rights and obligations of the parties. In express contract, the parties directly state the terms of the contract. (Sec.9).
Example:
A tells on telephone to M that he wants to sell his car and M informed A that he agrees to buy the car, it is an express contract.
b- Implied contract:
An implied contract is made otherwise than by words spoken or written. It arises from acts, conduct of parties, and course of dealings or circumstance. It arises when one person, with out being requested to do so, renders services under circumstances indication that e expects to be paid for them and the other person knowing such circumstances accepts the benefit of those services. (Sec.9).
Examples:
A went into a restaurant and had a cup of tea. It is an implied contract and A will pay for the cup of tea.
B, a shoe shiner starts polishing the shoes of P in his presence, and P allows him to do so. It is an implied contract.
c- Quasi contract:
In a quasi contract, the law imposes certain obligations under some special circumstances. It is based upon the principle of equity that a person shall not be allowed to get benefit at the cost of another. In fact, it is not a contract but creates relations similar to contract. It is also called constructive contract.
Examples:
A, finds lost goods of S. A is bound to return the goods to S.
A leaves his goods at the house of X by mistake, X treats them as his own and uses them. It is a quasi contract. X is bound to pay for the goods.
3. According to performance:
According to performance a contract is of the following two kinds,
a- Executed contract:
A contract Is said to be executed when both the parties have completely performed their obligation. It means that nothing remains to be done by either party under the contract.
Examples:
- A buys a book from L. a delivers the books and L pays the price. It is and executed contract.
- A agrees to paint a picture for V for Rs 4,000. When A paints the picture and V pays the price, the contract is said to be executed.
b- Executory contract:
In an executory contract some thing remains to be done. In other words a, contract is said to be Executory when both the parties to a contract have yet to perform their obligations.
Examples:
a- D sells his car to E for Rs 400,000 lac. E has not yet paid the price and D has not yet delivered the car. The contract between D and E is executory.
b- K agrees to teach L, in May and L agree and a promise to pay Rs 4,000 to K. it is an executory contract because the promises are yet to be performed.
4. according to parties:
According to parties a contract may be of the following two kinds,
a- Unilateral contract:
In a unilateral contact only one party makes a commitment. In other words, it is a contract where one party is bound but the other party chooses to be bound by it or part of it.
Examples:
A promise to pay Rs 100,000 to any one who finds his lost bag. J finds the bag and returns A. it is a unilateral contract which comes in to existence when the bag is found.
b- Bilateral contract:
It is a contract where both parties are bound by it, as soon as the contract is made. In other words it is a contract in which both the parties have yet to perform their obligations.
Example:
A promise to paint a picture for G and G promise to pay Rs 10,000 to A.