Law of Contract: Types of Contract & Cases under The Indian Contract Act, 1872

types of contract indian contract act 1872

TYPES OF CONTRACTS:Types of Contract & Cases under The Indian Contract Act, 1872

 

Types of contracts in contract are:

  • On the basis of Formation,
  • On the basis of Nature of Consideration,
  • On the basis of Execution and
  • On the basis of Validity.

 

 

I.TYPES OF CONTRACTS ON THE BASIS OF FORMATION

 

Express Contracts:

The Contracts where there is conversation or expression are called Express Contracts.

For example: X has offered to sell his house and Y has given acceptance. It is Express Contract.

 

Implied Contract: 

The Contracts where there is no given expression are called implied contracts.

For example: Sitting in a Train can be taken as example to implied contract between passenger and owner of the bus.

Upton Rural District Council v. Powell

A fire broke out in the defendant’s farm. He believed that he was entitled to the free services of Upton Fire Brigade and, therefore, summoned it. The Brigade put out the fire. It then turned out that the defendant’s farm was not within free service zone of the Upton, and fire brigade claimed compensation for the services. The court held the services were rendered on an implied promise to pay for them.

 

Quasi Contract:

In Quasi Contracts there will be no offer and acceptance so, there will be no Contractual relations between the partners. It is created by the Virtue of law and is called Quasi Contract. Sections 68 to 72 of the Indian Contract Act, 1972 read about the situations where court can create Quasi Contract.

  • 68: When necessaries are supplied
  • 69: When expenses of one person are paid by another person.
  • 70: When one party is benefited by the activity of another party.
  • 71: In case of finder of lost tools.
  • 72: When payment is made by mistake or goods are delivered by mistake.

 

Chowal v. Cooper.

In this case X’s husband becomes no more. She is very poor and therefore not capable of meeting even cost of cremation. Y, one of her relatives, understands her position and spends his own money for cremation. It is done so without X’s request. Afterwards Y claims his amount from X and X refuses to pay. Here court applies Sec. 68 and creates a Quasi Contract between them.

 

 

II.TYPES OF CONTRACTS ON THE BASIS OF NATURE OF CONSIDERATION

 

Bilateral Contracts:

It is called Bilateral Contract, if considerations are to be moved in both directions after the contract.

Example: A Contract has got formed between P and Q on 11th Jan, According to which P has to deliver goods to Q on 13th Jan and Q has to pay amount on 13th Jan. It is bilateral contract.

 

Unilateral Contract:

If considerations move in one direction only after the Contract, it is called Unilateral Contract.

 

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

 

 

III. TYPES OF CONTRACTS ON THE BASIS OF EXECUTION

 

On this basis Contracts can be classified into two groups. namely,

  • Executed and
  • Executory Contracts.

Executed Contracts:

If performance has been completed, it is called executed contract.

 

Executory Contracts:

In case where contractual obligations are not to be performed now but in future, it is called executor contract.

 

 

  1. 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:

Valid Contracts are the Contracts which are enforceable in a court of law. Such Contract should have:

  • 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 A and B and let us assume that their contract has all those above said features. It is Valid Contract.

 

Void:

Valid Contracts are the Contracts which are enforceable in a court of law. If any Contract is lacks 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 P and Q where Q is a minor who has no capacity to contract. It is Void Contract.

 

Mohiri  Bibi v. Dharmadas  Ghase

The court in this case has held that a contract with a minor is void ab intio which means void from the beginning as the minor is incompetent to enter into a contract. Hence, contract by minors are void from the very beginning.

 

Voidable:

Voidable Contracts are those contracts which are deficient in regard free consent only. In other words, it is a Contract which is made under certain pressure either physical or mental. At the option of suffering party, it may become either Valid or Void in future. A consent obtained is not free, if obtained by:

  • Coercion
  • Undue influence
  • Mistake
  • Misrepresentation

 

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.

 

Raniannapurna v. Swaminathan

A poor Hindu widow who needed the money to establish her right to maintenance, was persuaded by a money lender to agree to pay 100% rate of interest on money lent by him. It was a clear case of undue influence and the contract was held voidable by the court.

 

Voidable contracts can b avoided at instance of the suffering party but if not, then it becomes a valid contract.

 

Illegal:

If the contract has been made with an unlawful object it is called Illegal Contract. These contracts are void.

 

Example: There is a contract between P and Q according to which S has to murder S for a consideration of Rs. 15000/- from P. It is illegal contract.

 

Unenforceable:

A contract which has not properly fulfilled the required legal formalities is called unenforceable contract. That means unenforceable contract suffers from some technical defect which may be insufficient stamp etc. and hence, after rectification of that technical defect, it becomes enforceable or valid contract.

 

Example: X and Y have drafted their agreement on Rs. 100/- stamp where it is to be written actually on Rs. 1000/- stamp. It is unenforceable contract.

 

 

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