Kinds of

Contract
Dr. Ajay Sharma
 Kinds of Contract

(3) On the basis of

(1) On the basis of (2) On the basis of
Execution/Performanc
Enforceability Mode of Creation
e

(b) (a) (b)

(a) Valid Express (a) (b)
Voidable Implied
Contract Contract Executed Executory
Contract Contract
Contract Contract

(d) (c) (c)Partly executed

(c) Void and partly
Unenforceable Quasi/Constructive
Contract Contract executory
contract
 (1) On the basis of Enforceability

(a)Valid Contract

Section 2(h) defines contract as an agreement enforceable by law.

Thus, where the parties can go to the court for the enforcement of their rights
under the contract, then the contract is a valid contract.

e.g. A makes an agreement to sell his car to B for Rs.2 lac. This is a valid
contract.
What agreements are contract (section10)

All agreements are contracts if they are made by the free consent of
the parties competent to contract, for a lawful consideration and with a
lawful object and are not hereby expressly declared to be void.
 (b) Voidable Contract

It is 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. (section
2(i).

It means that a voidable contract is one which can be avoided by one or more of
the parties to the contract at his option but not at the option of other or
others. If such party does not avoid the contract, then the contract is valid.

e.g. A threatens B that he will kill his son C if he don’t agree to sell his property
to A at a fixed price. Here the consent of B has been obtained by coercion.
Therefore, the contract is voidable at his option.
 (c) Void contract

A contract which ceases to be enforceable by law becomes void when it

ceases to be enforceable by law u/s. 2(j).

It means that contract is valid in the beginning when the parties

entered into such contract but later on it ceases to be enforceable by law on
happening of some act and it becomes void.

e.g. A enters into a contract to sell some imported good to B. At that time of
the formation of contract, import of those goods was permitted under law.
Subsequently, Indian Govt. has passed a law whereby import of those goods
was banned. Here the contract is valid at the beginning but subsequently
after passing the law it becomes void.
 (d) Unenforceable contract:

It is a contract which is usually valid but can’t be enforced because of

some technical defect. This may be because of non-registration of
agreement, non-payment of stamp duty, where agreement is
mandatorily to be in writing. etc.
 (2) On the basis of Mode of
Creation

(a)Express Contract (sec.9)

Where both the offer and acceptance constituting an agreement are made
in words spoken (oral) or written, it is an express contract.

e.g. A writes a letter to B, offering to sell his house to him for 28 lakhs. B,
by a written letter, gives his acceptance of the proposal. Such a
contract is known as an express contract.
 (b) Implied
Contract (sec.9)

Where the offer and acceptance are made otherwise than in words, i.e.
by act or conduct of the parties, it is an implied contract.

e.g. A enters the restaurant of B and eats food. This is implied contract
under which B has to serve food and A has to make the payment for
the same.
 (c) Quasi/Constructive contract (sec.68-72)

Such a contract does not arise by virtue of any agreement between the
parties, but the law infers or recognizes a contract under certain
circumstances. They are called quasi contacts. In Indian Contract Act,
they are named as – certain relations resembling those created by
contract (s. 68-72).

Example: (a) Liability of finder of goods (u/s71).

(b) Liability of a person to whom money is paid under mistake to repay it

back to its owner (u/s72).
 (3) On the basis of Execution/Performance

(a)Executed Contract

A contract is said to be executed when both the parties to the contract

have completely performed their share of obligation and nothing
remains to be done by either party under the contract.

e.g. i. A book seller selling a book on cash payment.

ii. A makes a proposal to sell his car to B for 2 lac and B accepts the
proposal. Accordingly, B pays 2 lac to A and A gives his car to B. here
both parties have performed their obligations and thus this is an
executed contract.
 (b) Executory Contract

A contract is said to be executory when either both the parties to a

contract have still to perform their share of obligation in toto
(complete) or there remains something to be done under the
contract on both sides.

e.g. A and B agrees that A will sell his car to B for 2 lac in the next month. This is
executory contract as both parties have still to perform their obligation
under the contract.

ii. A agrees to give tuition to B, a pre-medical student, from the first day of the
next month and B promises to pay A Rs. 1000 per month.
 (c) Partly executed and Partly executory:-

A contract may sometimes be partly executed and partly executory. It

happens where only one of the parties has performed his obligation.

e.g. ‘A’ agrees to sell a book to ‘B’ for Rs. 500 but B has to make
payment after 10 days. A delivered the book to ‘B’ but ‘B’ has not paid
the price. The contract is executed as to ‘A’ and executory as to ‘B’.
 On the basis of execution, a contract
can also be grouped as:

(a) Unilateral contract

An unilateral contract is one in which only one party has to perform the
obligation as the other party had fulfilled his part of obligation at the time of
contract itself or before it comes into existence. In other words, one party has
already performed his duty and other party’s duty is outstanding. These are
the one-sided agreements.

e.g. ‘A’ person purchased the bus ticket from counter and waiting for the bus.
 (b) Bilateral contract
A bilateral contract is one in which the obligation on the part of both the parties
are outstanding at the time of formation of contract.

E.g. (i) Buying a house for a certain sum of money

(ii) Purchasing an item at a grocery store.
 Standard contracts
(Boilerplate/adhesion contract

Sometimes corporations or big organizations have to enter into

contracts with multiple people. It is difficult for such corporations to
make separate proposal for every person with whom they want to
make a contract. So, such organizations prepare a printed proposal
which is given to other party and once that party gives his assent
(sign) the proposal, it results into contract. This is called standard
form of contract. The acceptor here has only one option – “to take
it or to leave it”.
 Examples:
Insurance contracts, contracts with railway or
government agencies or other private organizations.
 Difference between void agreements and void
contracts

Void
Agreements Void Contracts
(a) This is defined u/s. 2(j) as “a contract which
(a) This is defined under s. 2(g).
ceases to be enforceable by law becomes void
“an agreement not enforceable by
when it ceases to be enforceable by law”. They
law is said to be void”. They are
are enforceable till the contract is valid.
never enforceable.
(b) Void contracts are valid contract in the
(b) Void agreements are void-ab-
beginning. They are not void-ab-initio.
initio. Thus, they are void (dead)
from the beginning.
c) The legal rights and duties may be there till the
contract is valid. However, they ceases when the
(c) No legal rights and duties exists
contract becomes void.
b/w the parties.
(d) Examples: An agreement with a minor
(d) Example: ‘A’ agrees to buy certain goods from ‘B’ at a certain
is void. price on a specific day in next month. However, the goods
An agreement to commit crime is void. destroyed due to fire before date of delivery. Thus, there are no
chances for the performance of contract, and it becomes void.