Introduction
Hey there! 🌟 Have you ever found yourself scratching your head over legal terms, especially when it comes to contracts? Don’t worry; you’re not alone.
Today, let’s dive into the fascinating world of the Indian Contract Act, 1872, and explore the different types of contracts it covers. Trust me, it’s not as daunting as it sounds. It’s pretty interesting once you get the hang of it!
Contracts are agreements that are enforceable by law. They’re everywhere in our daily lives, from the lease agreement for your apartment to the terms and conditions you accept when installing a new app on your phone.
The Indian Contract Act lays the framework for all these agreements and ensures that everything runs smoothly and fairly.
So, let’s break down the main types of contracts you’ll come across under this Act. Whether you’re a student, a budding entrepreneur, or just someone curious about how things work, understanding these basics will give you a solid foundation. Ready? Let’s jump right in!
To Know more about meaning and nature of contract [Click Here]
Types of Contracts
There are various types of contracts and all are fit into 3 concepts they are;
- Contract by Validity
- Contract by Formation
- Contract by Performace
Types of Contracts Based on Validity
Besides how a contract is formed, contracts can also be categorized by their validity. Let’s look at the most common agreements based on validity, along with some examples and relevant provisions in India.
Valid Contracts
A valid contract is an agreement that ticks all the legal boxes, like having an offer, acceptance, consideration, and the capacity to contract. This type of contract is legally binding and enforceable by law.
Image Source: thefactfactor.com
Illustration: Imagine you agree to buy a car from a dealership for a specific price. The agreement is written down and signed by both you and the dealer. That’s a valid contract.
Provision in India: Under Section 10 of the Indian Contract Act, 1872. Any agreement that meets the criteria for a valid contract, such as free consent, a lawful objective, and consideration, is legally binding.
Void Contracts
A void contract is an agreement that holds no legal weight and isn’t enforceable by law. This type of contract is considered null from the start.
A contract with a minor is a void contract and it’s void-ab-intio which means the contract is void from the beginning.
Illustration: If someone makes a deal to buy illegal drugs, that agreement is void because the subject of the contract is illegal.
Provision in India: As per Section 2(j) of the Indian Contract Act, 1872, any contract that cannot be enforced by law is considered void.
Voidable Contracts
A voidable contract is a legally binding agreement, but one or both parties have the option to void or cancel it due to certain legal or factual defects. This type of contract remains enforceable unless one of the parties chooses to cancel it.
At the option of the parties, they can choose to continue with the voidable contract and consider it valid, or they can change the terms in the contract to make it valid.
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Illustration: Let’s envision a scenario where you sign a contract to buy a house, only to discover later that the seller misrepresented the condition of the property. In such a situation, you have the option to cancel the contract due to this misrepresentation.
Provision in India: Transitioning to the legal aspect, under Section 2(i) of the Indian Contract Act, 1872, a contract is voidable if it can be enforced by law at the option of one or more parties.
Unenforceable Contracts
An unenforceable contract is a valid agreement that, for various legal or factual reasons, cannot be enforced by law. Though the agreement is legitimate, it lacks the necessary legal standing for enforcement.
For Instance, there is no written format or attestation and stap dut is not fulfilled.
Illustration: Consider a verbal agreement between two parties for the sale of real estate. Without a written contract, this agreement may be unenforceable in court, even though both parties agreed to its terms.
Illegal Contracts
An illegal contract is an agreement that either involves an illegal act or goes against public policy. Such contracts are considered void and cannot be enforced by law.
The subject matter of the contract is itself illegal for example contracting to do any act that is forbidden by the law.
Illustration: Let’s say someone enters into a contract to bribe a government official. Since bribery is illegal, this contract would be deemed illegal and unenforceable.
Provision in India: This concept is outlined in Section 23 of the Indian Contract Act, of 1872.
Types of Contracts Based on Formation
Contracts come in all shapes and sizes, depending on how they’re formed. Let’s explore some of the most common types of contracts, their unique traits, and how they apply in India.
Verbal Contracts
Ever made a deal with just a handshake or a nod? That’s a verbal contract, my friend! These agreements are made orally, without any fancy paperwork. While they’re totally legit and enforceable by law, proving the terms in court can be a bit tricky without a written record.
Illustration: Picture this: You call up a bakery and order a custom cake over the phone. You agree on a price, and the baker delivers the cake to your doorstep. But when you see it, it’s not what you expected. Now, there’s a dispute over payment because there’s no written agreement detailing the cake’s specifications.
Provision in India: In India, even verbal agreements hold weight under Section 10 of the Indian Contract Act, of 1872. As long as the essentials of a valid contract are met, including mutual consent and consideration, verbal agreements are legally binding.
Written Contracts
Ever put pen to paper to seal a deal? Well, that’s a written contract for you! These agreements are all about clarity—everything’s spelt out in black and white, reducing the chances of any “he said, she said” situations.
Illustration: Imagine you land a job at a company. They hand you a written employment contract laying out your salary, benefits, and job duties. Having everything in writing ensures both parties are on the same page from day one.
Provision in India: In India, written contracts are recognized under Section 2(h) of the Indian Contract Act, of 1872. It states that contracts can be either written or oral, as long as they meet the criteria for enforceability under the law.
Express Contracts
Ever laid out all the nitty-gritty details of a deal upfront? That’s what we call an express contract! Whether it’s spelt out in writing or agreed upon verbally, these agreements leave nothing to the imagination.
Express Contract must be in a visible way of accepting the contract and then only it’s considered as an express contract.
Illustration: Picture this: You’re getting your dream house built, and you hire a contractor. Together, you hash out all the specifics—cost, timeline, materials—clearly laid out in a written contract. That’s an express contract right there!
Provision in India: In India, the concept of express contracts is recognized under Section 9 of the Indian Contract Act, of 1872. It states that when parties explicitly agree to all the terms and conditions, whether in writing or verbally, an express contract is formed.
Implied Contracts
Ever found yourself in a situation where words weren’t necessary to strike a deal? That’s where implied contracts come into play! These agreements aren’t spelt out in words but are rather understood from the actions and behaviour of those involved.
Implied Contracts are based on the conduct and circumstance of the party then only it can be considered contracts.
Illustration: Let’s say you walk into a store, pick up an item, and head to the cashier. You offer to pay the displayed price, and the cashier accepts your payment. Voila! Even though you didn’t exchange any words, there’s an implied contract between you and the store—you buy the item, and they sell it to you.
Provision in India: In India, implied contracts are recognized under Section 9 of the Indian Contract Act, 1872. It states that when parties conduct themselves in a certain way, without explicitly agreeing, an implied contract can still be formed.
Quasi-Contracts
Ever heard of a contract that’s not a contract? Welcome to the world of quasi-contracts! These legal agreements aren’t agreed upon by both parties but are instead crafted by the court to prevent unfair advantages.
Illustration: Imagine you accidentally damage your neighbour’s fence. Feeling responsible, you offer to cover the repair costs—even though there was never any formal agreement to do so. In this scenario, a quasi-contract kicks in to ensure fairness and prevent you from benefiting unjustly at your neighbour’s expense.
Provision in India: In India, quasi-contracts find their place under Section 68 of the Indian Contract Act, of 1872. This provision empowers the court to step in and create a quasi-contract when necessary, all in the name of preventing unjust enrichment.
E-contracts
Ever sealed a deal with just a click? That’s the magic of e-contracts! These contracts are born online, whether it’s through a website, email, or electronic signatures. And guess what? They’re just as legally binding as the old-school paper ones.
Image Source: Ipleaders
Illustration: Picture this: You’re browsing your favourite online store and finding the perfect item. You agree to the terms and conditions listed on the website before hitting that “Buy Now” button. Shortly after, you receive a confirmation email—proof that the deal’s done and dusted!
Types of Contracts Based on Performance
Contracts aren’t just about what’s written on paper—they’re also about getting things done! Let’s explore some of the most common types of contracts based on how they’re executed. From shaking hands to signing on the dotted line, each type has its unique characteristics. Ready to dive in?
Executed Contracts
An executed contract is a type of contract in which both parties have fully performed their obligations under the contract. The contract is completed.
Illustration: Imagine you’re buying a car. You hand over the full payment in one go, and the seller hands you the keys. Boom! Both sides have held up their end of the bargain, and as a result, the contract is considered executed.
Provision in India: In India, executed contracts are recognized under Section 2(d) of the Indian Contract Act, of 1872. It’s all about both parties fulfilling their obligations, with no loose ends left hanging.
Executory Contracts
An executory contract is a type of contract in which one or both parties have not yet fully performed their obligations under the contract. As a result, the contract is still in the process of being executed.
Illustration: Consider a scenario where a person agrees to purchase a car on instalment payments. In this case, the contract remains executory because the person has not yet fully paid for the car.
Provision in India: Transitioning to the legal realm, according to Section 2(e) of the Indian Contract Act, 1872, an executory contract is defined as a contract in which the obligations of one or both parties are yet to be performed.
Unilateral Contracts
Ever heard of a one-sided deal where one party promises something in exchange for a specific action from the other? That’s what we call a unilateral contract! These agreements are like a game of give and take, but with a twist—it’s all about one party stepping up to the plate.
Illustration: Picture this: A company puts out a reward for anyone who finds a lost item. The deal’s sealed not when the reward’s offered, but when someone actually finds the lost item and brings it back. That’s when the contract springs into action!
Provision in India: According to Section 2(f) of the Indian Contract Act, 1872, a contract turns unilateral when only one side makes a promise or offers an act in exchange for the other party’s performance.
Bilateral Contracts
Ever been in a situation where both parties are on the hook for something? Welcome to the world of bilateral contracts! These agreements are like a mutual handshake—they only come to life when both sides are in sync and ready to make promises.
Illustration: Picture yourself buying a car from a dealership. You agree on the price, and in turn, they agree to sell you the car at that price. It’s a two-way street—both parties are making promises to each other, sealing the deal.
Provision in India: Moving into the legal framework, according to Section 2(h) of the Indian Contract Act, 1872, a contract is considered bilateral when both parties make promises to each other to perform specific acts.
Conclusion
In summary, contracts come in various forms, each with its own rules and implications. Whether verbal or written, unilateral or bilateral, understanding these types helps ensure clear and enforceable agreements in our daily dealings. So, next time you’re entering into a contract, knowing its type can empower you to protect your interests effectively.
Thank you
Also Read: Privity of Contract in Indian and English Law
Reference: Topper
Reference: Lawbhoomi