Contract | Kinds with Examples?

KINDS OF CONTRACT

There are different kinds of contracts. They can be classified as follows: 

1. According to Enforceability: 

According to enforceability, a contract can be divided as follows: 

a. Valid Contract 

An agreement enforceable by law is a valid contract. An Agreement becomes a contract when it fulfills all the essentials of a valid contract. In a valid contract, all parties are legally responsible for the performance of the contract. If the one of the parties breach the contract, the other party can enforce it through the court of law. 

Example

C agrees to sell his car to B for Rs. 5 Lac. B agrees to buy it. It is a valid contract. If C fails to deliver the car, B can sue him and if B fails to pay, C can sue him. 

b. Void Contract 

The term void means not binding in law. Section 2(j) states, " A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable. It means that a void contract is a valid contract when it is made but subsequently it becomes void due to certain reasons. In a void contract, both the parties are not legally responsible to fulfill the contract. 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 when it becomes impossible to be performed by any party due to any reason. [Sec. 56] 

Example

C agrees to sell his house to B after two days. The house is burnt the next day. The contract becomes void due to impossibility of performance. 

ii. Subsequent Illegality 

A contract becomes void by subsequent illegality. If a contract is made between two parties but before the performance of contract, a new law makes the implementation of the contract illegal, the contract becomes void. [Sec. 56] 

Example 

C agrees to sell 100 bags of wheat to B. Before delivery of wheat, the government put a bans on private trade of wheat. The contract becomes void. 

iii. Rejection of Voidable Contract

If the consent of one party is not free, the contract is voidable. The party whose consent is not free has the right to reject or accept the contract. A voidable contract becomes void when the party whose consent is not free projects the contract. [Sec. 19] 

Example 

C forcibly buys B's car for Rs. 20,000. The contract is voidable at the option of B. B may accept for rejects the contract. If B rejects the contract, it becomes void. 

iv. Impossibility of Depending Event 

The performance of a contingent contract depends upon the occurrence or non- occurrence of a certain event. It becomes void when that event does not occur. [Sec. 32] 

Example 

C contracts to give Rs. 1 Lac to B, if B gets admission in Hailey College. B fail to get admission. The contract becomes void. 

C. Void Agreement

An agreement which is not enforceable by law is a void agreement. The void agreement does not create legal obligations among the parties. It is void ab-initio i.e. from the beginning. In void agreement, there is absence of any essential of valid contract except free consent. Agreement with minor and agreement without consideration are void agreements. [Sec. 2 (g)] 

In a void agreement, the party who has received any benefit is bound to return it to the party from whom he received it. Both the parties are not responsible for the performance of the agreement. 

Example

C promises to buy a dog from B for Rs. 10,000. The dog was dead before the agreement was made but the parties were unaware. The agreement is void. 

D. Voidable Contract

Voidable contract is a contract which is enforceable by law at the option of one party but not at the option of the other party. [ Sec. 2 (i)] 

When contract is made without free consent, it is a voidable contract. It is considered valid if it is not cancelled by the aggrieved party within reasonable time. A contract becomes voidable under the following circumstances: 

i. A contract becomes voidable when consent of one of the parties to a contract is obtained by coercion, undue influence, misrepresentation or fraud. [Sec. 15-18]

Examples 

a. C compelled B to sell his car at gunpoint. The contract is made by coercion and is voidable at the option of B. 

b. C started that his factory produced 1000 kg of sugar daily and induced B to buy it. Later B found out that factory produced only 800 kg of sugar daily. The contract is voidable at the option of B. 

ii. When one party promises to do something for the other party for a consideration but the other party prevents him from performing his promise, the contract becomes voidable at his option. [Sec. 53] 

Example 

D contracts to paint B's house. D is ready to paint but B prevents him from doing so. This contract is voidable at the option of D. 

iii. When a party to the contract promises to perform an obligation within a specified time but fails to perform the same within the fixed time, the contract becomes voidable at the option of the promisee. [Sec. 55]

Example

X contract to paint Y's house within one week. X does not paint the house within the specified time. The contract is voidable at the option of Y 

E. Unenforceable Contract 

It is a contract which cannot be enforced by the court due to some technical defects. Technical defects may be absence of writing, registration, stamp etc. When the technical defects are removed, the contract becomes enforceable. 

Example 

C borrows Rs. 2 billion from B and makes a pronote on Rs. 10 stamp paper. It is unenforceable because the pronote is undervalued 

F. Illegal Agreement

An agreement is illegal if it is forbidden by any law. The object of illegal agreement is unlawful. It is void ab initio. It cannot be enforced by the court. The parties to an illegal agreement are not responsible to perform their promises. There is punishment for the parties who make such agreement. A collateral agreement to an illegal agreement is also void. A collateral agreement is secondary to the main agreement. [Sec. 23] 

Examples 

a. C gives money to B, a smuggler, to buy smuggled goods. The agreement is illegal and the money cannot be recovered. 

b. A borrows Rs. 2 Lac from B to buy a car from X to carry out a bomb blast. B knows the purpose of the loan. Agreement between A and B is collateral to the agreement with X so it is also illegal.

2. According to Formation 

According to formation, a contract has the following three kinds: 

A. Express Contract 

An express contract is a contract where the parties state the terms by words spoken or written at the time of its formation. When such a contract is formed there is no difficulty in understanding the rights and obligations of the parties. [Sec. 9] 

Example

A tells on telephone to B that he wants to sell his car and B informs 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 the acts or conduct of parties, or circumstances of the particular case. It arises when one person, without request, provides services and expects to be paid for them and the other person accepts those services. [Sec. 9] 

Examples

a.  B went into a restaurant and had a cup of tea. It is an implied contract and B must pay for the cup of tea. 

b. M, a shoe shiner, starts polishing the shoes of W in his presence, and W allows him to do so. It is an implied contract. 

c. B withdraws Rs. 25,000 from ATM of a bank. It is an implied contract. 

C. Quasi Contracts 

A quasi contracts is not a contract. In fact, it is an obligation created by law in the absence of a contract. It is based on the principles of equality that a person shall not be allowed to get benefits at the cost of another. It is also called constructive contract. 

Examples

a. C finds the lost goods that belonged to B. C is bound to return the goods to B. 

b. C leaves his goods at B's house by mistake. B treats the goods as his own and uses them. It is a quasi contract. B 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

In an executed contract, both the parties completely fulfill their obligations. It means that nothing remains to be done by either party under the contract. 

Examples

a. B buys a book from A. A delivers the book and B pays the price. It is an executed contract. 

b. A agrees to paint a picture for B for Rs. 2,000. When A paints the picture and B pays the price, the contract is said to be executed. 

B. Executory Contract 

In an executory contract, some obligations remain to be fulfilled. In other words, a contract is said to be executory when both the parties to a contract have not performed their obligations. 

Examples

a. M sell his car to N for Rs. 2 Lac. N has not yet paid the price and M has not delivered the car. The contract between M and N is executory. 

b. A agrees to teach B next month, and B promises to pay Rs. 800 to A. It is an executory contract because the promise are yet to be performed. 

4. According to parties 

According to parties, a contract has the following two kinds: 

A. Unilateral Contract 

It is a one sided contract. It is a contract where one party makes a promise in exchange for performance of a particular act by any party. 

Example

C promise to pay Rs. 1,000 to anyone who found his lost bag. B found the bag and returned it to C. It is a unilateral contract which came into existence when the bag was found. 

B. Bilateral Contract

It is a two sided contract. In this contract, both the parties exchange mutual promises. 

Example 

C promises to paint a picture for B and B promises to pay Rs. 5,000 to C. It is a bilateral contract.