Contracts

TITLE OF PROJECT: TYPES OF CONTRACT

A contract is a voluntary arrangement between two or more parties that is enforceable by law
as a binding legal agreement. Contract is a branch of the law of obligations in jurisdictions of
the civil law tradition. There are various types of contracts in business law depending upon
various legal transactions like transfer of property, sale of goods, etc. Without contract law,
these voluntary agreements would instantly become impractical and unworkable. Since such
agreements lie at the very heart of our society and economy, and since they depend upon
contract law. Contract law lies at the heart of our system of laws and serves as the foundation
of our entire society. it is our system of contract law that underpins and makes possible public
as well as private agreements by which exchanges of goods and services are accomplished in
our society at every level.

Books:

Anson’s Law of Contracts

Avtar Singh, Contract and Specific Relief act

R.K. Bangia, Law of Contracts

Websites:

https://legal-dictionary.thefreedictionary.com/
https://legaldictionary.net/express-contract/
https://www.investopedia.com/terms/
http://www.lawsofbusiness.com/2013/08/types-of-contracts.html
https://lawnn.com/law-contract-types-contract-cases
www.trainagents.com/Desktop Modules/.../Course Content
lawnn.com/law-contract-types-contract-cases-indian-contract-act-1872
Articles:
Statues Referred:

Indian Contract Act, 1872

Cases:

Upton Rural District Council v. Powell (Implied Contract)

Chowal Vs Cooper (Quasi Contract)
Mohiri Bibi v. Dharmadas Ghase (Void Contract)

Raniannapurna v. Swaminathan(Voidable Contract)

CONTEXTS:

1. Introduction 6

2. Synopsis 7

3. Nature and Contractual Obligation 8

4. Based on Formation

5. Based on Nature of Consideration 10

6. Based on Execution and 11

7. Based on Validity 12

8. Void Contracts and Illegal Contracts–––––––––––––––––––––––––––––––––––

9. Features of valid contract––––––––––––––––––––––––––––––––––––––––––

10. Conclusion ______________________________________________________21

11. Bibliography
 CONTRACTS ABSTRACT

TITLE OF PROJECT: TYPES OF CONTRACT

INTRODUCTION:
A contract is a voluntary arrangement between two or more parties that is enforceable by law
as a binding legal agreement. Contract is a branch of the law of obligations in jurisdictions of
the civil law tradition. There are various types of contracts in business law depending upon
various legal transactions like transfer of property, sale of goods, etc. Without contract law,
these voluntary agreements would instantly become impractical and unworkable. Since such
agreements lie at the very heart of our society and economy, and since they depend upon
contract law. Contract law lies at the heart of our system of laws and serves as the foundation
of our entire society. it is our system of contract law that underpins and makes possible public
as well as private agreements by which exchanges of goods and services are accomplished in
our society at every level.

CLASSIFICATION OF CONTRACT:
Regarding contracts, there are four types of classifications. Types of contracts in contract law
are as follows;

Based on Formation

Based on Nature of Consideration

Based on Execution and

Based on Validity.

Done by:

A. Nikhil Kalyan Reddy

2017126
I-Semester
 CONTRACTS SYNOPSIS

TITLE OF THE PROJECT: TYPES OF CONTRACT

INTRODUCTION:
A contract is a voluntary arrangement between two or more parties that is enforceable by law
as a binding legal agreement. Contract is a branch of the law of obligations in jurisdictions of
the civil law tradition. Contracts may be classified according to their:
(i) Formation,
(ii)Validity and
(iii) Performance, for purpose of analysis and clarity.
Legal scholar has classified contracts in many ways.

Type of review: In the present context the method followed is primary review as all sorts of
information have been collected from primary sources.

Literature review: The Primary Literature that has been reviewed while going through this
research topic in Books and Web sources.

Scope of the project: The scope of the project is limited to the concept of types of contracts.
Exceptional cases are also discussed.

Significance: The present project types of contract, cannot be dealt Without contract law,
these voluntary agreements would instantly become impractical and unworkable. Since such
agreements lie at the very heart of our society and economy and with out these things humans
can’t exists so contract law obviously exists.

Research Question:
1.Whether types of contracts can easily distinguish.
2. Whether there are exceptional cases in the types of the contract.

Research Methodology: Descriptive and Analytical

Nature and Contractual Obligation:

The purpose of a contract is to establish the agreement that the parties have made and to fix th
eir rights and duties inaccordance with that agreement. The courts must enforce a valid contra
ct as it is made, unless there are grounds that bar itsenforcement.

Statutes prescribe and restrict the terms of a contract where the general public is affected. The
terms of an insurancecontract that protect a common carrier are controlled by statute in order
to safeguard the public by guaranteeing that therewill be financial resources available in the
event of an accident.

The courts may not create a contract for the parties. When the parties have no express or impl
ied agreement on theessential terms of a contract, there is no contract. Courts are only empow
ered to enforce contracts, not to write them, for theparties. A contract, in order to be enforcea
ble, must be a valid. The function of the court is to enforce agreements only if theyexist and n
ot to create them through the imposition of such terms as the court considers reasonable.

It is the policy of the law to encourage the formation of contracts between competent parties f
or lawful objectives. As ageneral rule, contracts by competent persons, equitably made, are v
alid and enforceable. Parties to a contract are bound bythe terms to which they have agreed, u
sually even if the contract appears to be improvident or a bad bargain, as long as itdid not res
ult from Fraud, duress, or Undue Influence.

The binding force of a contract is based on the fact that it evinces a meeting of minds of two
parties in Good
Faith. Acontract, once formed, does not contemplate a right of a party to reject it. Contracts th
at were mutually entered into betweenparties with the capacity to contract are binding obligat
ions and may not be set aside due to the caprice of one party or theother unless a statute provi
des to the contrary.1

1
https://legal-dictionary.thefreedictionary.com/
Based on Formation:

On this base Contracts can be classified into three groups, namely Express, Implied, Quasi
Contracts.

Express Contracts:

The Contracts where there is expression or conversation are called Express Contracts. For
example: A has offered to sell his house and B has given acceptance. It is Express Contract.

An express contract is differs from a contract implied in fact only in the mode of manifesting
assent and the mode of proof required; the distinction involves no difference in legal
effect. Both forms of contract require mutual assent and a meeting of the minds, but an express
contract is proved by an actual agreement where a contract implied in fact is proved by
circumstances and the conduct of the parties.
For example: A has offered to sell his house and B has given acceptance. It is Express Contract2

Expressed Contracts:
Example:

Miguel wants to purchase his first home. He found the perfect place in Pasadena. The contract
for purchase was signed, and he closed on the home within a month.
The contract Miguel entered into is an expressed contract because the elements are specifically
stated, including offer, acceptance and consideration. To break it down, a contract contains six
elements:

 An offer
 Acceptance of the offer
 Consideration
 Mutual assent
 Capacity
 Legally accepted terms

This is straightforward. Miguel searched for a home, found the perfect place and accepted the
seller's offer to purchase.
Once Miguel did that, he had to come up with the money to purchase the home. Both parties
agreed to the terms and are of age and mental capacity to enter into the contract, and there was
nothing illegal about the sale. Miguel is now a happy homeowner.
But, not every contract works this way. In fact, some contracts are not written or expressed.
They just happen because of a circumstance. This sounds counter-intuitive, I know

2
https://legaldictionary.net/express-contract/
Implied Contract:
The Contracts where there is no expression are called implied contracts. Sitting in a Bus
can be taken as example to implied contract between passenger and owner of the bus.

A form of an implied contract is an implied warranty provided automatically by law. An

implied warranty means that when a product is purchased, it is guaranteed to work for its
ordinary purpose. For example, a refrigerator is fit to keep food cool.

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.

Express Contracts and Implied Contracts:

A contract can fit into one of two categories: express contracts and implied contracts. An
express contract illustrates the promise that was made between the parties in clear and certain
terms. An implied contract, on the other hand, is one that leads the parties to believe that a
contract exists based on the behaviours of those involved.

A contract to purchase a home is a good example of express contract use. This is because there
are specific elements to the contract that are clearly expressed and, if agreeable, are accepted
unequivocally by the purchaser. The elements of an express contract include the offer, the
acceptance of that offer, and an agreement between the parties as to the terms of the contract.
However, not every contract is this cut and dry. Some contracts simply happen due to
circumstance, and those contracts are referred to as implied contracts.

An implied contract, however, does not involve a written contract. However, the circumstances
of a situation lead to either one person benefitting from his actions, or to the understanding
among the parties that a contract exists. Implied contracts can be further broken down into
contracts that were either implied in fact or implied in law.3

3
https://www.investopedia.com/terms/
Quasi Contract:

In case of Quasi Contract there will be no offer and acceptance so, there will be no Contractual
relations between the partners. Such a Contract which is created by law is called Quasi
Contract.
Sections 68 to 72 of Contract Act read about the situations where court can create Quasi
Contract.
 Sec. 68: When necessaries are supplied
 Sec. 69: When expenses of one person are paid by another person.
 Sec. 70: When one party is benefited by the activity of another party.
 Sec. 71: In case of finder of lost tools.
 Sec. 72: When payment is made by mistake or goods are delivered by mistake.


Example: A case on this occasion is Chowal Vs Cooper. In this case A`s husband becomes
no more. She is very poor and therefore not capable of meeting even cost of cremation. B,
one of her relatives, understands her position and spends his own money for cremation. It is
done so without A`s request. Afterwards B claims his amount from A where A refuses to pay.
Here court applies Sec. 68 and creates a Quasi Contract between them.
Based on Nature of Consideration:

On this base, Contracts are of two types. Namely Bilateral Contracts and Unilateral Contracts.

Bilateral Contracts:

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

A bilateral contract is a reciprocal arrangement between two parties by which each promises
to perform an act in exchange for the other party's act.
Example:

A Contract has got formed between X and Y on 1st Jan, according to which X must deliver
goods to Y on 3rd Jan and Y must pay amount on 3rd Jan. It is bilateral contract.4
Unilateral Contract:

If considerations are to be moved in one direction only after the Contract, it is called Unilateral
Contract.

A unilateral contract is a contract created by an offer than can only be accepted by

performance. A unilateral contract can be formed by an express offer stating that the offer can
only be accepted through performance. Another example of unilateral contract is a reward or a
contest. business law. contracts.

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

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Bilateral Contracts vs. Unilateral Contracts

Bilateral contracts are distinct from unilateral contracts, the primary difference being that
bilateral contracts have reciprocal obligations. In a unilateral contract, Party A is under
obligation to fulfil certain terms (usually a transfer of funds) if and only if Party B completes
a specified task, but Party B is not actually obliged to complete the task if they don't want to.
If such an agreement were bilateral, Party B could be found in breach of contract if they didn't
complete the specified task. Because there is no guarantee that the task will be completed in a
unilateral agreement, they are effectively never used in business.

When determining whether a contract is unilateral or bilateral in nature (which can decide
whether there has been a breach of contract), courts and lawyers will often consider whether
both parties offered something of value in consideration – either money or the time and
resources required to provide the specified service. If so, the contract is bilateral.
Based of Execution:
On this base Contracts can be classified into two groups. namely, Executed and Executory
Contracts.
Executed contract:

A contract in which the promises are made and completed immediately, like in the purchase
of a product or service. On the other hand, an executory contract means that the promises of
the contract are not fully performed immediately.

Example of Executed Contract

John has been looking at a car he wants at a car lot, debating whether to buy it. Finally deciding
to make the purchase, John walks into the dealership, signs a purchase contract, pays for the
car in cash, and walks out with the keys to the car.

Executory Contract:
An executory contract is a contract that has not yet been fully performed or fully executed. It
is a contract in which both sides still have important performance remaining.

Example of Executory Contract

John has been looking at a car he wants at a car lot, debating whether to buy it. Finally deciding
to make the purchase, John walks into the dealership, signs a lease contract agreeing to pay a
specified amount each month until the car is paid off, or he returns the car at the end of the
lease. Until the car is either paid off or returned, the terms of the contract have not been
fulfilled.

Executed vs. Executory Contracts

While any type of contract must be “executed” by the parties by adding their signatures to it,
some people and entities refer to a contract for which the terms are to be carried out at a later
date by the specific name of “executory contract.” This may create some confusion for the
layperson when hearing the term “executed contract,” which may simply refer to the fact that
the contract has been signed by all parties or may refer to a signed contract for which the terms
were immediately carried out.

One example of this type of “executed contract” would be a contract for purchase of a major
appliance. This contract is entered, and the appliance is immediately delivered. An example of
an “executory contract” may be a contract with a general contractor for the construction of a
house, for which the work is to begin in four months’ time. The important thing to understand
is that, in either case, once a contract has been signed by all the parties, it becomes legal and
binding.5

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Based on Validity:
On this base Contracts can be classified into 5 groups. namely Valid, Void, Voidable, Illegal
and Unenforceable Contracts.

Valid:

The Contracts which are enforceable in a court of law are called Valid Contracts. To attain
Validity the Contract should have certain features like consensus ad idem, Certainty, free
consent, two directional consideration, fulfilment of legal formalities, legal obligations, lawful
object, capacity of parties, possibility of performance, etc.
A valid contract is a written or expressed agreement between two parties to provide a product
or service. There are essentially six elements of a contract that make it a legal and binding
document.
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,
 fulfilments of legal formalities,
 legal obligations,
 lawful object,
 capacity of parties,
 Possibility of performance, etc.

Example: there is a Contract between X and Y and let us assume that their contract has all
those above said features. It is Valid Contract.

Void:
A Contract which is not enforceable in a court of law is called Void Contract. If a Contract is
deficient in any one or more of the above features (Except free consent and legal formalities).
It is called Void Contract.6
An agreement to carry out an illegal act is an example of a void agreement. For example, a
contract between drug dealers and buyers is a void contract simply because the terms of the
contract are illegal. In such a case, neither party can go to court to enforce the contract.

Example: there is a Contract between X and Y where Y is a minor who has no capacity to
contract. It is Void Contract.

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Case;

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.

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 be avoided at instance of the suffering party but if not, then it becomes
a valid contract.

Illegal: If the contract has unlawful object it is called Illegal Contract.

An illegal agreement, under the common law of contract, is one that the courts will not enforce
because the purpose of the agreement is to achieve an illegal end. The illegal end must result
from performance of the contract itself. The classic example of such an agreement is
a contract for murder.
Example: There is a contract between X and Z according to which Z must murder Y for a
consideration of Rs. 10000/- from X. It is illegal contract.

Unenforceable:

A contract which has not properly fulfilled legal formalities is called unenforceable contract.
That means unenforceable contract suffers from some technical defect like insufficient stamp
etc. After rectification of that technical defect, it becomes enforceable or valid contract.

An unenforceable contract or transaction is one that is valid but one the court will not
enforce. Unenforceable is usually used in contradistinction to void (or void ab initio) and
voidable. If the parties perform the agreement, it will be valid, but the court will not compel
them if they do not.

Example: A and B have drafted their agreement on Rs. 10/- stamp where it is to be written on
Rs. 100/- stamp. It is unenforceable contract.7

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Void Contracts and Illegal Contracts:

All illegal Contracts are void, but all void contracts are not illegal:

An illegal Contract will not be implemented by court. So, illegal contract is Void. A void
contract may not be illegal because its object may be lawful.

The Contracts which are collateral to illegal contract are void, But the contracts which
are collateral to Void contract may be Valid:

An illegal makes not only itself Void but also the contracts connected to it. But a contract
collateral to void contract may attain Validity because object of main contract is lawful.

Void Contracts and Voidable Contracts:

Becoming Valid:

A Voidable Contract may become Valid at the option of suffering party. But a Void Contract
can never and never become Valid.

Third Party Rights:

In case of Voidable Contracts third party may attain rights on concerned property, If the third
party gets the property before the Voidable Contracts gets declared as Void. But in case of
Void Contract third party cannot get any right.
Features of Valid Contract:

Features of Valid Contract can be clearly known under the heads Consensus ad idem, Certainty,
Free Consent, Capacity of Parties, Consideration, Legal Formalities, Lawful Object, Legal
Obligations, Possibility of Performance and, Agreements not declared void.

Consensus ad idem:
Consensus ad idem means identity of minds. That means there should be no difference
between ways of thinking of offeror & offeree. Both should understand the same thing in the
same way. In the absence of consensus ad idem, the contract is not valid.
Example: A has two houses – one at City A and the other at City B. He wants to sell his house
situated at City A. Now he is making an offer to B to sell away one of his house to which he
gives his acceptance. Here A is thinking about house at City A and B has given acceptance
with a view to purchase house at City B. Here is no consensus ad idem.
A case on this point is Raffels Vs Wichelhaus. In this case there is a contract between A & B
according to the terms of which A must supply raw cotton to B in peerless ship. There are two
ships with the same name. While entering into the contract A thinks about second peerless and
B thinks about first peerless. Here court decides that their contract has no consensus ad idem
& hence it is void.

Certainty:
The wording used in the contract must be certain. Uncertain wording makes the Contract Void.
 Related case is Taylor Vs Portington. In this case there is a Contract between A and
B according to which A must modernize his house and B has to join as tenant. If the mode of
modernization is satisfactory to B. Here court decides that there is no Certainty and therefore
it is Void.

Free Consent:
Both parties should enter into the Contract with Free Consent. There should be no physical
pressure (coercion) or mental pressure (undue influence). Absence of free consent makes the
Contract Voidable. A Voidable Contract may become either Valid or void depending upon
intention of the suffering party.
A case on this point is Ranganayakamma Vs Alwar Setty. In this case B gives a threatening
to A saying that he (B) will not allow cremation of dead body of A`s husband, unless A adopts
B`s sons. Here it is decided that there is no free consent from the side of A. There it is voidable,
at the option of A.

Capacity of Parties:
Both parties should have eligibility or qualification to enter into a Contract. Such eligibility is
called Capacity of Contract. Minor insolvent person`s, lunatic persons etc have no capacity to
contract.
Related case is Mohiribeabee Vs Dharmades Ghosh. In this case A is a money lender and B
is a minor. A Contract gets formed between them according to which B has to pledge his
property with A to obtain a loan. On that occasion the minor executes a deed also saying that
money lender has write off lien on the pledged property till settlement of debt. There after the
minor sues to get in his property back without settling the debt. Money lender claims that he
has write-off lien as per the deed. Here court decides that the deed executed by minor is void
and therefore lender has no lien.

Consideration:
Both parties presenting the Contract should get benefited mutually. Consideration may be in
the form of cash or goods or act or abstinence. Consideration need not be adequate.

Legal Formalities:
Contract may be oral or documentary. In case where it is oral, the concept of legal formalities
is not applicable. If the contract is of documentary nature, all legal formalities like stamp duty
etc must be properly fulfilled. If legal formalities are not satisfied the contract becomes
unenforceable.
Example: A and B have written their agreement on Rs. 10/- stamp where it is to be written
actually on Rs. 100/- stamp. It is not Valid Contract.

Lawful Object: To attain validity object of the contract must be lawful. Un-lawful object
makes the contract illegal & hence void.
Example: There is a contract between X and Z according to which Z has to murder Y for a
consideration of Rs. 10000/- from X. It is unlawful object.

Legal Obligations: To attain validity contract must be capable of creating legal obligations.
One directional consideration leads to friendly relations and two directional consideration leads
to legal relations.
 A case on this point is Balfour Vs Balfour. In this case A and B are husband and wife
respectively. As per their contract, husband has to send money to his wife at regular intervals
of time for the purpose of medical treatment. Here Court decides that there is only one
directional consideration and hence their contract is not creating legal relations. So, their
contract is held to be void.

Possibility of Performance:
It should be possible to perform the event agreed in the contract. Impossibility makes the
contract void.
Example: A contract to join two parallel lines, has no possibility for performance and
hence such a type of contract is void.8

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Agreement not declared void: Certain types of agreements are declared to be void by statues.
As such agreements are harmful to society and they are named as Agreement opposed to public
policy. Agreements in restraint of trade, Agreements in restraint of marriage, Agreements in
restraint of personnel freedom etc come under Agreement opposed to public policy.
 A case of this occasion is Madhav Vs Rajkumar. In this case a contract gets formed
between A and B according to which B has to stop his business and for that A has to pay Rs.
900/- to B. There-after B stops his business and A fails to pay. B Sue’s for recovery. Court
decides that it is agreement in restraint of trade and hence void.

If an agreement satisfies all these features, then it becomes a contract. So, All Contracts are
agreements, but all agreements are not Contracts.
According to Sec. 10 of Indian Contract Act –All agreements are contracts if they are made
by free consent of the parties, competent to contract, with a lawful object, for lawful
consideration and are not hereby expressly declared to be void.
Conclusion:
Bibliography:

BOOKS

Anson’s Law of Contracts

Avtar Singh, Contract and Specific Relief act

R.K. Bangia, Law of Contracts

Websites

https://legal-dictionary.thefreedictionary.com/

https://legaldictionary.net/express-contract/

https://www.investopedia.com/terms/

http://www.lawsofbusiness.com/2013/08/types-of-contracts.html

https://lawnn.com/law-contract-types-contract-cases

www.trainagents.com/Desktop Modules/.../Course Content

lawnn.com/law-contract-types-contract-cases-indian-contract-act-1872