Kinds of Contracts
Valid contract, Voidable contract, Void contract, Unenforceable contract, Illegal or Unlawful contract, Express contract, Implied contract, Constructive or quasi-contract, Executed contract, Executory contract,
(A) From the point of view of Enforceability.
(i)Valid contract- It is an agreement enforceable by law [Sec. 2(h)]
(ii)Voidable contract- It is an agreement which is enforceable by law at the option of one or more o f the parties thereto, but not at the option o f the other or others [Sec. 2(i)].
Until it is avoided or rescinded by the party entitled to do so by exercising his option in that behalf it is a valid contract; after it is repudiated, it becomes a void contract.
(iii)Void contract- A contract which ceases to be enforceable by law becomes void [Sec. 2(j)]. Such a contract is a nullity, as for there has been no contract at all.
An agreement not enforceable by law is said to be void’ [Sec. 2(g)], Thus a void agreement is void ab initio i.e. no agreement at all from its very inception (e.g. an agreement with a minor or an agreement without consideration).
A ‘void agreement’ never amounts to a contract; a ‘void contract’ is valid when it is entered into, but subsequent to its formation something happens which makes it unenforceable by law. A contract cannot be void ab initio.
A valid contract becomes void because of supervening impossibility or illegality (Sec. 56) or
repudiation of a voidable contract, or when the event in a contingent contract becomes impossible (Sec. 32).
(iv)Unenforceable contract- It is one which is valid in itself, but is not capable of being enforced in a court of law because of some technical defect such as absence of writing, registration, etc., or time barred by the law of limitation.
(v) Illegal or Unlawful contract- The term ‘illegal contract’is inappropriate as it would mean an agreement enforceable by law and contrary to law. The term ‘illegal agreement’ is appropriate. An illegal agreement is narrower in scope than a void agreement. ‘All illegal agreements are void but all void agreements are not necessarily illegal.’ For example, an agreement with a minor is void as against him but not illegal.
(B) From the point of view of Mode of Creation
(i) Express contract- Where both the offer and acceptance constituting an agreement are made in words spoken or written, it is an express contract.
(ii) Implied contract- Where the offer and acceptance are made otherwise than in words i.e. by acts and conduct of the parties, it is an implied contract.
Sometimes, an offer is expressed in words and the acceptance is implied from acts and circumstances. Such contracts may be called as contracts ofmixed character.
(iii) Constructive or quasi-contract- Such a contract does not arise by virtue of any agreement between the parties but the law infers or recognizes a contract under certain special circumstances. The Contract Act has named such contracts as “certain relations resembling those created by contract” (Secs. 68-72). An example- liability of a person to whom money is paid under mistake to repay it back.
(C) From the point of view of the Extent of Execution
(i) Executed contract- A contract is said to be executed when both the parties tb contract have completely performed their share of obligation and nothing remains to be done by either party under the contract. For example, when a bookseller sells a book on cash payment.
However, where only one of the parties to a contract has performed his share of obligation and the other party is still to perform his share of obligation, then also the contract is called ‘executed’. Such contracts are called Unilateral contracts.
For example, a public advertisement offering a reward to anyone who finds a missing thing/ person.
(ii) 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 or there remains something to be done under the contract on both sides. Such contracts are called Bilateral contracts or Future contracts.
For example, A agrees to coach B, a pre-medical student, from first day of the next month and B promises to pay A Rs. 500 per month.
Standard Form Contract
When a large number of contracts have got to be entered into by a person, from a practical point of view and for the sake of convenience, a standard form for the numerous contracts may be used.
An insurance policy, shares or a railway ticket are few examples of such standardized contracts.
The “special terms and conditions” become binding as part of the contract only if they are brought to the notice of the acceptor before or at the time of contract.
In view of the unequal bargaining power of the two parties, the courts and the legislature have evolved certain rules to protect the interest of the weaker party: –
(1) Reasonable notice – e.g. by printing on a ticket, ‘Tor conditions see back”, or obtaining signatures on the document containing terms, or otherwise explaining the terms. Where an adequate notice is not given the offeree is not bound by the terms.
(2) Notice should be contemporaneous with the contract-If a party to the contract want to have exemption from liability he must give a notice about the exemption while the contract is being entered into and not thereafter (Olley v Marlborough Court, Ltd. (1949) 1 K.B. 532).
(3) Terms of contract should be reasonable-If the terms of the contract are unreasonable and opposed to public policy, they will not be enforced.
(4) Fundamental breach of contract – No exemption clause is allowed to permit the non-compliance of the basic contractual obligation i.e. obligation which is fundamental or ‘core’ o f the contract. Thus, a dry cleaner has to be answerable, even if the contract contains all sorts o f exemption clauses, if the cloth is altogether lost.
(5) Strict construction-A strict construction shall be applied to exemption clause, and any ambiguity is to be resolved in favour of the weaker party.
(6) Statutory protection – The English Unfair Contract Terms Act, 1977 severely limits the right of the contracting parties to exclude or limit their liability through exemption clauses in the agreement. India lacks such an Act; Indian Airlines v Madhuri Chowdhury (AIR 1965 Cal 252) highlights the inadequacy of the Indian Contract Act in providing relief to the weaker party against the exemption clauses.
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