DIFFERENT TYPES OF CONTRACTS AS PER INDIAN CONTRACT ACT, 1872 

The Indian Contract Act, 1872, provides a comprehensive framework for the formation and classification of contracts. Based on various criteria, contracts can be classified into different types. Here’s a detailed explanation of each type of contract based on the method of formation, time of formation, and validity or legality:

1. Based on Method of Formation

a. Express Contracts:

• Definition: An express contract is formed through explicit written or spoken words where the terms of the contract are clearly stated. The contract is said to be an express contract when the terms of the contract have been agreed between the parties expressly i.e. orally or in writing.
• Example: A written agreement between a contractor and a client for building a house.

b. Implied Contracts:

• Definition: An implied contract is formed through the actions or conduct of the parties involved, rather than through explicit words.
• Example: When you visit a restaurant, there is an implied contract that you will pay for the meal even though no formal agreement is made.

c. Quasi-Contracts (Constructive Contracts):

• Definition: These are not true contracts but are recognized by law to prevent unjust enrichment. They arise by operation of law when there is no actual agreement but one party benefits at the expense of another. These are obligations similar to contracts, but they arise from the law rather than an agreement between the parties. Examples include cases of unjust enrichment and obligations to restore benefits. A quasi-contract is a retroactive arrangement between two parties who have no previous obligations to one another, created by a judge to correct a circumstance in which one party acquires something at the expense of the other.
• Example: If a person mistakenly receives goods meant for someone else and uses them, the law may require them to pay for the goods.

d. Contingent Contracts:

Definition: These are contracts that are dependent on the occurrence or non-occurrence of a specific event. The Act lays down rules for enforcing such contracts.The word ‘contingent’ is used in the Indian Contract Act, 1872, to mean ‘conditional’ as we use ordinarily. Thus, a contingent contract is a conditional contract. A contingent contract is a contract that depends on the occurrence of a specific event that is uncertain i.e., it is a type of contract in which the performance of one or both parties’ obligations depend on the occurrence or non-occurrence of a specific event in the future. The event is uncertain at the time of contract formation, In other words, the performance of the contract is contingent upon the happening or non-happening of a particular event. Section 31 to 36 of the Indian Contract Act deal with contingent contracts. If the event specified in the contract becomes impossible, the contract becomes void.

2. Based on Time of Formation

a. Executed Contracts:

• Definition: These are contracts where both parties have fulfilled their obligations under the agreement.
• Example: A contract for the sale of a car where the buyer has paid and the seller has transferred ownership of the car.

b. Executory Contracts:

• Definition: These are contracts where one or both parties have yet to perform their obligations.
• Example: A lease agreement where the tenant has agreed to pay rent monthly, but the rent payment is yet to be made.

3. Based on Validity or Legality

a. Valid Contracts:

• Definition: A valid contract meets all the essential elements of a contract as specified in the Indian Contract Act, 1872 (e.g., offer and acceptance, consideration, capacity, free consent, and legality of object).
• Example: A contract for the sale of goods where both parties are competent to contract, have agreed on the terms, and the object of the contract is lawful.

b. Void Contracts:

• Definition: A void contract is one that lacks legal effect from the outset. It is not enforceable by law and has no legal obligations. A void contract is one that is not valid from the outset, and it has no legal effect. A void contract is not a contract at all, as it lacks one or more essential elements required for a valid contract. It is considered to have no legal effect from the outset. For example, a contract to engage in illegal activities or a contract with a mentally incapacitated person might be deemed void. If the contract is void from starting it is known as void ab initio.
• A contract can be considered void for several reasons, including:
  • The subject matter of the contract is illegal.
  • The contract involves fraudulent or deceptive practices.
  • One or both parties lacked legal capacity to enter into the contract.
  
• Example: A contract to perform an illegal act, such as selling illegal drugs, is void.

c. Voidable Contracts:

• Definition: A voidable contract is one where one party has the right to void or affirm the contract. It is valid unless one party chooses to void it. A voidable contract is a contract that is initially valid and enforceable, but due to certain circumstances, one party has the option to void (cancel) the contract. These circumstances might include fraud, misrepresentation, undue influence, duress, or the incapacity of one party. If the injured party chooses to void the contract, they can typically do so without incurring liability.
  Some common reasons for a contract to be voidable include:
  • One party was under duress or coercion when entering the contract.
  • One party lacked capacity to understand the contract terms (e.g., due to mental incapacity).
  • The contract was induced by fraud, misrepresentation, or undue influence
  
• Example: A contract signed under duress or undue influence is voidable at the option of the coerced party.

d. Unenforceable Contracts:

• Definition: These are contracts that cannot be enforced due to some technical defect or deficiency in the legal procedure, such as lack of written documentation where required.
• Example: A verbal contract for the sale of land which, under the Indian Contract Act, must be in writing and registered to be enforceable.

e. Illegal Contracts:

• Definition: Contracts that involve actions or objects that are illegal or against public policy. These are not only void but also punishable under law.
• Example: A contract to commit a crime, such as bribery or smuggling, is illegal and therefore void.

f. Contract of Adhesion:

• Definition: These are contracts where one party has significantly more bargaining power and presents a standard-form contract to the other party, who must either accept or reject it as a whole.
• Example: Insurance policies where the terms are dictated by the insurer with no room for negotiation by the insured.

4. based on parties to contract:

Under the Indian Contract Act, 1872, contracts can be classified into different types based on various criteria, including the nature of obligations and performance. Two important types of contracts in this context are bilateral and unilateral contracts. Here’s a detailed explanation of each:

1. Bilateral Contracts
Definition: A bilateral contract is an agreement where both parties exchange promises to perform certain obligations. In other words, each party makes a promise to the other, creating mutual obligations.

Characteristics:

Mutual Promises: Each party to the contract agrees to perform certain duties or provide certain benefits to the other. This creates reciprocal obligations.
Performance: Both parties are obligated to perform their promises at the agreed time.
Enforceability: Both parties have the right to enforce the contract against the other.
Example: Consider a contract for the sale of a car. In this case:

Party A promises to sell the car.
Party B promises to pay the agreed price for the car. Both parties have made promises and are bound to perform them, creating a bilateral contract.
Legal Framework: The Indian Contract Act, 1872, does not specifically mention bilateral contracts, but the principles governing them are embedded in the general provisions of contract formation, including the requirements of offer, acceptance, and consideration. For example, sections related to contracts where performance is due from both parties fall under this category.

2. Unilateral Contracts
Definition: A unilateral contract is an agreement where only one party makes a promise in exchange for a specific act or performance by the other party. In this case, only one side has a binding obligation until the other party performs the requested act.

Characteristics:

One-sided Promise: Only one party makes a promise, and the other party’s performance is the consideration for that promise.
Performance: The contract becomes binding only when the act requested is performed by the other party.
Enforceability: The promisor is bound to perform only after the promisee has completed the act.
Example: An example of a unilateral contract is a reward offer. For instance:

Party A offers a reward for the return of a lost dog.
Party B is not obligated to return the dog but will receive the reward if they do. In this case, Party A has made a unilateral promise (the reward), and Party B’s action (returning the dog) is the condition for Party A to perform.
Legal Framework: Unilateral contracts are also not explicitly defined in the Indian Contract Act, 1872, but the principles can be inferred from general contract law provisions. The essential aspect of unilateral contracts is that they are formed when one party performs an act in response to the offer, creating a binding obligation on the part of the promisor.

Therefore:

Bilateral Contracts: Both parties make promises and are obligated to perform their respective duties. These are the most common type of contracts and form the basis of many commercial agreements.
Unilateral Contracts: Only one party makes a promise, and the contract is completed only when the other party performs a specific act.
Understanding these types of contracts helps in navigating various legal situations and ensures that the obligations and expectations of all parties involved are clear. Each of these classifications helps in understanding the nature of different contracts and their implications under the Indian Contract Act, 1872.