TYPES OF CONTRACT

CONTRACT:

Contract is an agreement enforceable by law. Between two or

more parties for the doing or not doing of something specified.
Contracts can also be classified according to performance. A contract
can be either executed or executor. An executed contract is where
one party has performed all that is required to be done according to
the contract. For example, Alan delivers one tonne of wood to Brian.
Alan has performed his part of the contract, now it remains for Brian
to pay the price. An executor contract is a contract where both parties
still have obligations to perform under the contract.

CLASSIFICATION OF CONTRACT:

Contract can be classified into five broad divisions namely,

1. The method of formation of a contract

2. The time of performance of contract
3. The parties of the contract
4. The method of formalities of the contract
5. The method of legality of the contract

THE METHOD OF FORMATION OF A CONTRACT:

Under the method of formation of a contract may be three kinds

 Express contract
 Implied contract
 Quasi contract
EXPRESS CONTRACT:

Express contract is one which expressed in words spoken

or written. When such a contract is formal, there is no difficulty in
understanding the rights and obligations of the parties. An express
promise results in express contract. A promise is said to be an express
promise, when the offer or acceptance of any promise is made in
words.

IMPLIED CONTRACT:

An implied contract is one for which the proposal or acceptance

is made otherwise than in words. Where the proposal or acceptance of
any promise is made otherwise than in words, the promise is known
as implied promise. Implied contracts are inferred from the
circumstances of the case and conduct of the parties.

For example, when A takes a cup of milk in a hotel, there is an

implied contract.

QUASI CONTRACT:

There are certain dealings which are not contracts strictly,

though the parties act as if there is a contract. The contract Act
specifies the various situations which come within what is called
Quasi contract.

For example, A trader, leaves certain goods by mistake at B’s house.

B must either return the goods or pay the price.

THE TIME OF PERFORMANCE OF CONTRACT:

Under the method of the time of performance of contract may be two

kinds

 Executed Contract
 Executory Contract
EXECUTED CONTRACT:

There are contracts where the parties perform their obligations

immediately, as soon as the contract is formed.

For example, A agrees to sell a sofa set to B. A has delivered the sofa
set and B has paid the price.

EXECUTORY CONTRACT:

In this contract the obligations of the parties are to be performed

at a later time.

THE PARTIES OF THE CONTRACT:

Under the method of the parties of the contract may be two kinds

 Bilateral Contract
 Unilateral Contract

BILATERAL CONTRACT:

There must be at last two parties to the contract. Therefore all

contracts are bilateral or multilateral. A contract is said to be a
bilateral contract where the obligations of both the parties to the
contract are pending at the time of formation of the contract. In this
type of contract, a promise on one side is exchanged for a promise on
the other.

For example, A promises to stitch a blouse and B promises to pay

Rs.30. Here A promises to stitch the blouse and B promises to pay.
Thus each party is both a promisor and a promisee.

UNILATERAL CONTRACT:

It is also called as one-sided contract. In a unilateral contract,

only one party has to satisfy his obligation at the time of the formation
of it, the other party having fulfilled his obligation at the time of the
contract or before the contract comes into existence.

For example, A takes a public auto to go to Mount Road. A contract

comes into existence as soon as A was dropped in Mount Road. By
that time, auto man has fulfilled his obligation, only A has to fulfil his
obligation i.e. paying the auto- man.

THE METHOD OF FORMALITIES OF THE CONTRACT:

Under the method of the method of formalities of the contract may

be two kinds

 Formal contract
 Informal contract
FORMAL CONTRACT:

A formal contract is a contract which is formatted by satisfied

all the essentials formalities of a contract. A formal contract is one
which is entered into in a particular or prescribed form. It is in writing
and is to be signed, sealed and delivered by the parties. In addition
witness and attestation may also be necessary. Formal contracts can
be sub-divided into:

(a) Contracts of record which may take the form of a judgement of a

court or recognizance. A court judgement on being recorded is called
a contract of record. Recognizance is a written acknowledgement of
debt due to the Crown or the State.

(b) Contracts under seal are written documents signed, sealed and
delivered by the parties. Such a contract is based on form alone. No
consideration is necessary in such contract.
INFORMAL CONTRACT:

An informal contract is a contract which is failed to satisfy all or

any of the essentials formalities of a contract.

THE METHOD OF LEGALITY OF THE CONTRACT:

Under the method of the method of legality of the contract may be

five kinds

1. Valid Contract
2. Void Agreement
3. Void able Contract
4. Unenforceable Agreement
5. Illegal Agreement

VALID CONTRACT:

An agreement which satisfied all the essential of a contract and

which is enforceable through the court is called valid contract.

For example, X offers to marry Y, Y accepts X offer. This is a valid

contract.

VOID CONTRACT:

The term void contract is described as under section 2(j) of

I.CA, 1872, a contract which cases to be enforceable by law becomes
void when it ceases to be enforceable. In other words, a void contract
is a contract which is valid when entered into but which subsequently
became void due to impossibility of performance, change of law or
some other reason.

For example, X offers to marry Y, Y accepts X offer. Later on Y dies

this contract was valid at the time of its formation but became void at
the death of Y.
Void Agreement: According to Section 2(g), an agreement not
enforceable by law is said to be void. Such agreements are void which
means that they are unenforceable right from the time they are made.
E.g. in agreement with a minor or a person of unsound mind is void
because a minor or a person of unsound mind is incompetent to
contract.

VOID ABLE CONTRACT:

An agreement which is enforceable by law at the open of one or

more parties of the contract but not at the open of the other or others
is a void able contract. A void able contract is one which can be
avoided and satisfied by some of the parties to it. Until it is avoided, it
is a good contract.

For example, a contract is treated as voidable at the option of the

party whose consent has been obtained under influence or fraud or
misinterpretation. If, X threatens to kill Y, if he does not sell his
house for Rs. 1 lakh to X. Y sells his house to X and receives
payment. Here, Y consent has been obtained by coercion and hence
this contract is void able at the option of Y the aggrieved party. If Y
decides to avoid the contract he will have to return Rs. 1 lakh which
he had received from X. If Y does not exercise his option to repudiate
the contract within a reasonable time and in the meantime Z purchases
that house from X for 1 lakh in good faith. Y cannot repudiate the
contract.

UNENFORCEABLE CONTRACT:

It is contract which is actually valid but cannot be enforced

because of some technical defect (such as not in writing, under
stamped). Such contracts can be enforced if the technical defect
involved is removed.

Unenforceable Agreement: An Unenforceable Agreement is one

which cannot be enforcing in a court for its technical and formal
defect.
For example, An agreement required by law to register but not
resisted. Because, that agreement with not satisfied stamp.

ILLEGAL AGREEMENT:

An illegal agreement is one the object of which is unlawful.

Such an agreement cannot be enforced by law. Thus, illegal
agreements are always void. (i.e. void from the very beginning)

For example, X agrees to pay Rs. 1 lakh when Y kills Z. Y kills and
claims only Rs. 0.5 lakh. Y cannot recover from X because the
agreement between X and Y is illegal and also its object is unlawful.

Thus the different type’s contracts are classified under

administration of justice. Where managers should know these things
while they are under certain circumstances of lawful difficulties in an
organization.