Types of Contract

A. On the Basis of Creation or Formation

a. Express Contract
The Section 9 of the Act defines what is meant by the term express: “Promises, express and
implied —In so far as the proposal or acceptance of any promise is made in words, the promise
is said to be express.” This means that if a proposal or a promise is expressed by listing the terms
in words – in writing or orally is said to be an Express Contract as long as it gets acceptance
from the other party. The terms of the Express Contract are clearly stated either orally or in
writing. So the main aspect of the Express Contract is that the terms of the contract are expressed
clearly.
For example, consider the following:
A person A sends a text from his phone to person B, proposing to sell their bike for a cost of Rs.
10,000/-. The person B calls the first person and agrees to the terms of the promise.
This is an Express Contract as the terms have been stated clearly in oral as well as written form.
Note that the communications could be entirely oral or written.
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.
1. Written Contract
Written contracts provide more certainty for both parties than verbal contracts. They
clearly set out the details of what was agreed. It’s much safer to have something in
writing than to rely on someone's word. A written contract will give you more
certainty and minimise your business risks by making the agreement clear from the
outset. It's always better to have your contract in writing, no matter how small the job
is. Any contract with a hirer that involves a significant risk to your business should
always be carefully considered and put in writing. This is advisable even if it means
delaying the start of the work.
 X writes a letter to Y, I offer to sell my car for Rs. 100000 to you. Y send a
letter to Y, I am ready to buy your car for Rs. 100000. It is an express contract
made in writing.
2. Oral Contract
Oral contracts are spoken agreements that are sometimes legally binding. The problem proving
an oral contract is the lack of significant evidence. Oral contract cases often rely on the
performance of one or both parties that exhibits a clear confidence on the agreement. In general,
oral contracts are just as valid as written ones, but some jurisdictions either require a contract to
be in writing in certain circumstances (for example where real property is being conveyed), or
that a contract be evidenced in writing (although the contract itself may be oral). An example of
the latter is the requirement that a contract of guarantee be evidenced in writing, which is found
in the Statute of Frauds.
Similarly, the limitation period prescribed for an action may be shorter for an oral contract than it
is for a written one. The term verbal contract is sometimes incorrectly used as a synonym for oral
contract. However, a verbal contract is one that is agreed to using words, either written or
spoken, as opposed to an implied contract.[1]
 A says to B, will you buy a car for Rs. 1000000? A says to B, I am ready to
buy your car for Rs. 1000000. It is an express contract made orally.
b. Implied Contract
The second part of section 9 of the Act defines what is meant by an implied contract: “In so far
as such proposal or acceptance is made otherwise than in words, the promise is said to be
implied.”
Going by the definition we can say that a contract in which the terms of the agreement are not
expressed in written or oral form is an implied contract. Let us see an example to understand this.
For example, you board a rickshaw and the driver starts to drive. You tell the driver the address
where he has to drop you. The driver stops and you pay him.
As you can see this is a contract but did you and the driver express any of the terms in written
and oral form? No, the intent was implied by your conduct and thus there was an implied
contract.
1. Implied in Fact
An implied-in-fact contract ("implied contract") is a contract agreed by non-verbal conduct,
rather than by explicit words. As defined by the United States Supreme Court, it is "an
agreement 'implied in fact'" as "founded upon a meeting of minds, which, although not embodied
in an express contract, is incidental, as a fact, from conduct of the parties showing, in the light of
the surrounding circumstances, their tacit understanding."
Although the parties may not have exchanged words of agreement, their actions may indicate
that an agreement existed anyway.
For example, when a patient goes to a doctor's appointment, his actions indicate he
intends to receive treatment in exchange for paying reasonable/fair doctor's fees.
Likewise, by seeing the patient, the doctor's actions indicate he intends to treat the
patient in exchange for payment of the bill. Therefore, it seems that a contract
actually existed between the doctor and the patient, even though nobody spoke any
words of agreement.
2. Implied in Law
A quasi-contract (or implied-in-law contract or constructive contract) is a fictional contract
created by courts for equitable, not contractual, purposes. A quasi-contract is not an actual
contract, but is a legal substitute formed to impose equity between two parties. The concept of a
quasi-contract is that of a contract that should have been formed, even though in actuality it was
not. It is used when a court finds it appropriate to create an obligation upon a non-contracting
party to avoid injustice and to ensure fairness. It is invoked in circumstances of and is connected
with the concept of restitution.
Generally the existence of an actual or implied-in-fact contract is required for the defendant to be
liable for services rendered, and a person who provides a service uninvited is an officious
intermeddler who is not entitled to compensation. They are used as remedies for unjust
enrichment, management of another's affairs (negotiorum gestio), or payment of a thing not due
(indebiti solutio).
For example, suppose that a doctor X dining in a restaurant finds A lying unconscious on the
bathroom. X provides medical aid that saves A's life. Although the unconscious A did not
explicitly asked for the medical aid and was not aware that the aid had been rendered, A received
care of a doctor, and the requirements for a quasi-contract were fulfilled. In such a situation, the
law will impose a quasi-contract.

c. Formal Contract
 A formal contract is a contract which is formatted by satisfied all the essentials
formalities of a contract. Formal contracts are legally worded contracts in which all the
terms and conditions of the contract are laid down and the same bears the signatures of at
least two witnesses who can stand in evidence to prove the contents of the contract. Such
contracts are well entertained in the court of law and are enforceable with assistance of
the court.
For example: After negotiations over the sale of a land, X and Y finally reached a price. X
offered Y Rs20,00,000 for the land and Y accepted the offer.
Y typed up a written agreement, including:
 X's offer of Rs20,00,000
 Y's acceptance of the offer
 The collection of Y's Rs200000, also known as consideration
 The actual description, including lot, block, city, state, and anything included in the sale
 Date and signature lines, and
 Transfer of the title, changing owners from Y to X
Both X and Y were, of course, of sound mind, and the contract contained terms that were lawful.
What they had was a formal contract, which is legally binding and enforceable. If X changed
mind and decided not to pay agreed amount for the land, Y would have a strong breach of
contract case against X for failing to take action on the promises of a contract.
d. Informal Contract
An informal contract is a contract which is failed to satisfy all or any of the essentials
formalities of a contract. Informal contract is basically an understanding between two
parties to the contract may be verbal or written but in which the essential requirements of
seal of the parties whichever it may be and signatures of witnesses are not appended. The
said sort of contracts will not stand enforceable by a court unless there is very strong
evidence that the contract had been agreed to with mutual consent.
Suppose A promises to pay B in three years Rs50000, with interest at 6%. The promise is
not in writing. This was an agreement which A and B agreed upon and is an informal
one.
If A dies it will be difficult for B to prove that the promise was ever made, unless there
were others who heard it made. Or the parties may disagree over the amount of the
principal or the interest, or whether the interest was to be simple or compound. The
mistake may be an honest one, or one party may be trying to gain some advantage by
deliberate falsification. Even witnesses may disagree - a man's memory is not as reliable
as a memorandum in writing over his own signature.
Another example may be of ordering food from a restaurant that has an option for home
delivery. To elaborate when A picks up his phone and orders food and the order taker at
the other end agrees to accept the order, whats happening is both A and Restaurant are
entering in an oral agreement. The terms are simple, A wants food in exchange for
payment, both reach an oral agreement, call after delivery, payment and both part ways.
The informal contract is thus satisfied.
e. Quasi Contract
They are not contracts in the sense that no agreements are made between any of the parties. In
fact, there is no contract prior to some court order. Let us first see an example and then we will
get a clear idea of what we mean by Quasi-Contract.
For example, a bank mistakenly transfers a large amount of money into your account. Now there
is no written or oral or any sort of agreement between you and the bank but the money doesn’t
belong to you.
You will have to return the money even if you don’t want to. The bank will approach the court
and the court will issue an order to return the money, which is becoming a quasi-contract.
So here we see that a quasi-contract is not agreed upon by the two parties but it comes into
existence by a court order. It is thus enforced by the law which also creates it. Most of the times
the quasi-contract is created to stop any of the parties from taking unfair advantage of the other.
Consider this example. A has a yard and he commissioned a person to build a small door for his
car, within a day. A comes home that day to find out that the mason has made a big door which
is very expensive. While the door is expensive at the same time it is very good for the value of
the property. Now, what would happen if both approach the court?
The courts usually enforce what is known as the “Quantum Merit” which means “as much as is
deserved.” Since the work was done also increased the value of your property, it would be
immoral if the worker doesn’t get paid for the extra work and materials. The payment might be
lesser than the normal cost but the quantum merit will apply. This is a quasi-contract.

f. Bilateral contract : A Promise for Promise

A bilateral contract is one that has two parties. It is a traditional type of contract most
commonly known and occurring. Here both parties agree to the terms of the agreement
and thus enter into a contract. Hence it is also known as a reciprocal contract
In bilateral contracts, both parties have usually agreed to a time frame to carry out the
said contract. Say for example the contract of sale of a house. The buyer pays a down
payment and agrees to pay the balance at a future date. The seller gives possession of the
house to the buyer and agrees to deliver the title against the specified sale price. This is a
bilateral contract.

g. Unilateral contract: A Promise for an Act.

As the name suggests these are one-sided contracts. It usually comes into existence when
only one party makes a promise, which is open and available to anyone who wishes to or
can fulfil the said promise. The contract will only be fulfilled once someone fulfils the
promise.
 A unilateral contract is one in which only one party has to fulfill his obligation at the
time of formation of the contract, the other party having fulfilled his obligation at the
time of the contract or before the contract comes into existence.

Example:  

                   A permits a railway coolie to carry his luggage and place it in a carriage. A

contract comes into existence as soon as the luggage placed in the carriage. But by that
time Coolie already performed his obligation. Now only A has to fulfill his obligation
i.e., pay the reasonable charges to the Coolie.
Let us see an example. Alex lost his bag pack on the metro. So he decided to announce a
reward of Rs 1000/- to anyone who finds and returns his bag with all its contents. Here
the is only one party to the contract, namely Alex. If someone finds and returns his bag
he is obligated to pay the reward. This is a unilateral contract.
B. On the Basis of Enforceability
a. Valid Contract
An agreement which satisfied all the essential of a contract and which is enforceable
through the court is called valid contract.
Example: X and Y are adults and have been in a long term relationship, X offers to
marry Y. Y accepts X’s offer. This is a valid contract.
b. Void Contract
An agreement which is failed to satisfied all or any of the essential element of a contract and
which is not enforceable by the court is called void agreement. An agreement not enforceable by
law is said to be void. A void agreement has no legal fact. It confers no right on any person and
created no obligation. Void contracts lack an element needed to make a valid contract. It is void
immediately because it was never legally valid in the first place.
A void contract is a contract which is not enforceable by law. As a matter of fact, a void contract
is not at all a contract, as it is without any legal effect.
The term void contract is defined in Sec2 (j) of the Indian Contract Act, which reads as under:
“A contract which ceases to be enforceable by law becomes void when it ceases to be
enforceable “. A void contract is one that has no effect due to some fundamental defect.
Generally no property can pass under a void contract. Contracts contrary to public policy, for
example, to restrain another from pursuing their business, are usually void.
Example: An agreement made by a minor.
X and Y are adults and have been in a long term relationship, X offers to marry Y. Y accepts X’s
offer. Later on, Y dies this contract was valid at the time of its formation but became void at the
death of Y.
c. Voidable Contract
These types of Contracts are defined in section 2(i) of the Act: “An agreement which is
enforceable by law at the option of one or more of the parties thereto, but not at the
option of the other or others, is a voidable contract.” This may seem difficult to wrap
your head around but consider the following example:
Suppose a person A agrees to pay a sum of Rs. 10,0000 to a person B for an antique
chair. This contract would be valid, the only problem is that person B is a minor and
can’t legally enter a contract.
So this contract is a valid contract from the point of view of A and a “voidable” contract
from the point of view of B. As and when B becomes a major, he may or may not agree
to the terms. Thus this is a voidable contract.
A voidable contract is a Valid Contract. In a voidable contract, at least one of the parties
has to be bound to the terms of the contract. For example, person A in the above
example.
The other party is not bound and may choose to repudiate or accept the terms of the
contract. If they so choose to repudiate the contract, the contract becomes void.
Otherwise, a voidable contract is a valid contract..
Example: contracts brought about by coercion or undue influence or misrepresentation or fraud.
Another example of voidable contract is a marriage contract entered into by a person induced by
misrepresentations regarding the spouse’s identity. X and Y are adults and have been in a long
term relationship, X offers to marry Y. Y accepts X’s offer. After their marriage Y finds out that
X had lied about his entire personal history, their marriage can be voidable given the fact that Y
wants to repudiate, otherwise their contract is still a valid one.

d. Unenforceable Contract:
 An unenforceable contract is one which cannot be enforced in the Court of Law because
of some technical defect such as absence of writing or where the remedy has been barred
by lapse of time. Such contracts can be enforced if the technical defect involved is
removed. The Contract may be carried out by the parties concerned but in the event of
breach or repudiation of such a contract, the aggrieved party shall not be entitled to the
legal remedies.
For example, A agrees to sell to B 100kgs of rice for 10,000/-. But there was a huge
flood in the states and all the rice crops were destroyed. Now, this contract is
unenforceable and cannot be enforced against either party.

The two types of unenforceable contracts are void and voidable contracts. Void contracts
lack an element needed to make a valid contract. It is void immediately because it was
never legally valid in the first place. Voidable ones are only unenforceable at the request
of one of the parties. Though voidable contracts contain all of the legal elements of a
valid contract, when some outside factor is applied to the circumstances surrounding the
making of the contracts, the court can decide it is unenforceable.
C. On the Basis of Performance
a. Executed Contract
b. Executory Contract
c. Partial Executed and Partial Executory Contract