Kinds of contract Contract can be divided into three types 1) Acoording to enforceability 1) Valid contract : A valid contract is an aagreement

which is inforceable by law. An agreement becomes inforceable when all the essential s of a valid contract is are present. In a valid contract all the parties are responsible for the performance of a contract if one party breaks it the other has the right to to take action against it. 2) Voidable contract : An agreement which is inforceable by law at the option of or more of the parties thereto, but not at the option of the other to other, is a voidable contract. It generally happens when the consent of parties is not free. It is a valid contract until it is avoided by the party having rights to avoid it. Once it is avoided it becomes void. 3) Void contract. The word void means not binding in law. A contract which cannot be either party , is called a void contract . A contract which ceases to be enforceable . It is not enforceable from the very beginning. It is valid contract and binding in the parties when it is originally made but after its formation it becomes void due to certain reasons . 1) 2) 3) 4) Impossible of performance Subsequent illegality Rejection of a voidable contract. (free consent) Contingent contract when depending eventbecomes impossible.

5) Unenforceable contract : An unenforceable contract is one , which is valid but cannot be enforced in a court of law because of some technical defect such as absence of writing , registration , requisite stamp etc. when these defects are removed , the contract can be enforced. 5) Illegal agreement. The word illegal means against the law. An agreement is illegal when its performance is forbidden by any law of the country. Such an agreement can never become a contract. It is also void. An agreement is illegal and void if it is forbidden by law or is of such a nature that , If permitted , it would defeat the provision of any law or is fraudulent or it involves injury to the person r property of another or the court regards it as immoral, or opposed to public policy. II. ACCORDING TO FORMATION.

According to formation , a contract can be divided into following three kinds. 1. Express contract. Where the offeror acceptance is made in words spoken or written, it is an express contract . It can be defined as an express contract is one which the parties directly state the terms of the contract orally or in writing at the time the contract is made. 2. Implied contract. Where the offer or acceptance is made, otherwise than in words , it is an implied contract. Implied contract is made, which is not made by words , written or spoken but by the acts and conduct of the parties thereto. It arises when one person, without being requested to do so , renders services under circumstances indicating that he expects to be paid for them . and the other person , knowing such circumstances accepts the benefit of those services. 3. Constructive or quasi contract. Such a contract does not arise due to express or implied agreement between the parties but the law imposes a contract under certain circumstances . A Quasi contract is based upon the principle of Equity that a person shall not be allow to get benefit at the expense of other No man must grow rich out of another person s loss. It is not a contract in strict sense. It is an obligation which the law creates, in the absence of any8 agreement , when and because the acts of the parties or others have placed in the possession of one person money , pr its equivalent, under such circumstances that in equity and good conscience he ought not to retain it , and which in justice and fairness belongs to another. Duty , and not a promise or agreement or intention of the person sought to be charged. 1) 2) 3) 4) 5) Necessariessupplied to a person incapable of contracting or on his behalf. Suits for money had and received. Quantum Meruit.(as much earned) Obligation of a finder of goods Obligation of a person enjoying benefit of a non gratuitousact.

ACCORDING TO PERFORMANCE According to performance a contract can be dividing into following two kinds. 1. Executed Contract . Executed means that which is done . A contract is said to be executed when both the parties have completely performed their obligations . It means that nothing remains to be done by either party under the contract.

2. Executory contract. Executory means that which remains to be done . In an executory contract something remains to be done . In other words a contract is said to be executor y when both the parties to a contract have yet to perform their obligation. VOID AGREEMENT An agreement not enforceable by law is said to be void. The void agreement does not create legal relations among the parties and is void ab-ininto (from the beginning ). It is not recongnized by law . In case of void agreement there is absence of one or more essentials of valid contract except Free consent. Thus , an agreement with minor is void ab-ininto because a minor lacks the capacity to contract . Similarly , an agreement without consideration is void ab-ininto except the certain exceptions . When an agreement is discovered to be void , any preson who has received any advantage under such agreement is bound to restore it to be person from whom he received it. According both the parties will not be responsible for the performance of the agreement. DISCHARGE OF CONTRACT When the right and obligations arising out of a contract come to an end, the contract is said to be discharged or terminated . A contract may be discharged in any of the following ways. DISCHARGE BY PERFORMANCE Performance is the natural mode of discharge. When the parties to a contract perform their share of the promises, the contract is discharged. If only one of the several parties performs the promise, the alone is discharged. Performance may be: a)ACTUAL PERFORMANCE When each party to a contract fulfils the obligations arising under the contract according to the terms and conditions of the contract, it is called Actual performance of the contract and the contract comes to an end. b)OFFER OF PERFORMANCE OR TENDER when one of the parties to the contract offers to perform the contract but the other party does not accept it, there is offer of performance. It is called TENDER OR ATTEMPTED PERFORMANCE it is not a actual performance but is equivalent to actual performance .in case of offer of performance the promisor is then excused from performance and is

entitled to sue the promises for breach. The object of the tender is to show that the party was ready to perform the contract but was prevented from doing so by the other party. ESSENTIALS OF A VALID OFFER OF PERFORMANCE OR TANDER 1.it must be unconditional. if the tender is conditional, the other party is under no obligation to accept it. 2. It must be made at proper time and proper place. 3. It must be of the whole quality contracted for or of the whole obligation. 4. if the tender relates to delivery of goods, the promise must be given opportunity to check that the goods are according to contract. 5. It must be made by a person who is able to perform the promise. 6.If there are several joint promises , a tender to any one of them is valid. 7. In case of tender of money , exact amount should be tendered. 3. DISCHARGE BY AGREEMENT. A contract can be also be discharged by the fresh agreement between the same parties. A contract may be terminated by agreement in any of the following ways: a) Novation: it means replacement of an existing contract by another contract. In novation the parties may change .if the parties are not changed then the material terms of the contract must be altered in the new contract because mere variation of some of the terms of a contract is not novation but alternation. b) Alternation: It takes place when one or more of the terms of the contract are changed . If a material alternation in a written contract is made with the consent of all the parties the original contract is discharged by alternation and a new contract takes place. An alternation may be a change in amount of money , the rate of interest , or the name of the parties. Anlternation results in the discharge of the original contract. The difference between Novation AND Alternation is that in case of novation there may be a change of parties but in case of alternation parties remain the same and only terms of the contract are changed. c) Rescission: It means cancellation of contract by mutual consent. A consent may be cancelled by agreement between the parties at any time before it is discharged by performance. The cancellation of agreement releases the parties from their obligation arising out of the contract.

d) Remission: It means the acceptance of lesser sum than what was due from promisor . A person who has a right to demand the performance of contract may: 1) Remit or give up the whole or part of a dept. 2) Extend the time of performance Where a promise remits a part of the dept and gives a discharge for the whole dept on receiving a Smaller amount , such discharge is valid. e) Waiver: It means intentional abandonment of a right, which a person is entitled, to under a contract, whereupon the other party is released from his obligation. 4. DISCHARGE BY SUBSEQUENT IMPOSSIBILITY. a) Initial impossibility: An agreement to do impossibility act is void ab- initio. An agreement which is obviously impossible cannot be binding. b) Subsequent Impossibility: Sometimes, a contract capable to be performed after formation becomes impossible, or unlawful and as a result void. Doctrine of frustration or subsequent impossibility. It means that subsequent impossibility or illegality will make the contract void and the will be charged. A contract will remain valid, if the party to a contract feels difficulty in performing the contract. He cannot claim to be excused from performance has become burdensome, difficult or expensive. This is known as the DOCTRAIN OF FRUSTRATION OR DOCTRINE OF SUPERVEVING IMPOSSIBILITY. Specified Grounds of Frustration: a) Destruction of subject matter. When the parties make a contract for a particular subject matter, the contract is discharged if the subject matter is destroyed without the fault of the promisor or promise b) Failure of ultimate purpose. Sometimes the contract is entered into between two parties on the basis of occurrence of a particular state of things. If there is any change in the state which formed the basis of the contract, the contract is discharged. c) Death o f personal incapacity. Where the performance of a contract depends upon the personal skills, or qualification or the existence of a given person, the contract is discharged on the illness or in capacity or the death of that person. d) Change of a law. Contracts, which are lawful when made but become unlawful due to change in law, become impossible to be performed. A subsequent change in law may

render the contract illegal and in such cases the contract is deemed discharged. Impossibility created by law is valid excuse for non performance. e) Declaration of War. A contract entered into with an alien enemy during war is illegal and void ab-initio .contract entered into before the commencement of war is suspeneded during the war> However, such contracts may be revived after the war is over if the nature of the contract permits.

4 DISCYHAGE BY LAPSE OF TIME A contract is discharged by lapse of time. The LIMITATION ACT, 1908 lays down that a contract should be performed within a specified period. If the contract is not performed and no legal action is taken by the promise within the period of limitation, he is deprived of his remedy at law. The contract is terminated in such a case. 5 DISCHARGE BY OPERATION OF LAW A contract terminates by operation of law in the following ways. a)INSOLVENCY. Where the court declares a person as insolvent, such person is discharge from his liabilities incurred before his insolvency. b) MERGER. It takes lace when an inferior right available to a party merges into a superior right available to the same party under some other contract. As a result of merger the former contract stands discharged automatically. c)UNAUTHORIZED MATERIAL ALTERATION; where a party to the contract makes any material alteration in the contract, without the consent of the other party, the contract can be avoided by the other party. A material alteration is one, which changes the legal identity or character of the contract or the rights and duties of the parties to the contract. 6 DISCHARGE BY BREACH OF CONTRACT A contract must be performed according to its terms. But where the promisor fails to perform the contract according to the terms of the contract, there is a breach of contract by him. Breach of contract may be of two kinds; a)ACTUAL BREACH .it occurs when a party fails to perform a contract, when performance is due . But, if a party , who was failed to perform , he can do so after paying compensation , if time is not essence of contract.

b) Anticipatory Breach. In occurs a party to the contract communicates to the other party, his intention not to performance has arrived. It may happen in two ways. 1) Express Breach. In this case a party to the contract communicates to the other party, his intention not to perform the party, before the due date of performance has arrived. 2) Implied Breach . In this case a party to the contract does an act, which makes the performance of the contract impossible Effect of anticipatory breach. In anticipatory breach, the promise gets the following rights: 1. The promise is excused from performance. 2. He may treat the contract as rescinded and sue the other party for damages immediately. 3. He may ignore the conduct of promisor and wait for the time of performance and then sue the promisor. REMEDIES FOR BREACH OF CONTRACT Where a party breaks the contract by refusing to perform his promise, the breach s contract takes place. The following remedies are available to the aggrieved party against the guilty party. 1). Suits for rescission of the Contract. When one of the parties to a contract commits breach of contract. The other party is released from his obligation under the contract and can file suit for rescission of the contract . 2). Suits for Damages. The aggrieved party may sue for damages as well. The damages are awarded to compensate the injured person. Kinds of Damages: 1) Ordinary or general Damages: the injured party can recover from the guilty party damages for loss, which is the direct result of such breach. 2) Special Damages: These arises when a party makes a special contract through which he expects a large profits. 3) Examplary Damages : These are such damages, which are awarded in order to punish the guilty party for the breach and not to compensate injured party. 4) Liquidated Damages. Where a sum has been agreed between the parties then actual or agreed amount whichever is less would be awarded. 5) Normal Damages: When the aggrieved party suffers no loss , the court may award him nominal damages in recognition of his right.

INDEMINITY AND GUARANTEE Indemnity: A contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself or by the conduct of any other person , is called a contract of indemnity . PARTIES: INDEMNIFIER: The person who promises to make good the loss is called the indemnifier(promisor) INDEMNITY HOLDER: The person whose los is to be made good is called the indemnity holder or indemnified(promise). Rights of indemnity holder: 1). He can recover all damages which he may be compelled topay in respect of any suit filed against him. 2). He can recover express in respect of any suit filed by him with the authority of indemnifier. 3). He can recover all expenses which he may have paid under the terms of any compromise of any such suit, provided the compromise was made the consent of indemnifier. Rights of Indemnifier: It is well known principle of law that where one person has agreed to indemnify another, he will on making good the loss, be entitled to all the ways and means by which he person indemnified might have protected himself against or reimbursed himself for the loss. Guarantee: A CONTRACT TO PERFORM THE PROMISE OR DISCHARGE THE LIABILITY OF A THIRD PERSON IN CASE OF HIS DEFAULT . A contract of guarantee is made with the object of enabling a person to get a loan or goods on credit or an employment etc. It may be either oral or written. It is a promise to pay a dept owing by a third person in case the later does not pay . PARTIES: SURETY: The person who gives the guarantee is called the surety or guarantee

CREDITOR: The person to whom the guarantee is given. PRINCIPLE DEBTOR: The person for whom the guarantee is given. ESSENTIAL FEATURES: 1). Secondary contract. The principle contract exists between the principle debtor and the creditor and the contract between creditor and surety is a secondary contract. 2). Consideration: Anything done, or any promise made. For the benefit of the principle debtor, may be a sufficient consideration to the surety for giving guarantee. Essential of consideration must be fulfilled like free consent, etc. 3). Misrepresentation: A guarantee obtained by means of misrepresentation made by the creditor or with his knowledge and essent concerning a material part of the transavtion , is valid. 4). Writing not necessary: It is not necessary that contract of guarantee must be in writing. KINDS OF GUARANTEE: 1). SPECIFIC: The guarantee which is given for a single dept or transaction. It comes to an and as soon as the liability under the transaction ends. 2). CONTINUING GUARANTEE: A guarantee which extends to a series of transaction over a period of time. RIGHTS OF SURITY: 1). Against the creditor: a) right to securities: At the time of payment, can demand the securities, which the creditor has received from the principle debtor at the time of creation of contract. Whether the surety knows thee existence of such securities or not is immaterial. b)Right to claim set off, if any : he is entitled to the benefit of any set off or counter claim, which the principle debtor has against the creditor on respect of the same transaction. He is entitled to use the defenses of the debtor of the debtor against creditor. 2). Against Principle Debtor: a) Right to indemnity: b) Right of Subrogation:

3). Surety s right against co surities: a) Similar Amount: c) Different Amount : DISCHARGE OF SURETY FROM LIABILITY. A surety is Said to be discharge from liability when his liability comes to an end. It comes to an end in any of the following ways. 1). Notice of Revocation: 2). Death of Surety: 3). Change In Terms Of Contract: 4). Release or Discharge Of Principle Debtor: 5). Arrangement without Surety s Consent : 6). Credit s Act or Omission: 7). Loss of Surety: 8). Invalidation of the contract of guarantee: DIFFERENCE BETWEEN INDEMNITY AND GUARANTEE