CHAPTER 1

Contract and its Kinds (Continued)

CLASSIFICATION OF
CONTRACT
The contracts can be classified into following four categories;
1. By Enforceability
a. Valid contract
b. Void contract
i. Impossibility of performance
ii. Subsequent illegality
iii. Rejection of voidable contract
iv. Impossibility of depending event
c. Void agreement
d. Voidable contract
e. Unenforceable contract
f. Illegal agreement
CLASSIFICATION OF
CONTRACT (CONTD.)
2. By Formation
a. Express contract
b. Implied contract
c. Quasi contract
3. By Performance
a. Executed contract
b. Executory contract

4. By Parties
a. Unilateral contract
b. Bilateral contract
1. Classification of Contract by Enforceability:

a. Valid contract
When agreement fulfills basic essentials of contract.
If any party breaches agreement, the other party can file suit against him/her.
e.g. “A” promises to sell his car to “B” for Rs. 800,000.

b. Void contract
Not enforceable by law.
Contract that was valid at the time of its formation but with the passage of time becomes
unenforceable/ void due to certain reasons.
Benefit received by any party is bound to return it back to the other party.

The circumstances under which a contract becomes void are;

i. Impossibility of performance
Physically impossible to perform- Subject matter is destroyed or theft.
e.g. “C” agrees to sell his house to “B” after two days. The house is burnt the next day.
 ii. Subsequent Illegality
Contract becomes void due to change in law before the performance.
e.g. “C” agrees to sell 100 bags of wheat to “B”. Before delivery of wheat, the government puts a ban on
private trade of wheat.
iii. Rejection of Voidable Contract
The party whose consent is not free, refuse to perform.
e.g. “A” forcibly purchases “B” house for 40 Lakhs. The contract is voidable at the option of “B”.
iv. Impossibility of Depending Event
The performance of contingent contract becomes if the depending event does not occur.
e.g. “C” contract to give 1 lakh to “A”, if “A” gets admission in a particular college. “A” fails to get the
admission in that college.

c. Void Agreement
An agreement that is unenforceable from its formation, i.e. it is void ab-initio.
It lacks essentials to contract except free consent. Parties are not competent, consideration is
unlawful, object is unlawful.
e.g. “A” promises to buy bike from “B” who is a minor.
“C” promises to buy a dog from “B” for 10,000. the dog was dead before the agreement was
made but the parties were unaware.
d. Voidable Contract
A contract that is valid but that can be declared invalid at the request of one of the parties
because of a defect or illegality in making it.

The contract becomes voidable in following circumstances;

• When the consent of one or more parties is not free.
• When one party to the contract prevents the other from performing his promise, the contract becomes voidable
at the option of the party so prevented; and he is entitled to compensation from the other party for any loss
which he may sustain in consequence of the non-performance of the contract. (e.g. painting a house)
• When time should be of the essence of the contract and one party fails to perform his/her premise.

e. Unenforceable Contract
Contract not enforceable on the basis of technical defects such as absence of writing,
registration, requisite stamp etc.
e.g. “C” borrows Rs. 1 billion from “B” and makes a pronote on Rs. 10 stamp paper.
 f. Illegal Agreement
Agreement forbidden by law, or is fraudulent or involves injury to the person or property of another or court
regards it immoral or opposed to public policy.
A collateral agreement to illegal agreement is also void.
e.g. Lending money for smuggling or buying a car for bomb blast.

2. By Formation
a. Express contract
The agreement of the parties is expressed in words, either in oral or written form.
The terms of which are all clearly stated either orally or in writing, so there is no difficulty in understanding
the rights and obligations of the parties.
e.g. “A” tells on telephone to “B” that he wants to sell his car for 15 Lakhs and “B” informs “A” that he agrees
to buy the car.

b. Implied contract
It is a legally-binding obligation that derives from actions, conduct, or circumstances of one or more parties
in an agreement.
It arises when one person without request, render services.
e.g. A shoe shiner starts polishing your shoes and you allow him, is an implied contract.
 c. Quasi contract
A quasi contract is a court-imposed document designed to prevent one party from unfairly
benefiting at another party's expense, even though no contract exists between them. Also called
constructive contract.
e.g. Finding the lost goods and returning it back to the owner.

3. By Performance
a. Executed contract
A contract that has been fully performed by both parties.
e.g. “A” buys a book from “B” for 500. “B” delivers the book and “A” pays the price.

b. Executory contract
An executory contract is a contract that has not yet been fully performed.
e.g. “A” agrees to teach “B” next month and “B” promises to pay Rs. 800.
4. By Parties
a. Unilateral contract
When one party, the offeror, makes an offer. It could be an offer to the general public or to a specific
person.
The party making the offer, makes a promise in exchange for the act of performance by the other party.
e.g. “A” promises to pay Rs. 1000 to anyone who finds his lost bag.

b. Bilateral contract
A promise made by one party in exchange for the performance of some act by the other party.
e.g. Any sales agreement is an example of a bilateral contract.

After this lecture you all must be able to;

 Differentiate between agreement & contract.

 Differentiate between void agreement & void contract.
 Differentiate between illegal agreement & void agreement.
 Differentiate between void agreement & voidable contract.