Classification of Contract

CLASSIFICATION OF CONTRACTS
Contracts may be classified into different categories depending upon their

enforceability or validity, mode of creation or formation and extent of execution
or performance.
A. CLASSIFICATION OF CONTRACTS ON THE BASIS OF
ENFORCEABILITY
1. Valid Contracts: An agreement enforceable at law is a valid contract. An
agreement becomes a contract when all the essentials of a valid contract as laid
down in Section 10 are fulfilled. For example, A offers to sell his house for Rs.
10 lakhs to B and B agrees to buy it for this price is a valid contract.
Agreements falling short of legal requirements of Section 10 are Invalid
contracts. These are:
2. Void Contract: An agreement which was legally enforceable when entered
into but which has become void later on due to certain reasons such as
supervening impossibility of performance or illegality are known as void
contracts for e.g. when a war breaks out between the importing country and
exporting county.
3. Void Agreements: According to Section 2 (g), an agreement which is not
enforceable by law by either of the parties is said to be void. A void agreement
does not create any legal rights or obligations. It is void ab initio, i.e., from its
very inception, for example, an agreement without consideration or with a
minor.
4. Voidable Contract: 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 [Sec. 2 (i)]. This happens when the essential element of free
consent in a contract is missing. When the consent of a party to a contract is not
free, i.e., it is caused by coercion, undue influence, misrepresentation or fraud,
the contract is voidable at his option (Secs. 19 and 19-A). Thus, a voidable
contract is valid and enforceable until it is repudiated by the party entitled to
avoid it.
5. Unenforceable Contract: An unenforceable contract is one which cannot be

enforced in a court of Law because of some technical defect such as absence of
writing or where the remedy has been barred by lapse of time. 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 will not entitle to the legal remedies.
Such contracts will not be enforced by the courts until and unless the defect is
rectified.
6. Illegal Contracts: A contract which is either prohibited by law or otherwise
against the policy of law is an illegal agreement. It is void ab initio. Thus, a
contract to commit dacoity is an illegal contract and cannot be enforced at law.
All illegal agreements are void but all void agreements or contracts are not
necessary illegal.
B. CLASSIFICATION OF CONTRACTS ON THE BASIS OF FORMATION

A contract may be made in writing or by word of mouth or inferred from the
conduct of the parties or the circumstances of the case. These are the modes of
formation of a contract. Contracts may be classified according to the mode of their
formation as follows:
1. Express Contract: If the terms of a contract are expressly agreed upon
(whether by words spoken or written) at the time of formation of the
contract, the contract is said to be an express contract. Where the offer or
acceptance of any promise is made in words, the promise is said to be express
(Sec. 9) and the resulting contract an express contract.
2. Implied Contract: Where the proposal or acceptance is made otherwise than in
words, it is an implied contract. An implied contract is one which is inferred
from the acts or conduct of the parties or course of dealings between them. So,
where a person employs another to do some work, the law implies that the
former agrees to pay for the work.
3. Constructive or Quasi-Contract: A quasi-contract is not a contract at all. It is
a contract in which there is no intention on either side to make a contract, but
the law imposes a contract. In such a contract, rights and obligations arise not
by any agreement between the parties but by operations of law. It rests on the
grounds of equity that “a person shall not be allowed to enrich himself unjustly
at the expense of another”. For example, a finder of lost goods is under an
obligation to find out the true owner and return the goods.
4. E-Com Contracts/Contracts over Internet: An E-Commerce contract is one
which is entered into between two parties via internet. In electronic commerce,
different parties/persons create networks which are linked to other networks
through EDI (Electronic Data Inter-change). This helps in expanding the area of
operation in commercial transactions for any person using electronic mode.
These are known as EDI contracts or cyber contracts or mouse click contracts.
C. CLASSIFICATION OF CONTRACTS ON THE BASIS OF

PERFORMANCE
To the extent to which the contracts have been performed, these may be classified
as
1. Executed Contract: ‘Executed’ means that which is done. An executed contract
is one where both the parties have performed their respective obligation or
carried out the terms of the contracts. In other words, it is a completed contract.
For example, A sells a T.V set for Rs. 30,000 to B. B pays the price and A hands
over TV set to B.
2. Executory Contract: ‘Executory’ means that which remains to be carried
into effect. An executory contract is one in which the contract is yet to be
performed either wholly or partially or one or both the parties have yet to
perform their obligations. For example, A grees to make furniture for B for Rs.
20,000. A has yet to make furniture and B has not made the payment. So, both
A and B are yet to perform their obligations. Suppose A has made the furniture
but B has yet to make payment, it is executed on A’s part but executor on B’s
part. On the basis of execution, the contracts may also be classified as follows:
3. Unilateral Contract: A unilateral or one-sided contract is one in which only
one party has to fulfill his obligation at the time of the formation of the
contract, the other party having fulfilled his obligation t the time of the
contractor before the contract comes into existence. Such contracts are also
known as contracts with executed consideration. For 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 is placed in the carriage. But by that time
coolie has already performed his obligation. Now only A has to fulfil his
obligation, i.e., pay the reasonable charges to the coolie.
4. Bilateral Contract: A bilateral contract is one in which the obligations on the
part of both the parties to the contract are outstanding at the time of the
formation of the contract. In this sense, bilateral contracts are similar to
executory contracts and are also known as contracts with executory
consideration.

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CLASSIFICATION OF CONTRACTS

Contracts may be classified into different categories depending upon their

5. Unenforceable Contract: An unenforceable contract is one which cannot be

B. CLASSIFICATION OF CONTRACTS ON THE BASIS OF FORMATION

C. CLASSIFICATION OF CONTRACTS ON THE BASIS OF

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