Classification of Contract

Synopsis

  1. Classification on the Basis of Validity or Enforceability
    • Valid Contract (Section 10)
    • Voidable Contract (Section 2(i) and Sections 19, 19A)
    • Void Agreement/Contract (Section 2(g) and 2(j), and Sections 24-30, 56)
    • Illegal Agreement (Section 23)
  2. Classification on the Basis of Formation
    • Express Contract (Section 9)
    • Implied Contract (Section 9)
    • Quasi-Contract (Sections 68-72)
  3. Classification on the Basis of Performance
    • Executed Contract (Implied)
    • Executory Contract (Implied)
    • Contingent Contract (Section 31)

Classification of Contracts under the Indian Contract Act, 1872

Introduction

According to Section 2(h) of the Indian Contract Act, 1872:

“An agreement enforceable by law is a contract.”

All contracts are agreements, but all agreements are not contracts. Contracts can be classified for easier understanding of their enforceability, formation, and performance.

1. Classification Based on Validity or Enforceability

Valid Contract:

A Valid Contract is an agreement that is legally enforceable. It meets all the essential elements of a contract as laid down in Section 10 of the Indian Contract Act (e.g., offer, acceptance, lawful consideration, competent parties, free consent, and lawful object).

Example: A agrees to sell his house to B for ₹50,00,000, and both are major, of sound mind, and freely consent to the terms. This is a Valid Contract.

Voidable Contract:

Section 2(i) of The Indian Contract Act defines 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;”.

This right arises where the consent of a party is not free (Section 14), typically due to Coercion (Section 15), Undue Influence (Section 16), Fraud (Section 17), or Misrepresentation (Section 18).

Example: A threatens to shoot B if B does not sell his car for a low price. B agrees. The contract is voidable at B’s option due to coercion.

Void Agreement:

Section 2(i) of The Indian Contract Act defines Void Agreement: “An agreement not enforceable by law is said to be void. It is void ab initio (from the very beginning).

This includes agreements with unlawful objects (Section 23), agreements in restraint of trade (Section 27), marriage (Section 26), legal proceedings (Section 28) or agreements for uncertainty (Section 29) or agreements by way of wager (Section 30).

Example: An agreement between A and B to share the profits of an illegal smuggling operation is a Void Agreement.

Void Contract:

Section 2(j) of The Indian Contract Act defines Void Contract: “A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.”

It was valid when entered into but becomes void later due to a subsequent event, such as impossibility of performance (Section 56) or a change in law.

Example: A contracts to sell 100 bags of wheat to B, but before the sale can be completed, the entire stock is destroyed by fire. The contract becomes a Void Contract due to impossibility.

Illegal Agreement:

Though not explicitly defined, an Illegal Agreement is one whose object or consideration is unlawful. Such agreements are prohibited by law or are opposed to public policy (Section 23). All illegal agreements are void, but all void agreements are not necessarily illegal.

2. Classification Based on Formation

Express Contract:

An Express Contract is one where the proposal and acceptance forming the agreement are made in words (spoken or written), as implied by Section 9. The terms are explicitly stated by the parties.

Example: A writes an email to B offering to buy B’s books for ₹5,000, and B replies, “I accept your offer.”

Implied Contract:

An Implied Contract arises when the proposal or acceptance is made otherwise than in words, inferred from the conduct of the parties or the circumstances of the case (Section 9).

Example: A boards a public transport bus. There is an implied contract that A will pay the legal fare for the journey.

Quasi-Contract:

These are not contracts by agreement but are obligations imposed by law to prevent unjust enrichment. They are relations resembling those created by contract, dealt with in Chapter V (Sections 68-72).

Example: A mistakenly delivers goods to B’s house instead of C’s. B, the recipient, is bound to restore the goods to A or pay for them (Section 72).

3. Classification Based on Performance

Executed Contract:

An Executed Contract is one where both parties have completely fulfilled their respective obligations under the contract. Performance has been completed.

Example: A delivers a television to B, and B pays the price in full immediately.

Executory Contract:

An Executory Contract is one where the obligation on the part of one or both of the parties is yet to be performed. This may be a Bilateral Contract (both parties are yet to perform) or a Unilateral Contract (only one party is yet to perform, as the other has already performed).

Example: A promises to paint B’s portrait next month, and B promises to pay the fee upon completion. The contract is Executory as both obligations are pending.

Contingent Contract:

Section 31 of The Indian Contract Act defines Contingent Contract: “A “contingent contract is a contract to do or not to do something, if some event, collateral to such contract, does or does not happen.”

Example: A contracts to pay B Rs. 10,000 if B’s house is burnt. This is a contingent contract.