Classification of Contract | Business Law - B Com PDF Download

Based on Validity

1. Valid Contract

• A valid contract is one that meets all the legal requirements and essential elements at the time of its creation. For instance, if S offers to sell his car to T for Rs. 2,00,000, and T agrees to the terms, it constitutes a valid contract.

2. Void Contract

• A void contract is one that is not enforceable by law because it lacks one or more essential elements required for a valid contract. For example, a contract between drug dealers to buy and sell illegal drugs is a void contract as it does not meet the legal criteria.

3. Voidable Contract

• A voidable contract is an agreement that is enforceable by law at the option of one or more parties involved. This type of contract arises due to factors such as coercion, undue influence, fraud, or misrepresentation. For example, if a person is pressured into signing a contract under threat, they have the option to void it.

4. Illegal Contract

• An illegal contract is one that is prohibited by law. While all illegal agreements are void, not all void agreements are necessarily illegal. Contracts that are immoral or against public policy are considered illegal. For instance, a contract for illegal activities is void from the beginning, whereas valid contracts can become void under certain circumstances.

5. Unenforceable Contract

• An unenforceable contract is one that cannot be enforced due to technical defects, such as the absence of written documentation or legal restrictions. If the parties involved choose to perform the contract, it is valid, but the court cannot compel them to do so if they refuse.

On the Basis of the Formation

1. Express Contract

• A contract is considered express when it is formed through words, either spoken or written. According to Section 9 of the Indian Contract Act, when a proposal or acceptance is made in words, the promise is said to be express. For instance, if P offers to sell his bicycle to Q for Rs. 1,000, and Q agrees, an express contract is formed.

2. Implied Contract

• An implied contract is one that is not explicitly stated but is understood through the conduct of the parties involved. When a proposal or acceptance is made without using words, the promise is considered implied. For example, when A boards a public bus, there is an implied contract that he will pay the bus fare.

3. Quasi Contract

• A quasi contract is one that is created by law, even in the absence of an actual contract. It is based on the principle that no one should be unjustly enriched at the expense of another. In other words, it is an obligation imposed by law on one party to another, regardless of any agreement between them.

4. Tacit Contract

• A tacit contract is inferred from the conduct of the parties involved. For example, when a person withdraws cash from an automatic teller machine or when goods are sold at an auction through the fall of a hammer, a tacit contract is in place.

On the Basis of Performance

1. Executed Contract

• An executed contract is one where both parties have fulfilled their obligations. For instance, if X agrees to buy a car from Y for cash and Y delivers the car immediately, the contract is executed.

2. Executory Contract

• In an executory contract, both parties have yet to fulfill their obligations. For example, if A agrees to buy B's bicycle by promising to pay cash on June 15, and B agrees to deliver the bicycle on June 20, the contract is executory.

3. Unilateral Contract

• A unilateral contract involves one party fulfilling their promise while the other party has yet to fulfill theirs. For instance, if X promises to pay Y Rs. 10,000 for goods to be delivered, and X pays the money but Y has not yet delivered the goods, it is a unilateral contract.

4. Bilateral Contract

• A bilateral contract is one where both parties commit to perform their respective promises. For example, if R offers to sell his Fiat car to S for Rs. 10,00,000 and S accepts the offer, R promises to sell the car, and S promises to buy it, making it a bilateral contract.