PRESENTATION ON:

KINDS OF CONTRACTS
ON THE BASIS OF
ENFORCEABILITY
PREPARED BY :
PALLVI ARORA
R.NO.15
SUBJECT:LEGAL ASPECTS OF
BUSINESS
 LAW OF CONTRACTS
 An introduction
 WHAT IS A CONTRACT ?
A contract is an agreement to do or not to
do an act. It is a legally binding
agreement, which is enforceable by law.

Section 2(h) of the Contract Act defines

contract as “an agreement enforceable by
law”.
 DEFINITIONS
According to Salmond “Contract is an
agreement creating and defining
obligations between the parties”.

According to Sir Fredrick Pollock “Every

agreement and promise enforceable at law
is a contract”.
2 ESSENTIAL PARTS OF
CONTRACT

ITS ENFORCEABILITY
AT LAW

CONTRACT

AN
AGREEMENT
 AN AGREEMENT:
Section 2(e) defines an agreement as
“every promise or every set of promises
forming the consideration for each other”.

Section 2(b) defines a promise as

“ a proposal when accepted becomes a
promise”.
 ENFORCEABILITY AT LAW:
Creation of LEGAL RELATIONS and not
merely relations which are social or
domestic in nature

The leading case is:

Balfour Vs Balfour (1919)
 CLASSIFICATION OF
CONTRACTS

The classification of contracts is done on the

basis of :
1.Enforceability / Validity.
2.Formation .
3.Performance.
CONTRACTS ON THE BASIS OF
ENFORCEABILITY / VALIDITY
1.Valid Contracts.
2.Void Contracts.
3.Void Agreements.
4.Voidable Contracts.
5.Unenforceable Contracts.
6.Illegal Contracts.
CONTRACTS ON THE BASIS OF
FORMATION

1.Express Contracts.
2.Implied Contracts.
3.Quasi Contracts.
 CONTRACTS ON TE BASIS OF
PERFORMANCE

1.Executed Contracts.
2.Executory Contracts
Or
 Unilateral Contracts.

 Bilateral Contracts.
 1.VALID CONTRACT
An agreement
+ = CONTRACT
Enforceability
At Law

Contract + Essentials of a valid= VALID

Contract under CONTRACT
Section 10
Essentials of a valid contract under
Section 10 are :
 Offer & Acceptance.
 Intention to create legal relationship.
 Lawful Consideration.
 Capacity Of Parties.
 Free Consent.
 Lawful Object.
 Certainity Of Meaning.
 Possibility of Performance.
 Not declared to be illegal or void.
 Legal formalities.
 EXAMPLE:
A offers to sell his house to B for Rs.5 lakhs.B
agrees to buy it for this price.
This is a VALID CONTRACT

Agreements Not fulfilling INVALID

the essentials CONTRACTS
+ Legal
requirements of
Section 10

*A contract to enter into a contract is however not

a contract.
 2.VOID CONTRACT
Legal Supervening
Enforceability VOID impossibility
At the time when of
entered performance

EXAMPLE:A contract between citizen of India

& Pakistan is valid at the time of peace but
becomes void if a war breaks out between
the 2 countries.
 A void contract is not necessarily unlawful
but it is destitute of legal effects.
 Such a contract will not be enforced by
law.
 It can’t be made valid by the parties.
 3.VOID AGREEMENT
According to Section 2(g) of the Contract
Act
“an agreement which is not enforceable by
law by either of the parties is void”.

It is void ab initio,i.e from its very inception.

EXAMPLE:
1.An agreement without consideration..
2.An agreement with a minor.
 VOID CONTRACT & VOID
AGREEMENT:DISTINGUISHED
VOID VOID
CONTRACT AGREEMENT
*A contract does *No contract comes

come into existence into existence & it

but subsequently is an agreement
ceases to be not enforceable
enforceable by law at law.

*An agreement which becomes illegal in the course of action

is a void contract while a contract which is null and void
ab initio is a void agreement.
 4.VOIDABLE CONTRACT
According to Section 2(i)
“an agreement which is enforceable by law
at the option of one or more of the parties
but not at the option of other or others is
a voidable contract”.

Note that the word CONTRACT is used and

not just an AGREEMENT.
 Rights and duties are created.
 Contract is valid until the option to avoid it

is exercised by the person whose consent

to the agreement was not free but was
obtained by
- Coercion.
- Fraud.
- Undue influence.
- Misrepresentation.
 The party who induced the consent cannot
take the advantage of his own fraud.
 Validity & Until
Enforceability repudiated by
Of the Voidable the party
Contract entitled to avoid it

This party is not bound to repudiate it but

may affirm it, in that case the other party
remains bound to carry it on as agreed
 EXAMPLES :
1. A, a person of weak intelligence made a gift of
his entire property to B, who was in a position
to dominate him. The gift having being
obtained due to undue influence is voidable at
the option of A.
2. S, intending to deceive Y, falsely represents
that 500 maunds of indigo are made annually
at X’s factory & thereby induces Y to buy the
factory. The contract is voidable at the option
of Y.Y can take advantage of the contract or
repudiate it.
Defect of Not If Valid

Voidable Curable Condoned Contract

Contract

TREATMENT OF DAMAGES / ANY BENEFIT FROM

THE CONTRACT TO THE RESCINDING PARTY.
 DIFFERENCE BETWEEN VOIDABLE
CONTRACT & VOID AGREEMENT
Void Contract Void Agreement
• *It is valid & *Being
enforceable till it unenforceable at
is repudiated & law, it has no
repudiated. legal effects.
*Defect in case of *It is void ab initio
voidable contract & its defects are
is curable & may be incurable.
condoned.
*A person is entitle *Being
to compensation on unenforceable
account for at law ,there does
loss/damages for not arise any
non –performance question of
of contract compensation on
account of non-
performance of the
agreement
 5.UNENFORCEABLE
CONTRACTS
Valid Cannot Technical
Contract be defects like
enforced absence of
written form/
absence of
proper stamp.
*Such contracts cannot be proved in the court of law.
*Their defect has to be rectified for them to be enforced by
the court.
*such contract must be sued upon by 1 or both parties.
 EXAMPLE:
A borrows Rs.10,000/- from B & makes a
promissory note & a Re.1 stamp pasted on
the promissory note. The agreement
though complete is unenforceable because
of the technical defect that is the
promissory note being under stamped.
 6.ILLEGAL AGREEMENTS
ILLEGAL AGREEMENT

Prohibited Otherwise
By Law against the
policy of Law
*It is void ab initio.
*All illegal agreements are void whereas all void
agreements/contracts are not necessarily illegal.
EXAMPLE: Agreement with a minor is void but not
illegal.
• Every void agreement is not illegal unless its
object / consideration is
a)Immoral
b)Opposed to public policy etc.

EXAMPLE:
X borrows Rs.50,000/- from Y for the purpose of
smuggling. Y knows the purpose of the loan.
The agreement between X & Y is collateral to
the main agreement which is illegal. The
collateral agreement is also illegal.
 DISTINCTION B/W ILLEGAL &
VOID AGREEMENT
 Void agreements are broader in scope. Such
agreements may be void for a reason other than
illegality. All illegal agreements are void.
 Parties to a void agreement may not be punished but
parties to an illegal agreement are liable for
punishment.
 Transactions collateral to void agreements are
enforceable by law. However, transactions collateral to
illegal agreements are also tainted with illegality &
hence become void because ‘Ex turpi causa, no oritor
actio’ , i.e out of illegal agreement no cause of action
arises.
??? QUESTIONS ???
THANK YOU