Types of Contracts

In connection with contracts, there are four types of classifications. Types of contracts in contract law are
as follows;
1.
On the basis of Formation,
2.
On the basis of Nature of Consideration,
3.
On the basis of Execution and
4.
On the basis of Validity.

Types of Contracts on the basis of Formation

On this base Contracts can be classified into three groups, namely Express, Implied, Quasi Contracts.
Express Contracts: The Contracts where there is expression or conversation are called Express
Contracts. For example: A has offered to sell his house and B has given acceptance. It is Express
Contract.
Implied Contract: The Contracts where there is no expression are called implied contracts. Sitting in a
Bus can be taken as example to implied contract between passenger and owner of the bus.

Quasi Contract: In case of Quasi Contract there will be no offer and acceptance so, Actually there will be
no Contractual relations between the partners. Such a Contract which is created by Virtue of law is called
Quasi Contract. Sections 68 to 72 of Contract Act read about the situations where court can create Quasi
Contract.
Sec. 68: When necessaries are supplied

Sec. 69: When expenses of one person are paid by another person.

Sec. 70: When one party is benefited by the activity of another party.

Sec. 71: In case of finder of lost tools.

Sec. 72: When payment is made by mistake or goods are delivered by mistake.
Example: A case on this occasion is Chowal Vs Cooper. In this case A`s husband becomes no more. She
is very poor and therefore not capable of meeting even cost of cremation. B, one of her relatives,
understand`s her position and spends his own money for cremation. It is done so without A`s request.
Afterwards B claims his amount from A where A refuses to pay. Here court applies Sec. 68 and creates a
Quasi Contract between them.

Types of Contracts on the basis of Nature of Consideration

On this base, Contracts are of two types. Namely Bilateral Contracts and Unilateral Contracts.
Bilateral Contracts: If considerations in both directions are to be moved after the contract, it is called
Bilateral Contract.
Example: A Contract has got formed between X and Y on 1st Jan, According to which X has to deliver
goods to Y on 3rd Jan and Y has to pay amount on 3rd Jan. It is bilateral contract.
Unilateral Contract: If considerations is to be moved in one direction only after the Contract, it is called
Unilateral Contract.
Example: A has lost his purse and B is its finder. There after B searches for A and hands it over to A. Then
A offers to pay Rs. 1000/- to B to which B gives his acceptance. Here, after the Contract consideration
moves from A to B only. It is Unilateral Contract.

Types of Contracts on the basis of Execution

On this base Contracts can be classified into two groups. namely, Executed and Executory Contracts. If
performance is completed, it is called executed contract. In case where contractual obligations are to be
performed in future, it is called executor contract.

Types of Contracts On the basis of Validity

On this base Contracts can be classified into 5 groups. namely Valid, Void, Voidable, Illegal and
Unenforceable Contracts.
Valid: The Contracts which are enforceable in a court of law are called Valid Contracts. To attain Validity
the Contract should have certain features like consensus ad idem, Certainty, free consent, two directional
consideration, fulfillment of legal formalities, legal obligations, lawful object, capacity of parties, possibility
of performance, etc.
Example: there is a Contract between X and Y and let us assume that their contract has all those above
said features. It is Valid Contract.
Void: A Contract which is not enforceable in a court of law is called Void Contract. If a Contract is
deficient in any one or more of the above features (Except free consent and legal formalities). It is called
Void Contract.
Example: there is a Contract between X and Y where Y is a minor who has no capacity to contract. It is
Void Contract.
Voidable: A Contract which is deficient in only free consent, is called Voidable Contract. That means it is
a Contract which is made under certain pressure either physical or mental. At the option of suffering party,
a voidable contract may become either Valid or Void in future. For example: there is a Contract between A
and B where B has forcibly made A involved in the Contract. It is voidable at the option of A.
Illegal: If the contract has unlawful object it is called Illegal Contract.
Example: There is a contract between X and Z according to which Z has to murder Y for a consideration
of Rs. 10000/- from X. It is illegal contract.
Unenforceable: A contract which has not properly fulfilled legal formalities is called unenforceable
contract. That means unenforceable contract suffers from some technical defect like insufficient stamp
etc. After rectification of that technical defect, it becomes enforceable or valid contract.
Example: A and B have drafted their agreement on Rs. 10/- stamp where it is to be written actually on Rs.
100/- stamp. It is unenforceable contract.

Void Contracts and Illegal Contracts

All illegal Contracts are void, but all void contracts are not illegal: An illegal Contract will not be
implemented by court. So, illegal contract is Void. A void contract may not be illegal because its object
may be lawful.
The Contracts which are collateral to illegal contract are void, But the contracts which are
collateral to Void contract may be Valid: An illegal makes not only itself Void but also the contracts
connected to it. But a contract collateral to void contract may attain Validity because object of main
contract is lawful.

Void Contracts and Voidable Contracts

Becoming Valid: A Voidable Contract may become Valid at the option of suffering party. But a Void
Contract can never and never become Valid.
Third Party Rights: In case of Voidable Contracts third party may attain rights on concerned property, If
the third party gets the property before the Voidable Contracts gets declared as Void. But in case of Void
Contract third party cannot get any right.

Classifications

A. Classification according to validity:

1. Void contracts:
A void contract is a contract which is not enforceable by law. As a matter of fact, a void
contract is not at all a contract, as it is without any legal effect.
The term void contract is defined in Sec2 (j) of the Indian Contract Act, which reads as
under: A contract which ceases to be enforceable by law becomes void when it ceases
to be enforceable .
Thus, when a valid and enforceable contract subsequently becomes legally
unenforceable due to some reasons which may be:(i) Due to some emergent impossibility or the operation of law, contract may become
void (Sec 56);
(ii) Voidable contract becomes void when the concerned party uses his right to
repudiate it; and
(iii) A contingent contracts becomes void when the possibility of happening of the
concerned event is over.

2. Voidable contracts:
Under Sec 2 (i), All agreements which are enforceable at the option of any one of the
parties, and other party has no such option, are known as voidable contracts.
It may also be said that a voidable contract is an agreement that is binding and
enforceable, but because of the lack of one or more of the essentials of a valid contract,
it may be repudiated.

3. Illegal agreement:
An agreement which goes beyond the rule of basic public policy and is criminal in
nature or immoral
It is not only void as between the immediate parties but it is also paints the collateral
transactions with illegality.

B. Classification according to formation or creation:

1. Express contract:
A contract in which the terms are stated by parties in words, written or spoken.
Sec 9 of the Indian Contract Act contains this provision which reads as under: So far as
the proposal or acceptance of any promise is made in words, the promise is said to be
express.
Thus, a promise made in words is called an express promise. And the express promises
result in express contracts.

2. Implied contract:
A contract in which the terms are inferred from the circumstances of the case or conduct
of the parties.

Thus, an implied contract is that which is not made in words. Such contracts came into
existence on account of act or conduct of the parties. In a continuing course of dealing,
the acts or conduct of the parties may give rise to implied contracts.

3. Quasi contract or constructive contract:

It is an obligation created by law regardless of agreement between the parties. As a
matter of fact, quasi-contracts are not contracts as there is no intention of the parties to
enter into a contract.
In fact, it is an obligation which the law creates in the absence of any agreement. A
quasi-contract is based upon the equitable principle that a person shall not be allowed
to enrich himself at the expense of another.

C. Classification according to performance:

1. Unilateral contract:
A contract in which one party has performed his obligation while the other party has yet
to perform his obligation
Thus, a unilateral contract is a one-sided contract in which only one party has to
perform his obligation. In such contracts, promise on one side is exchanged for an act
on the other side.

2. Bilateral contract:
A contract in which both the parties have yet to perform their obligations. A bilateral
contract is a two-sided contract in which both the parties have to perform their
respective obligations, i.e. at the time of .formation of a contract the obligations of both
the parties are outstanding.
In such contracts, promise on one side is exchanged for a promise on the other. The
bilateral contracts are also known as contracts with executor consideration.

3. Executory contract:
A contract in which the promises of both the parties have yet to be performed. Thus,
executory contract is that where under the terms of a contract something remains to be
done by the parties.
In other words, where one or both the parties to the contract have still to perform their
obligations in future, the contract is termed as executory contract.

4. Executed Contract:
A contract in which both the parties performed their respective promises. When a
contract has been completely performed, it is termed as executed contract, i.e. it is a
contract where, under the terms of a contract, nothing remains to be done by either
party. A contract may be executed at once i.e. at the time when it is made.
For example, in case of cash sales, the contract is executed at once. It may become
executed in some future date when the terms of the contract are carried out.

D. Classification on the basis of enforceability:

1. Valid contract:
A valid contract is one which complies with all the elements of a valid contract as
provided under Section 10. A valid contract is an agreement which is binding and
enforceable at law.

2. Unenforceable contracts:
The unenforceable contracts are those which cannot be enforced in a Court of Law
because of some technical defects. In certain cases, there are special provisions of law
which require some formalities to be fulfilled, e.g. there are special provisions which
provide that a contract must be in writing, or it must be registered, or it must be properly
stamped or it must be attested etc.

If such formalities are not properly observed, the contract cannot be enforced in a Court
of Law. Otherwise, such a contract is perfectly valid and has all the requirements of a
valid contract.
Some of such contracts can be enforced if the technical defect is removed e.g. where a
document requires to be stamped and it is understamped (i.e. the stamp affixed is of
less value), the contract as such is unenforceable. But if the required stamp is now
affixed, the document becomes enforceable.

E. Classification according to English Law:

1. Formal Contracts:
English Contract Act recognizes formal contracts. Validity of these contracts depends
upon their form and they are valid even without consideration. They are of two types:(i) Contracts under Seal, and
(ii) Contracts of Record.
(i) Contracts under seal are in writing and signed by the parties to them. The following
contracts should be under seal, otherwise they will not be valid:(a) Contracts without consideration;
(b) Lease of land for a period of more than three years;
(c) Contracts by corporations; and
(d) Contracts with British Shipping.
(ii) Contracts of Records include the court judgments and recognisances. Obligations in
such cases arise out of court judgments and not under contracts.

2. Simple Contracts:
All contracts other than the formal ones are called simple contracts. They may either be
in writing or oral. Consideration is also necessary for their validity. Indian Contract Act,
1872 does not recognize Formal Contracts, but provides for Simple Contracts only.

Classification of contract
Contracts can be classified into five broad divisions namely
1.
2.
3.
4.
5.

The method of formation of a contract

The time of performance of contract
The parties of the contract
The method of formalities of the contract
The method of legality of the contract

1. The method of formation of a contract

Under the method of formation of a contract may be three kinds

Express contract
Implied contract
Quasi contract

Express contract: Express contract is one which expressed in words spoken or written. When
such a contract is formal, there is no difficulty in understanding the rights and obligations of the
parties.
Implied contract: The condition of an implied contract is to be understood form the acts, the
contract of the parties or the course of dealing between them.
Quasi contract: There are certain dealings which are not contracts strictly, though the parties
act as if there is a contract. The contract Act specifies the various situations which come within
what is called Quasi contract.
2.The time of performance of contract

Under the method of the time of performance of contract may be two kinds

Executed Contract
Executory Contract

Executed Contract: There are contracts where the parties perform their obligations
immediately, as soon as the contract is formed.
Executory Contract: In this contract the obligations of the parties are to be performed at a later
time.
3. The parties of the contract
Under the method of the parties of the contract may be two kinds

Bilateral Contract
Unilateral Contract

Bilateral Contract: There must be at last two parties to the contract. Therefore all contracts are
bilateral or multilateral.
Unilateral Contract: In certain contracts one party has to fulfill his obligations where as the
other party has already performed his obligations. Such a contract is called unilateral contract.
4. The method of formalities of the contract
Under the method of the method of formalities of the contract may be two kinds

Formal contract
Informal contract

Formal contract: A formal contract is a contract which is formatted by satisfied all the essentials
formalities of a contract.
Informal contract: An informal contract is a contract which is failed to satisfy all or any of the
essentials formalities of a contract.

5.The method of legality of the contract

Under the method of the method of legality of the contract may be five kinds
1.
2.
3.
4.
5.

Valid Contract
Void Agreement
Void able Contract
Unenforceable Agreement
Illegal Agreement

Valid Contract: An agreement which satisfied all the essential of a contract and which is
enforceable through the court is called valid contract.

Void Agreement: An agreement which is failed to satisfied all or any of the essential element of
a contract and which is not enforceable by the court is called void agreement. An agreement not
enforceable by law is said to be void. A void agreement has no legal fact. It confers no right on
any person and created no obligation.
Example: An agreement made by a minor. Void able Contract: An agreement which is
enforceable by law at the open of one or more parties of the contract but not at the open of the
other or others is a void able contract.
A void able contract is one which can be avoided and satisfied by some of the parties to it. Until it
is avoided, it is a good contract.
Example: contracts brought about by coercion or undue influence or misrepresentation or fraud.

Unenforceable Agreement: An Unenforceable Agreement is one which cannot be enforcing in a

court for its technical and formal defect.
Example: (1) An agreement required by law to register but not resisted. (2) An agreement with not
satisfied stamped.
Illegal Agreement: An illegal agreement is one which is against a law enforcing in Bangladesh.

Example: An agreement to compiled madder.

Contracts on the basis of creation:

a) Express contract: Express contract is one which is made by words spoken or written. Example
No. 1: X says to Y, will you buy a car for Rs. 100000? Y says to X, I am ready to buy you car for
Rs. 100000. It is an express contract made rally. Example No. 2: X writes a letter to Y, I offer to
sell my car for Rs. 100000 to you. Y send a letter to Y, I am ready to buy you car for Rs. 100000.
It is an express contract made in writing.
b) Implied contract: An implied contract is one which is made otherwise than by works spoken or
written. It is inferred from the conduct of a person or the circumstance of the particular case.
Example: X, a coolie in uniform picks up the bag of Y to carry it from railway platform to the -----without being used by Y to do so and Y allow it. In this case there is an implied offer by the coolie
and an implied acceptance by the passenger. Now, there is an implied contract between the
coolie and the passenger is bound to pay for the services of the coolie.
c) Quasi or constructive contract: It is a contract in which there is no intention either side to make
a contract, but the law imposes contract. In such a contract eights and obligations arise not by
any agreement between the practice but by operation of law. e.g where certain books are
delivered to a wrong address the addresses is under an obligation to either pay for them or return
them.

Contracts on the basis of execution:

a)

Executed contract: It is a contract where both the parties to the contract have fulfilled their
respective obligations under the contract. Example: X offer to sell his car to Y for Rs. 1 lakh, Y
accepts X offer. X delivers the car to y and Y pays Rs. 1 lakh to X. it is an executed contract.

b)

Executory contract: It is a contract where both the parties to the contract have still to perform
their respective obligations. Example: X offers to sell his car to y for Rs. 1 lakh. Y accepts X offer.

It the car has not yet been delivered by X and the price has not yet been paid by Y, it is an
Executory contract.
c)

Partly executed and partly executory contract: It is a contract where one of the parties to the
contract has fulfilled his obligation and the other party has still to perform his obligation. E.g X
offers to sell his car to y for Rs. 1 lakh on a credit of 1 month. Y accepts X offer. X sells the car to
Y. here the contract is executed as to X and Executory as to Y.

Contracts on the basis of enforceability:

a) Valid contract: A contract which satisfies all the conditions prescribed by law is a valid contract.
E.g. X offers to marry y. y accepts X offer. This is a valid contract.
b)

Void Contract: the term void contract is described as under section 2(j) of I.CA, 1872, A contract
which cases to be enforceable by law becomes void when it ceases to be enforceable. In other
words, a void contract is a contract which is valid when entered into but which subsequently
became void due to impossibility of performance, change of law or some other reason. E.g. X
offers to marry Y, Y accepts X offer. Later on Y dies this contract was valid at the time of its
formation but became void at the death of Y.

c) Void Agreement: According to Section 2(g), an agreement not enforceable by law is said to be
void. Such agreements are void- ab- initio which means that they are unenforceable right from the
time they are made. E.g. in agreement with a minor or a person of unsound mind is void ab-initio
because a mino or a person of unsound mind is incompetent to contract.
d)

Voidable contract: According to section 2(i) of the Indian contract act, 1872, arrangement which
is enforceable by law at the option of one or more of the parties thereon but not at the option of
the other or other, is a voidable contract. In other words, A voidable contract is one which can be
set aside or avoided at the option of the aggrieved party. Until the contract is set aside by the
aggrieved party, it remains a valid contract. For e.g. a contract is treated as voidable at the option
of the party whose consent has been obtained under influence or fraud or misinterpretation. E.g.
X threatens to kill Y, if the does not sell his house for Rs. 1 lakh to X. Y sells his house to X and
receives payment. Here, Y consent has been obtained by coercion and hence this contract is void
able at the option of Y the aggrieved party. If Y decides to avoid the contract he will have to return
Rs. 1 lakh which he had received from X. If Y does not exercise his option to repudiate the

contract within a reasonable time and in the meantime Z purchases that house from X for 1 lakh
in good faith. Y can not repudiate the contract.
e) Illegal Agreement: An illegal agreement is one the object of which is unlawful. Such an
agreement cannot be enforced bylaw. Thus, illegal agreements are always void ab- initio (i.e.
void from the very beginning) e.g. X agrees to y Rs. 1 lakh Y kills Z. Y kill and claims Rs. 1 lakh. Y
cannot recover from X because the agreement between X and Y is illegal and also its object is
unlawful.
f) Unenforceable contract: It is contract which is actually valid but cannot be enforced because of
some technical defect (such as not in writing, under stamped). Such contracts can be enforced if
the technical defect involved is removed.