Types of Contracts Under the Indian Contract Act, 1872

Contracts are a part of everyday life. Whether you buy a mobile phone online, sign a rent agreement, or accept a job offer, you are entering into a contract. In India, contracts are governed by the Indian Contract Act, 1872, which defines what a contract is and explains different types of contracts based on their formation, validity, and performance.

What Is a Contract?

According to Section 2(h) of the Indian Contract Act, a contract is “an agreement enforceable by law.” For an agreement to become a valid contract, it must include free consent, lawful consideration, lawful object, capacity of parties, and must not be expressly declared void.

1. Valid Contracts

A valid contract is one that satisfies all the essential elements laid down under the Act. These include:

• Offer and acceptance

• Lawful consideration

• Free consent

• Competent parties

• Lawful object

Case Law: Carlill v. Carbolic Smoke Ball Co. (1893)

The court held that a valid contract existed when the company promised to pay a reward and the plaintiff fulfilled the conditions. This case illustrates how acceptance by conduct can create a valid contract.

2. Void Contracts

A void contract is a contract that was valid at the time of formation but later becomes unenforceable due to certain reasons such as impossibility of performance.

Example

A contract to perform a concert becomes void if the artist dies before the performance.

Case Law: Taylor v. Caldwell (1863)

The destruction of a music hall made performance impossible, and the contract was declared void due to frustration.

3. Void Agreements

A void agreement is unenforceable from the very beginning. The Indian Contract Act declares certain agreements void, such as:

• Agreements in restraint of marriage

• Agreements in restraint of trade

• Agreements in restraint of legal proceedings

Case Law: Pearce v. Brooks (1866)

An agreement made for immoral purposes was held void and unenforceable.

4. Voidable Contracts

A voidable contract is valid and enforceable at the option of one party whose consent was not free. This includes contracts formed by coercion, undue influence, fraud, or misrepresentation.

Case Law: Ranganayakamma v. Alwar Setti (1889)

A contract obtained through undue influence was held voidable at the option of the affected party.

5. Express Contracts

An express contract is one where the terms are clearly stated either orally or in writing.

Example

A written employment agreement specifying salary, duties, and working hours.

Express contracts provide clarity and reduce disputes.

6. Implied Contracts

An implied contract is formed by the conduct or behavior of parties rather than words.

Example

Using public transport implies a contract to pay the fare.

Case Law: State of West Bengal v. B.K. Mondal & Sons (1962)

The court recognized implied contracts based on conduct.

7. Quasi-Contracts

A quasi-contract is not a real contract but is imposed by law to prevent unjust enrichment.

Example

If a person mistakenly delivers goods to someone, the receiver must return or pay for them.

Case Law: State of Madhya Pradesh v. G.S. Dall & Flour Mills (1991)

The court enforced obligations under quasi-contracts to avoid unfair gain.

8. Unilateral Contracts

A unilateral contract involves a promise by one party in exchange for performance by another.

Example

Reward contracts for finding lost property.

Case Law: Carlill v. Carbolic Smoke Ball Co.

This is the classic example of a unilateral contract.

9. Bilateral Contracts

A bilateral contract involves mutual promises between two parties.

Example

A sale agreement where one party agrees to sell and the other agrees to buy.

Most commercial contracts are bilateral in nature.

10. Executed Contracts

An executed contract is one where both parties have fully performed their obligations.

Example

Buying groceries and paying immediately.

11. Executory Contracts

An executory contract is one where performance is yet to be completed by one or both parties.

Example

A construction contract where work is ongoing.

12. Contingent Contracts

A contingent contract depends on the occurrence or non-occurrence of a future uncertain event.

Example

Insurance contracts.

Conclusion

The Indian Contract Act, 1872 provides a comprehensive framework for different types of contracts, ensuring fairness and certainty in agreements. By classifying contracts based on validity, formation, and performance, the Act helps parties understand their rights and obligations. Knowledge of these contract types not only helps law students but also protects individuals and businesses from legal disputes.