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Different types of contracts
Business Law (BC13)
Jamia Millia Islamia
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What are the different types of
contracts
"A contract is an agreement formed between two (or) more parties that the law will enforce," says the dictionary.
"An agreement enforceable by law is a contract," says section 2(h) of the Indian Contract Act of 1872.
A contract, according to SALMOND, is "an agreement that creates and defines duties between the parties."
Contract types: - Contracts can be divided into three categories: (a)
validity, (b) formation, and (c) performance.
(a) Validity-based classification:-
A legitimate contract is a legal arrangement that is both binding and enforceable. When all of the fundamental elements (i., offer and acceptance, intent to create a legal relationship, etc.) are present, the agreement is said to be a contract, and the contract is said to be valid.
A voidable contract is one that is enforceable by law at the option of one (or) more of the parties to the agreement, but not at the discretion of the other (or) others. This occurs when one or more of the necessary parts of free consent are lacking. When a party's consent to a contract is stated to be not free because of coercion, undue influence, misrepresentation (or) fraud, etc., it is said to be not free.
A void contract is one that isn't actually a contract at all. The phrase "void" refers to a contract that has no legal standing. "An agreement that is not enforceable by law is said to be void," in other words.
Contracts that are illegal in and of themselves: Some agreements are illegal in and of themselves (ex:- contracts of immoral nature, opposed to public policy etc..,) As a result, all illegal contracts are null and void, but not all invalid contracts are illegal (ex:- A wagering agreement, though void is not illegal).
An unenforceable contract is one that cannot be enforced in a court of law due to a technical flaw such as a lack of writing (or) where the remedy has been barred due to delays in time.
(b) Classification based on their composition:
An express contract is one in which the terms are stated in words, either spoken (or) written, at the time the contract is formed.
Implied contract: An implied contract is one in which the parties' actions
and conduct serve as evidence of their agreement rather than written (or spoken) terms. In other terms, an implied promise (or) implied contract exists when an offer (or) acceptance of a promise is given in a manner other than in words.
Quasi-contract: In reality, a quasi-contract isn't even a contract. Acts that
are produced by law are referred to as quasi-contracts. It lacks all of the necessary components of a legitimate contract. It is imposed by law rather than intentionally developed by parties. It is based on the "principles of natural justice, equity, and fairness."
(c) They are categorised based on their performance:
Contract that has been executed: "executed" refers to something
that has been completed. A contract that has been completed is one in which both parties have fulfilled their respective obligations.
Agreements based on improbable happenings (section 36) Agreements to perform impossibly difficult tasks (section 56) In the case of reciprocal commitments to undertake both legal and illegal activities. A void agreement is the second set of (illegal) reciprocal promises (section 57)
Void contract and void agreement
Section 2(g) of the Indian Contract Act of 1872 defines a void agreement. 'A void agreement is one that is not legally binding.'
There is no legal right (or) obligation created by a void agreement. It's a void- ab-initio situation (i.., void of into right from the beginning).
For example, a contract with a minor, a contract without consideration, and so on.
According to section 2(f) of the Indian Contract Act of 1872, the contract is void. "A contract that is no longer enforceable by law becomes void when it is no longer enforceable."
A contract may be legitimate and binding on the parties when it is first signed, but it may later become void. A deal like this is known as an invalid agreement.
For example, when a conflict breaks out between the importing and exporting countries, a contract to import goods from a foreign country is cancelled.
What is a contingent contract? What are the regulations governing contingent contracts?
A contingent contract, according to section 31 of the ICA, 1872, is a contract to do or not do anything if an event, which is a condition of the contract, occurs or does not occur.
As a result, it is a contract whose fulfilment is contingent on the occurrence or non-occurrence of an uncertain future event, collateral to such events.
EX: If B's house is burned down, 'A' offers to pay Rs 10,000/-.
A CONTINGENT CONTRACT'S ESSENTIAL
CHARACTERISTICS INCLUDE:
Its performance is determined by the occurrence or non-occurrence of a future event. The event has to be unpredictable. It must be a collateral occurrence.
RULES FOR A CONTINGENT CONTRACT'S
PERFORMANCE: The following are the rules for a
contingent contract's performance:
Contingent contract based on the occurrence of an unpredictable future event:-
When such an event is possible, it becomes enforced, and when it is impossible, it becomes void.
EX: 'A' agrees to give 'B' a certain amount of money if 'B' marries 'C'. 'C' dies before marrying 'B'. The contract is now null and void.
Contingent contract based on the non-occurrence of a future uncertain event: When the occurrence of such an event becomes impossible, it is enforced; when the occurrence of such an event becomes possible, it is void.
EX: If "C" dies, "A" agrees to sell his car to "B." As long as "C" is alive, the contract cannot be enforced.
PERFORMANCE-BASED DISCHARGE.
The term "performance" refers to carrying out a contract's requirements. Discharge by performance occurs when the contracting parties complete their contractual duties within the time and in the way specified. The parties are released and the contract is terminated in this circumstance.
The most common method of contract discharge is performance. It could be:
Performance in real life
Attempting to perform or tendering a performance.
Actual performance: The contract is discharged when both parties fulfil
their obligations. Complete, precise, and in accordance with the agreement's conditions are required. In this way, the vast majority of contracts are fulfilled.
For example, "A" agrees to sell his car to "B" for Rs. 15,000/- if the car is delivered to "B" and "B" pays the agreed-upon price. Performance brings the contract to a close.
Attempted performance or Tender of Performance: In some cases, the promisor offers to perform his contract obligation at the agreed-upon time and location, but the promise refuses to accept it. This is referred to as a "Tender" or "Tried Performance." When a legal Tender is submitted but is not accepted by the promisee, the promisor is not liable for non-performance and does not lose his contractual rights.
"Agreement (or) consent (or) mutual consent" "Discharge of a contract by agreement (or) consent (or) mutual consent"
A thing can be destroyed in the same way it is created, according to the general rule of law. This means that a commercial duty can be discharged by an express or implied agreement.
Sections 62 and 63 deal with several circumstances of contract discharge by mutual consent, which are detailed below:
Novation (Section): Novation takes place in the
following locations:
When a new contract is substituted for the old one, either between the same parties or between the same parties and the same parties and the same parties and the same parties and the same parties and the same parties and the same parties and the
The consideration for the new contract is the mutual discharge of the previous contract. The novation should take place before the original contract's performance period expires.
For instance, "A" owes "B" Rs. 10,000/-. In lieu of the debt of Rs. 10,000/-, he enters into an agreement with "B" to mortgage his (A's) estate for Rs. 5,000/-. This is a new contract that replaces the previous one.
Contract Recession (Section): A contract is rescinded when all
or part of the contract's provisions are annulled. It could happen if:
The parties have agreed to work together (or)
When one side fails to fulfil his or her obligations. In this instance, the other party has the option of resending the contract without seeking compensation for the breach.
difficult for him to do so via his own actions. It gives the injured party a right of action or damages.
There are two sorts of contacts branches:
Actual contact breath.
Awaiting the contact breath.
Actual breach of contract refers to the promisor's failure to fulfil the promise by the agreed-upon deadline. Actual breach of contract occurs when a promisor fails or refuses to perform the promise by the agreed-upon deadline. The promisee is exempt in this circumstance and may resend the contract. Promise has the right to sue the party who broke the contract for damages.
For example, in the case of O'Neil vs. Armstrong (1895),
Facts: 'P,' a British subject, was hired as a fireman by the captain of a Japanese government-owned warship. When the Japanese government declared war on China, "p" was notified that fulfilling the contract would subject him to the foreign enlistment act's penalties. As a result, he disembarked off the ship.
He was entitled to the agreed-upon salary, according to the court.
Anticipatory Breach of contract happens when one of the parties to an executory contract indicates that he will not perform the contract before the due date. It might happen in one of two ways.
Expressly by words: a contracting party notifies the other parties of his intention not to perform the contract before the due date for performance.
For instance, Hochster vs. de la Tour (1853):
Facts: On the 12th of April, "D" hired "H" to work as his courier and accompany him on a tour. The job was supposed to start on June 1st. On the 11th of May,
"D" emailed "H" to inform him that his services were no longer necessary. Despite the fact that the deadline for performance had not passed, "H" filed a lawsuit for damages right away.
He had the right to do so, according to the judge.
Implied by the conduct: In this case, a party hinders himself from completing the contract through his own voluntary act.
For example, a person agrees to sell a horse to another on June 1st, but sells the horse to someone else before the deadline.
An anticipatory breach has the following effect/right: In the event of an anticipatory breach, the promise is excused from performance and may choose between the following two options:
He can treat the contract as discharged, meaning he is no longer responsible for his party's fulfilment of the commitment.
Different types of contracts
Course: Business Law (BC13)
University: Jamia Millia Islamia
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