Kinds Of Contract

Abdul Majid Khalil

 KINDS OF CONTRACT
• The contract can be classified into the
following four categories:
• According to Enforceability
• According to Formation
• According to Performance
• According to Parties
Explanation of each kind is given below in detail.
1. According to Enforceability
According to enforceability, a contract can be
divided as under:
a. Valid Contract
A valid contract is enforceable by law. An
agreement becomes enforceable by law when
all the essentials of a valid contract are present.
Obligation of Parties
In a valid contract, all the parties are legally
responsible for the performance of the contract. If
one of the parties breaches the contract, the other
party can enforce it through the court of law.
Example
A agrees to sell a car to B. if it fulfills all the
essentials of a contract, it is a valid contract. If A
fails to deliver the car, B can sue him and if B fails to
pay, A can sue him.
Void Contract
The word void means not binding in law. Section
2(j) defines “A contract which ceases to be
enforceable by law becomes void, when it ceases to
be enforceable.” it means that a void contract is not
void from the beginning. It is valid contract when it
is made but subsequently it becomes void due to a
certain reasons.
Obligation of Parties
In void contract both the parties are not legally
 responsible to fulfill the contract. Under this
contract the party who has received any benefit
is bound to return it to the other party.
A contract becomes void under the following
circumstances:
i. Impossibility of Performance
A contract becomes void due to impossibility of
performance. A contract becomes void before
performance when it becomes impossible to be
 performed by any party due to any reason. (sec. 56)
Example
A agrees to sell his house to B after two days. The house
is burnt next day. The contract becomes void.
ii. Subsequent Illegality
A contract becomes void by subsequent illegality. A
contract may become illegal before performance due to
certain reasons. (sec.56)
Example
A agrees to sell 100 bags of wheat to B. before delivery
the government bans private trade in wheat. The contract
becomes void.
iii. Rejection of a voidable contract
A voidable contract becomes void when the party
whose consent is not free rejects the contract. (sec.
19)
Example
A forcibly buys B’s car for Rs. 50,000. the contract is
voidable at the option of B. B may accept or reject
it. If B rejects the contract it becomes void.
iv. Impossibility of depending event
The performance of a contingent contract
depends upon the happening or non happening
of a certain event. It becomes void when that
event does not happen. (sec 32)
Example
A contracts to give Rs. 1 Lac to B, if B gets
admission in Comsats University. B fails to get
admission. The contract becomes void.
c. Void agreement
An agreement not enforceable by law is said to
be void. The void agreement does not create legal
obligations among the parties. An agreement which
is void from the beginning is void ab initio. In void
agreement, there is absence of one or more
essentials of a valid contract except free consent.
An agreement with minor and an agreement
without consideration is void from the beginning.
Sec. 2(g)
Obligation of Parties
In void agreement, the party who has received any
advantage is bound to restore it to the party from
which he received it. Both the parties are not
responsible for the performance of the agreement.
Example
A promises to buy a dog from B for Rs. 10000. the
dog was dead before the contract. The parties were
unaware. The agreement is void.
d. Voidable contract
An agreement which is enforceable by law at the
option of one or more of the parties thereto but
not at the option of the other or others, is a
voidable contract. ( sec 2 (i))
A contract is voidable when consent of one of the
parties is not free. It is a valid contract until it is
avoided by the party having the right to avoid it. If
the party decides to confirm it, it remains valid. A
contract becomes voidable under the following
circumstances:
A. A contract becomes voidable when the
consent of one or more of the parties to a
contract is obtained by coercion, undue
influence, misrepresentation or fraud. (sec.
15-18 of contract act, 1872)
Examples
a. A compels B to sell his car at a gunpoint. The
contract is made by coercion and is voidable at
the option of B.
b. A deceives B by stating that his factory produces
90 kg of sugar daily and induces B to buy it. The
contract is voidable at the option of B. When one
party promises to do something for the other party
but the other party prevents him from performing
his promise, the contract becomes voidable at his
option. (Sec. 53)
Example
A contracts to paint B’s house. A is ready to paint
but B prevents him from doing so. This contract is
voidable at the option of A.
c. When a party to the contract promises to do a
certain thing within a specified time, but fails to
do it, then the contract becomes voidable at the
option of promisee, if time is essence of the
contract. (sec. 55)
Example
A contracts to paint B’s house within one week.
A, does not come within the specified time. the
contract is voidable at the option of B.
• Obligation of Parties
the following are obligations of the parties:
a. It is a valid contract for both the parties if it is not rejected
by the party having the right to reject.
b. The law gives an option to one of the parties to avoid it.
c. The party entitled to cancel the contract is not bound to
cancel. If he confirms it, the other party remains bound to
perform.
d. The aggrieved party can get damages from the other
party.
e. If one party has received some benefit, he must return it
to the other.
Burden of Proof
the burden of proof lies on plaintiff i.e. the
aggrieved party. It means that the party, who claims
that his consent is unfree, has to prove in the court
of law. If he fails to prove, the contract remains
valid.
e. Unenforceable Contract
An unenforceable contract is that contract which
cannot be enforced in a court of law because of
some technical defects such as absence of writing,
 registration, requisite stamp etc. when these
defects are removed, the contract can be enforced.
Example
A borrows Rs. 1 billion from B and makes a pronote
on a Rs. 10 stamp paper. It is unenforceable
because pronote is undervalue.
Obligation of Parties
In an unenforceable contract, the parties may
perform the contract. But in case of breach of
 such contract, the aggrieved party is not entitled to
legal remedies.
f. Illegal agreement
An agreement is illegal when its performance is
forbidden by any law such an agreement can never
become a contract. An agreement is illegal and void
if it is forbidden by law or is of such a nature that if
permitted, it would defeat the provisions of any law
or is fraudulent or involves injury to the person or
property of another or the court regards it as
immoral or opposed to public policy. (sec. 53)
Example
A gives money to B, a smuggler to buy smuggled
goods. The agreement is illegal and the money
cannot be recovered.
Obligation of Parties
The parties to the agreement are not
responsible to perform their promises. There is
punishment for the parties according to law.