nature and classification of contracts

8/6/2019 Nature and Classification of Contracts

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In our daily life, we enter into a series of contracts, evenwithout realising it

For example, when we enter into a public transport, arestaurant, etc., we enter into a contract

Contract is an agreement, enforceable by law[Section 2(h)]

But, every promise and every set of promises, formingconsideration for each other is NOT an agreement[Section 2(e)]


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When the person, to whom the proposal is made,signifies his assent thereto, the proposal is said to beaccepted. A proposal when accepted becomes apromise. [Section 2(b)].

But, only such agreements constitute contracts, whichare:

(i) Enforceable in law, and are also(ii) Intended to be so.

For example, Following types of agreements are notcontracts:

(a) Social agreements, like inviting some friend for dinner,as these are not intended to be enforceable in law, and

(b) Contracts, specifically declared as void, ab initio.

Nature and Classification of Contracts


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Contracts, specifically declared as void, ab initio:

(i) An agreement in restraint of trade [Section 27]

(ii) An agreement to bet, or wagering contract[Section 30]

(iii) An agreement to do an impossible act, like shiftingTaj Mahal from Agra to Delhi [Section 56]

(iv) An agreement to do any unlawful, immoral, illegal,or impossible act is void ab initio


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All agreements are contracts if they are made with:

(i) Free consent of the parties,

(ii) Competent to contract,

(iii) For a lawful consideration and with a lawful object,and

(iv) Not expressly declared to be void. [Section 10]


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Ten essential elements involved in a valid contract:

1. Agreement, includes

(i) Offer and Acceptance

(ii) Offeror and Offeree, and

(iii)Consensus-ad-idem

2. Intention to create legal relationship

3. Free and genuine consent; i.e. Without

(i) Misrepresentation

(ii) Fraud

(iii)Undue Influence

(iv)Coercion

(v) Mistake (of Fact, or of Law)


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Ten essential elements involved in a valid contract(continued):

4. Parties should be competent to contract

i.e. They should be:

(i) Major

(ii) Of sound mind, and

(iii) Not disqualified from contracting by any law,

to which they are subject.

5. Lawful consideration

[i.e. the consideration (price), taken and given, bythe two parties, must not be for any unlawfulpurpose].

6. Lawful Object


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Ten essential elements involved in a valid contract(continued):

7. Agreements not declared void or illegal

8. Certainty of Meaning;

with No Ambiguity

9. Possibility of performance

10. Necessary legal formalities must be

completed

[i.e. to be in writing, duly stamped, and/or registered,

if so required by law]


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Classification of Contracts in terms of their validity orenforceability in law

(i) Valid agreements or contracts, i.e.

Not being voidable, void, illegal or unenforceable

in law

(ii) Voidable agreements or contracts, i.e.Which could be repudiated, but at the option andwill, only of aggrieved party [Section 2(i)]

(iii) Void agreements or contracts, i.e.Which are invalid, ab initio; and so isunenforceable in law [Section 2(i)]Remember: A contract with a minor is void abinitio [Section 11]


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(iv) Illegal agreements or contract; i.e.

Wherein the consideration and / or object is:

(a) Forbidden by law, or(b) Defeats the provisions of any law, or(c) It is fraudulent, or

(d) It involves or implies injury to the person orproperty of another person, or

(e) The court regards it as immoral or opposed to

public policy

Classification of Contracts in terms of their validity orenforceability in law(continued):


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(a) Express Contracts, which are stated in words

(written or verbal), and

(b) Implied Contracts, which are not stated in words(written or verbal), but are inferred from the conductof the parties involved, or else from the

circumstances of the particular case [Section 9]



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(a) (i) Executed contract, which is fully completed byboth parties; nothing further remaining to bedone, and

(ii) Executory contract, where either all or some ofthe terms of the contract, still remain to becompleted by both or any one of the parties

(b) (i) Unilateral contract, where, while one of theparties has already performed his obligation, theother party remains to fulfil his obligation, and

(ii) Bilateral contract, where both the partiesremain to perform their obligations

Classification of Contracts in terms of their performance

nature and classification of contracts

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