- Meaning and Basis of Classification of Contracts
- Voidable Contract
- Void Contract
- Illegal Agreement
- Express Contract
- Implied Contract
- Executed Contract
- Executory (Executable) Contract
CLASSIFICATION OF CONTRACTS
1. Meaning and Basis of Classification of Contracts
Contracts may be classified on the basis of their validity, mode of formation, and stage of performance. This classification helps in understanding the legal enforceability of agreements and the rights and liabilities of parties involved. Not all agreements are contracts, and not all contracts remain enforceable at all times. Depending upon surrounding circumstances, conduct of parties, and legal provisions, contracts may become void, voidable, or illegal, or may differ based on how they are formed or performed.
2. Voidable Contract
A voidable contract is a contract that is valid and enforceable at the option of one party, but not at the option of the other. Such contracts arise when the consent of one party is not free. Consent is said to be not free when it is obtained by coercion, undue influence, fraud, misrepresentation, or mistake.
Until the aggrieved party chooses to avoid the contract, it remains legally binding on both parties. If the aggrieved party decides to rescind the contract, it becomes void. For example, if a person is induced to enter into a contract by fraud, the contract is voidable at the option of the deceived party. If that party affirms the contract, it continues to be valid.
3. Void Contract
A void contract is a contract that ceases to be enforceable by law. It may be valid at the time of formation but later becomes void due to subsequent impossibility, change in law, or lapse of time.
A contract may also be void ab initio, meaning void from the beginning, if it lacks essential elements such as lawful object or consideration. For instance, a contract to perform an act that becomes impossible due to destruction of subject matter becomes void. A void contract creates no legal rights or obligations once it becomes void.
4. Illegal Agreement
An illegal agreement is one that is expressly prohibited by law or opposed to public policy. Such agreements are void from the very beginning and have no legal existence. Unlike void contracts, illegal agreements also affect collateral transactions.
For example, an agreement to commit a crime or to carry out an unlawful activity is illegal. Courts will not enforce illegal agreements, and no legal remedy is available to either party. Even agreements connected indirectly with an illegal agreement become unenforceable.
5. Express Contract
An express contract is a contract in which the terms are clearly stated in words, either written or spoken. The intention of the parties is explicitly communicated.
Written contracts such as lease agreements, hotel booking forms, employment contracts, and service agreements are common examples of express contracts. Oral agreements may also be express contracts if the terms are clearly spoken and agreed upon. Express contracts leave little scope for ambiguity as the obligations of parties are clearly defined.
6. Implied Contract
An implied contract is one where the agreement is not expressed in words but inferred from the conduct of the parties or the circumstances of the case. The intention of the parties is gathered from their actions and relationship.
For example, when a person enters a hotel, orders food, and consumes it, an implied contract arises that the person will pay for the food consumed. Implied contracts are legally enforceable provided they satisfy the essential elements of a valid contract. Such contracts are common in everyday commercial and social transactions.
7. Executed Contract
An executed contract is a contract in which both parties have fully performed their respective obligations. Once performance is complete, the contract is said to be executed and no further obligation remains.
For example, when goods are purchased and payment is made immediately, the contract becomes executed. Executed contracts are important as they give rise to completed legal rights and liabilities and usually do not result in future disputes unless fraud or mistake is involved.
8. Executory (Executable) Contract
An executory contract is a contract in which performance remains to be completed either wholly or partially by one or both parties. Such contracts involve future obligations.
For example, a contract where goods are ordered today and delivery is to be made at a future date is an executory contract. Most commercial contracts are executory in nature at the time of formation. Rights and liabilities under executory contracts arise when performance becomes due.
