Introduction
The Indian Contract Act, 1872 recognizes different types of contracts based on the manner in which they are created, their validity, the extent to which they have been performed, and the obligations undertaken by the parties.
Understanding the classification of contracts is important because the legal rights and remedies of the parties may differ depending upon the nature of the contract.
Contracts can broadly be classified on the following bases:
| Basis of Classification | Types of Contracts |
|---|---|
| 1. Creation or Formation | Express, Implied, Tacit, Quasi-Contract, E-Contract |
| 2. Validity or Enforceability | Valid, Void, Voidable, Unenforceable, Illegal |
| 3. Execution or Performance | Executed, Executory, Partly Executed and Partly Executory |
| 4. Liability or Obligation | Bilateral and Unilateral |
| 5. Other Traditional Classifications | Contracts of Record and Contracts under Seal |
A contract may fall into more than one category at the same time. For example, a contract may be express, valid, bilateral and executory.
1. Types of Contracts on the Basis of Creation or Formation
The first classification is based on the manner in which the contract is created.
A. Express Contract
Section 9 of the Indian Contract Act, 1872 recognizes an express promise where the proposal or acceptance is made in words.
An express contract is therefore a contract in which the terms are clearly communicated by spoken or written words.
Example
A says to B, “Will you purchase my motorcycle for ₹20,000?”
B replies, “Yes, I will.”
The offer and acceptance have been communicated through words. This is an express contract, assuming the other requirements of a valid contract are satisfied.
An express contract may therefore be:
- Oral, or
- Written.
B. Implied Contract
Under Section 9, where a proposal or acceptance is made otherwise than in words, the promise is said to be implied.
An implied contract arises from the conduct of the parties or the circumstances of the case rather than from express words.
Example
A enters a taxi and tells the driver his destination. The driver takes him there, and A pays the prescribed fare.
Although the parties may not expressly discuss all the contractual terms, their conduct indicates an agreement that the passenger will pay the applicable fare for the transportation service.
Thus:
Express Contract → Created through words
Implied Contract → Inferred from conduct or circumstances
C. Tacit Contract
The term tacit contract is commonly used to describe an agreement inferred from the conduct of the parties.
In practice, a tacit contract is generally treated as a form of implied contract, rather than as a separate statutory category under Section 9.
Examples
Common illustrations include:
- A person obtaining money from an ATM using a banking facility;
- A sale being completed by the fall of the auctioneer’s hammer.
The contractual relationship is inferred from the circumstances and conduct rather than from an express oral statement between the parties.
D. Quasi-Contract
A quasi-contract is not a contract in the strict sense because it does not arise from an agreement between the parties.
Instead, certain obligations are created or recognized by law in order to prevent one person from being unjustly enriched at the expense of another.
The Indian Contract Act, 1872 deals with such relationships in Sections 68 to 72, under the heading of “certain relations resembling those created by contract.”
Example
A accidentally leaves his goods in B’s possession. B is required in the circumstances prescribed by law to take reasonable care of the goods and return them to the rightful owner.
The obligation does not arise because A and B entered into a contract. It arises because the law imposes an obligation in the circumstances.
Therefore:
Quasi-contract = Obligation imposed by law, not a true contract created by agreement.
E. E-Contract
An electronic contract or e-contract is a contract formed through electronic means.
The parties may communicate or accept contractual terms through:
- E-mail;
- Websites;
- Mobile applications;
- Electronic platforms;
- Electronic signatures;
- Online ordering systems; and
- Other electronic communication methods.
For example, when a person purchases a product through an online shopping website and accepts the applicable terms electronically, a contractual relationship may arise through electronic means.
E-contracts are not a separate species of contract merely because electronic technology is used. The ordinary principles of contract law continue to apply, along with applicable legislation relating to electronic transactions, including the Information Technology Act, 2000.
2. Types of Contracts on the Basis of Validity or Enforceability
A second important classification is based on whether the agreement or contract is legally enforceable.
A. Valid Contract
A valid contract is an agreement that satisfies all the essential requirements prescribed by law and is enforceable by law.
The requirements generally include:
- Offer and acceptance;
- Intention to create legal relations;
- Competency of parties;
- Free consent;
- Lawful consideration;
- Lawful object;
- Certainty of terms;
- Possibility of performance; and
- Compliance with applicable legal formalities.
Example
A agrees to sell his car to B for ₹5 lakh. Both parties are competent, consent freely, the consideration and object are lawful, and the agreement satisfies all applicable legal requirements.
Such an agreement may constitute a valid contract.
B. Void Contract
Section 2(j) provides that:
A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.
A void contract is therefore one that was enforceable when made but subsequently ceases to be enforceable.
This is different from a void agreement, which may be void from the beginning.
Example
A and B enter into a contract for the supply of particular goods. Subsequently, before performance, an event covered by the law of frustration makes performance impossible or unlawful. The contract may thereafter become void under the applicable provisions of Section 56.
Thus:
Valid when created → Subsequently becomes unenforceable → Void contract
C. Voidable Contract
Section 2(i) defines a voidable contract as an agreement that is enforceable by law at the option of one or more of the parties, but not at the option of the other party or parties.
Voidability commonly arises where consent has been obtained through factors such as:
- Coercion;
- Undue influence;
- Fraud; or
- Misrepresentation,
subject to the provisions of the Act.
Example
A induces B to enter into a contract by fraud. The contract is not automatically void in every case. Instead, B may have the legal right to avoid the contract in accordance with the relevant provisions.
Therefore:
Voidable contract = Valid and enforceable unless and until the entitled party exercises the right to rescind it.
Important Correction
An agreement entered into by a minor is not generally a voidable contract. The leading decision in Mohori Bibee v. Dharmodas Ghose established that a minor’s agreement is void ab initio.
D. Unenforceable Contract
An agreement may be perfectly sound in substance but unenforceable because of a technical or procedural defect.
For example, a transaction may fail to satisfy a statutory requirement relating to:
- Writing;
- Registration;
- Stamping;
- Limitation; or
- Other prescribed formalities.
The precise legal consequence depends upon the applicable statute and circumstances.
Example
Where the law requires a particular document to be registered before it can be enforced in a particular manner, failure to register it may prevent enforcement of the transaction to the extent provided by law.
Therefore:
Unenforceable does not necessarily mean that the underlying transaction is illegal.
E. Illegal Contract or Illegal Agreement
An illegal agreement is one whose object or consideration is prohibited by law. Section 23 identifies circumstances in which consideration or object becomes unlawful.
An illegal agreement is therefore incapable of being enforced.
Example
A agrees to sell narcotic drugs to B in violation of applicable criminal law. The object of the arrangement is unlawful, and the agreement is illegal.
Difference between Illegal and Void
It is important to remember:
All illegal agreements are void, but all void agreements are not necessarily illegal.
An agreement may be void because the law simply denies it enforceability, without the agreement itself involving an unlawful object or consideration.
Illegal transactions may also have additional legal consequences under other laws, including possible criminal liability.
3. Types of Contracts on the Basis of Execution or Performance
Contracts can also be classified according to whether the parties have performed their respective obligations.
A. Executed Contract
An executed contract is one in which the obligations contemplated by the contract have been performed, wholly or substantially, by the parties.
Example
A buys a book from B for ₹500. A pays the price and B immediately delivers the book.
The essential obligations of both parties have been completed. It is an example of an executed transaction.
B. Executory Contract
An executory contract is one in which performance is still due, either wholly or in part.
The contractual obligations are to be performed in the future.
Example
A agrees to purchase a motorcycle from B, with payment to be made on 20 October and delivery to take place on 25 October.
At the time of entering into the contract, neither party has yet fully performed his obligation. The contract is executory.
C. Partly Executed and Partly Executory Contract
A contract may also be partly executed and partly executory where one party has performed his obligation while the other party’s obligation remains outstanding.
Example
A sells his car to B. A delivers the car, but B has not yet paid the agreed purchase price.
From A’s side, the obligation has been performed. From B’s side, the payment obligation is still outstanding.
Therefore, the contract is:
Partly executed + Partly executory
4. Types of Contracts on the Basis of Liability or Number of Outstanding Promises
Another common classification is based upon the obligations undertaken by the parties.
A. Bilateral Contract
A bilateral contract is a contract in which both parties make promises to each other. The promises form the consideration for one another.
It is sometimes called a reciprocal contract.
Example
A agrees to sell his car to B for ₹1,00,000.
A promises to deliver the car, while B promises to pay ₹1,00,000.
There are reciprocal promises on both sides.
Thus:
Promise by A ↔ Promise by B
B. Unilateral Contract
A unilateral contract is commonly described as a contract in which a promise is made in exchange for the performance of a specified act, rather than a return promise.
Example
A announces that he will pay ₹5,000 to anyone who finds and returns his lost bag.
A person who finds the bag and returns it performs the required act and may claim the reward, subject to the applicable legal requirements.
In this type of arrangement, acceptance is generally demonstrated through performance of the specified condition.
Important Point
The expressions “unilateral contract” and “bilateral contract” are often used in textbooks to describe the structure of contractual obligations. They should not be confused with the separate classifications of executed and executory contracts, because the same contract may be described differently depending on the basis of classification being used.
Difference Between Void and Voidable Contracts
| Basis | Void Contract | Voidable Contract |
|---|---|---|
| Meaning | A contract that ceases to be enforceable by law | A contract enforceable at the option of one or more parties |
| Status | Becomes unenforceable | Remains enforceable unless the entitled party avoids it |
| Right to avoid | No question of election in the same sense | The aggrieved party may elect to rescind |
| Common reason | Subsequent impossibility or other circumstance causing loss of enforceability | Defective or improperly obtained consent, such as coercion, fraud or misrepresentation |
| Effect | Becomes void when it ceases to be enforceable | Continues until rescinded or otherwise discharged according to law |
Easy Formula
Void Contract → Becomes unenforceable
Voidable Contract → Enforceable at the option of the aggrieved party
Difference Between Void and Illegal Agreements
| Basis | Void Agreement | Illegal Agreement |
|---|---|---|
| Nature | Not enforceable by law | Object or consideration is prohibited by law |
| Legality | May not involve anything unlawful | Involves an unlawful element |
| Enforceability | Cannot be enforced | Cannot be enforced |
| Punishment | Mere voidness does not by itself imply punishment | May attract additional legal consequences under other laws |
| Collateral transactions | Consequences depend on the nature of the agreement | Collateral transactions may also be affected in accordance with the law relating to illegality |
| Relationship | Not every void agreement is illegal | Every illegal agreement is void |
The central principle is:
Illegal agreements are a subset of void agreements, but not every void agreement is illegal.
5. Contracts of Record
A contract of record is a traditional common-law classification associated particularly with English legal terminology.
It refers to an obligation arising from an official record of a court, such as a judgment or certain forms of recognizance.
Strictly speaking, such an obligation does not arise from an ordinary agreement between private parties. Its binding force arises from the authority of the court.
Example
A judgment imposing an obligation upon a person creates a legal obligation by operation of judicial authority rather than through an ordinary consensual contract.
This classification is mainly of historical and comparative significance when studying traditional classifications of contracts.
6. Contract under Seal
A contract under seal is another traditional classification of English common law.
Historically, a deed or specialty contract derived legal effect from the prescribed form, traditionally involving execution under seal.
Such a classification does not form a central classification under the Indian Contract Act, 1872 and should therefore be studied separately from the principal classifications used in Indian contract law.
Quick Revision Chart: Types of Contracts
On the Basis of Creation
1. Express Contract
Created through spoken or written words.
2. Implied Contract
Inferred from conduct or circumstances.
3. Tacit Contract
A commonly used expression for an agreement inferred from conduct.
4. Quasi-Contract
Obligation imposed by law, not created by agreement.
5. E-Contract
Contract formed through electronic means.
On the Basis of Validity
1. Valid Contract
Fully enforceable by law.
2. Void Contract
A contract that ceases to be enforceable.
3. Voidable Contract
Enforceable at the option of the entitled party.
4. Unenforceable Contract
Cannot be enforced because of a legal or technical defect.
5. Illegal Agreement
Agreement involving unlawful consideration or object.
On the Basis of Performance
1. Executed Contract
Obligations have been performed.
2. Executory Contract
Performance remains due.
3. Partly Executed and Partly Executory Contract
One side has performed while another obligation remains outstanding.
On the Basis of Liability
1. Bilateral Contract
Both parties undertake reciprocal promises.
2. Unilateral Contract
A promise is made in exchange for performance of a specified act.
Conclusion
The classification of contracts helps us understand the formation, validity, enforceability and performance of contractual obligations.
The most important classifications for students of Indian contract law are:
Express and Implied — based on formation
Valid, Void, Voidable, Unenforceable and Illegal — based on validity and enforceability
Executed and Executory — based on performance
Bilateral and Unilateral — based on reciprocal obligations and the manner in which acceptance is made
A proper understanding of these categories is essential for studying later topics under the Indian Contract Act, 1872, including void agreements, contingent contracts, performance of contracts, discharge of contracts, breach of contract and remedies.
The key point to remember is that the same contract can belong to several classifications simultaneously, because each classification examines a different legal characteristic of the contract.