chapter - 2 kinds of contract

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Chapter II

Kinds of Contract


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Kinds of Contract

Contract can be classified into thefollowing five categories

1.

According to enforceability2. According to formation

3. According to performance

4. According to parties.5. Special kinds of contract

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Kinds of ContractAccording to enforceability


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According to Enforceability

According to enforceability contract may be classified asfollows

A. Valid contract: it is the contract which fulfils all theessentials of valid contract. It is a contract which is

binding and enforceable.

B. Void contract: the expression void in its accuratesense means absolutely null that is to say,incapable of ratification or confirmation.

It is the one to which the law will give no effectwhatever.

It is not a contract at all.



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According to enforceability Contd

It cannot be enforced whatsoever. For example a contractby minors or unsound mind is void and unenforceableeven if the minor were to ratify it after attaining majority.

In a void contract no parties is legally bound to fulfill thecontract.

It is void by two ways, either from the beginning orbecomes void subsequently due some reasons.

i. From the beginning: also known as Ab-inition. (Ab-initio is a Latin word, where ab means from and initiomeans beginning it means from the beginning or fromfirst or start).



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It is illegal from the moment it is made. Lack of capacity to

contract automatically makes the contract void. Lack ofcapacity arises from being an infant or minor, intoxicated orinsane or unsound minded.

It may be known as void agreement or illegal contract. Acontract becomes void ab-inition under the followingcircumstances.


1. Agreement in restrainfrom marriage.

2. Agreement in restrain of

business3. Agreement by way of

wager4. Uncertainty of terms5. Un lawful object

6. Immorality7. Fraudulent case8. Agreement without

consideration9. Impossibility of

performance10. Agreement in restrain

of legal proceedings


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b) Subsequent illegality: A contract which ceases tobe enforced by the law becomes void. It means thata void contract is not void from the beginning whenit is made, but subsequently it becomes void due tosome reasons.

i. A agrees to sell his house to B after two days.The house is burnt next day. The contract becomesvoid.

ii. By death of any party to contract: F agrees tomerry G. G dies before the marriage the contractis void.



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iii. Due to changes in law or government policy:Kareem agrees to sell 1000 bags of wheat toJamaal. Before the delivery the governmentbans private trade in wheat. The contract

becomes void.iv. By rejection of voidable contract: A forcibly

buys Bs car for 2000 Afs. The contract is

voidable at the options of B. B may accept orreject it. If B rejects the contract it becomes void.

v. It has been fully performed



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C. Voidable contract: it is an agreement that isbinding and enforceable but, because of the lack ofone or more of the essentials of valid contract, it maybe repudiated (rejected) by the aggrieved party at hisoption.

It is voidable when consent of the one or more of theparties to it is not free.

A voidable contract is valid until it is avoided by the

party having right to avoid it. If the parties decide toconfirm, it remains valid.

A contract becomes voidable under the followingcircumstances



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i. When consent of either party has beenobtained by coercion, undue influence,misrepresentation or fraud.

Example: A compels B to sell his car atgunpoint. The contract is voidable at theoption of B.

Example: A deceives B stating that his

factory produces 90 kg sugar daily andinduces B to buy it. The contract is voidable.



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ii. When one party promises to do something forthe other party but the other party prevents himfrom performing his promise, the contractbecomes voidable at his promise.

Example: A contracts to paint B house. A is ready topaint but B prevents him to do so. The contract isvoidable at the option A.

iii. When a party to the contract promises to do

certain thing within specified time, but fails todo, the contract becomes voidable at the optionof promise. If the time is the essence of contract.



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Example: A contracts to paint Bs house within aweek, A does not come within the specified time.The contract is voidable at the option of B.

D. Unenforceable contract: unenforceablecontract is the one which is good in all otheraspects but by the reason of some technicaldefect, it cannot be enforced until the defect is

rectified. such as absence of writing, registration,requisite stamps etc. When these defects areremoved the contract becomes enforceable.



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Kinds of ContractAccording to Formation


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Contract according to formation

According to formation contract can be classified into

following categories

1. Express contract: It is the one which is expressedby the words spoken or written. When such a

contract is formed, there is no difficulty inunderstanding the rights and obligations of theparties. In expressed contract the parties directlystate the terms of the contract.

Example:A tells on telephone to B that he wants to sell hiscar, and B informs A that he agrees to buy the car.It is expressed contract.



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Contract according to formation contd

2. Implied contract: is the one which is made otherwise

than by the words spoken or written. It arises from theacts, or conduct of the parties, course of dealings orcircumstances. It arises when one person, without beingrequested to do so, renders services under circumstances

indicating that he expects to be paid for them, and theother person knowing such circumstances accepts thebenefit of those services.

Examples:

A went to restaurant and has a cup of tea. It is an impliedcontract and A will pay for the cup of tea.

M a shoe shiner starts polishing the shoes of W in hispresence and W allows him to do so. It is implied contract.



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Kinds of ContractAccording to Performance


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Kinds according to performance

According to performance contract can be classified intofollowing categories.

1. Executed contract: a contract is said to be an executedwhen both parties have completely performed theirobligations. It means that nothing remains to be done

by either party under the contract.

Example:

Sohail buys book form Mohib, Sohail pays the priceand Mohib delivers the book. It is an executed contract.

Jamshaid agrees to paint a picture for Noor, on 2000 Afs.When Jamshaid paints the picture and Noor pays theprice, the contract is said to be executed.



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Kinds according to performance

2. Executory contract: A contract is said to beexecutory when something remains to be done. It is acontract when both parties to the contract have yet toperform their obligations.

Examples:

Roshan sells his car to Sultan for Afs. 3 lac. Sultan hasnot yet paid the price and Roshan has not delivered thecar. The contract between Roshan and Sultan isexecutor.

Hadi agrees to teach Faisal, in May and Faisal agrees topay Afs. 1000 to Hadi. It is an executor contractbecause both the promise has yet to be performed.



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Kinds of ContractAccording to Parties


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According to parties.

On the basis of parties contract can be classified

into following kinds.

1. Unilateral Contract: A contract is said to beunilateral when only one party makescommitment. In other words a contract whereonly one party is bound but the other partychooses to be bound by it.

Example:

Mujeeb promises to pay Afs. 2000 to anyone whofinds this lost bag. Farishta finds the bag andreturns. It is a unilateral contract which comes intoexistence when the bag is found.



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According to parties contd ..

1. Bilateral contract:it is a contract where bothparties are bound by it as soon as the contractis made. In other words both parties have yetto perform their obligations.

Examples:

Maria promises to paint a picture for Nargis,and Nargis promises to pay Afs. 20000 to

Maria. It is bilateral contract.



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Special Kinds of Contract


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1. Quasi contract: In a Quasi contract, the law imposes

certain obligations under some special circumstances.It is based upon the principle ofequity that a personshall not be allowed to get benefit at the cost ofanother. In fact, it is not a contract but creates

relations similar to contract. It is also calledConstructiveContract.

Examples:

A finds lost property of B. A is bound to return it to B.

Akram leaves his goods at Farhads house by mistake.Farhad treat them as his own, and uses them. It is Quasicontract Farhad is bound to pay for the goods.



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2. Contingent Contract: an absolute contract is one in which

the promises has to be performed independently of anycontingency or condition. A contingent contract is thecontract to do or not to do something, if some event,collateral to such contract, does or does not happen.

Contingent contract must be must be dependent on futureevent, collateral to the contract and must be certain.

Example : A Contracts to pay B Afs. 30000, ifBs house isburnt. This is a contingent contract. A contract of fire

insurance is contingent. A wager is also contingent but forbidden by the law.

Contingent contract is also known as conditional Contract,but technically there is distinction between the two.



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Conditional Contract: is a contract in which

performance of one party is conditional or dependenton the readiness or willingness to perform by the other

party. In such contracts condition is a part ofPerformance itself, and is not uncertain, whereas in

contingent , the event supposed to occur is not a partof performance but collateral to the contract, and isuncertain.

Example : A agrees to deliver 200 bags of wheat to B

only when B pays, is conditional on the performance ofpayment but not contingent, as payment is the part ofperformance and not uncertain.



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THANK YOU

Sayyed Majid [email protected]

chapter - 2 kinds of contract

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