Definition and Types of Contracts

Introduction

A contract is the foundation of legal and business relationships in India. It governs agreements between parties and ensures that promises are legally enforceable. The Indian Contract Act, 1872 provides the basic rules for formation and classification of contracts.

Understanding the definition and types of contracts is essential for applying contract law in practical situations.

Meaning / Definition

Section 2(h) of the Indian Contract Act, 1872 defines a contract as:
“An agreement enforceable by law is a contract.”

This means:

• Agreement = Promise between parties
• Enforceable by law = Recognised and protected by courts

Thus, Contract = Agreement + Legal enforceability

Other definitions:

• Pollock: A contract is a promise or set of promises which the law will enforce.
• Salmond: A contract creates and defines legal obligations (legal duties) between parties.

The Act is divided into:

• Sections 1–75: General principles applicable to all contracts
• Sections 124–238: Special contracts

Contracts create rights in personam (rights enforceable against a specific person only).

Modes or Types

Based on Enforceability

• Valid Contract
  A contract that is legally binding and enforceable.

• Voidable Contract
  A contract which is valid but can be cancelled (set aside) by one party.

• Void Agreement
  An agreement not enforceable by law from the beginning.

• Illegal Agreement
  An agreement forbidden by law and punishable.

• Unenforceable Agreement
  A contract which cannot be enforced due to some technical defect (for example, lack of writing or registration where required).

Based on Mode of Formation

• Express Contract
  Formed by words spoken or written.

• Implied Contract
  Formed by conduct (actions of parties).

• Quasi Contract
  Not a real contract but created by law to prevent unjust enrichment (unfair gain).

Based on Performance

• Executed Contract
  A contract where both parties have completed their obligations.

• Executory Contract
  A contract where obligations are yet to be performed.

• Unilateral Contract
  A contract where only one party has to perform.

• Bilateral Contract
  A contract where both parties have mutual obligations.

Distinction / Comparison

Practical Example

X agrees to sell a book to Y and Y agrees to pay ₹500. This is an agreement.
When the law recognises and allows enforcement of this agreement, it becomes a contract.
If Y does not pay, X can approach the court to enforce the contract.

Summary

• A contract is an agreement enforceable by law (Section 2(h))
• Contract = Agreement + Legal enforceability
• It creates rights in personam (against specific persons)
• Contracts can be classified based on enforceability, formation, and performance
• The Indian Contract Act, 1872 governs general and special contracts
• Contracts form the basis of business and legal transactions in India