Short Notes on the Classification of Contracts

Contracts can be classified on a number of basis:

1. Classification on the basis of creation or formation:

A contract may be created – (i) expressly, (ii) impliedly.

(i) Express Contract:

An express contract may be created orally, i.e., by words spoken or written. When one party makes the offer by words spoken or written and the other party accepts the same accordingly, there is an express contract created.

(ii) Implied Contract:

An implied contract is created by the conduct of acts of the parties and not by words spoken or written. For example, A boards a public bus, say a D.T.C. bus in Delhi or a M.E.S.T. bus in Mumbai.

(iii) Quasi-Contracts:

Indian Contract Act has named such contracts as “Certain relations resembling those created by contracts.” Such contracts are not created expressly or impliedly by the parties but are created by law on the equitable principle that a person shall not be allowed to become rich at the expense of the other. For example, A, a trader, leaves certain goods by mistake at B’s house. B must either return the goods or pay the price.

(iv) Unenforceable Contracts:

The term ‘Unenforceable Contract’ is used for those contracts which are perfectly valid but cannot be enforced due to certain technical defects such as under stamping. These types of contracts cannot be placed in the category of void or illegal agreement. Hence the new term “Unenforceable Contract” is justified. If the defect can be removed, these contracts can be enforced. For example, if the requisite stamp is affixed, the Court may enforce such a contract.

2. Classification on the basis of Execution:

(i) Executed Contract:

Where a contract has been performed by both the parties, it is called an executed contract. For example, A agrees to sell a sofa set to B. A has delivered the sofa set and B has paid the price.

(ii) Executory Contracts:

A contract where both the parties have not yet performed their obligation, the contract is called executory contract. If in the above example, both have to perform their obligations, it will be an executory contract.

(iii) Partly executed and executory contract:

Where only one of the parties to the contract has performed its obligation, the contract is called partly executed and executory. For example, in the above case if A delivered the sofa set, but B has not made the payment, it will be a partly executed and executory contract.

(iv) Bilateral Contracts:

Executed and executory contracts are also called bilateral contracts as both the parties have either performed or have to perform their obligation.

(v) Unilateral Contracts:

A partly executed contract is also called unilateral contract as the contract is to be performed by only one of the parties i.e., unilaterally.

3. Classification on the basis of Formality:

(i) Formal Contracts:

A formal contract is one which is entered into in a particular or prescribed form. It is in writing and is to be signed, sealed and delivered by the parties. In addition witness and attestation may also be necessary. Formal contracts can be sub-divided into:

(a) Contracts of record which may take the form of a judgement of a court or recognizance. A court judgement on being recorded is called a contract of record. Recognizance is a written acknowledgement of debt due to the Crown or the State.

(b) Contracts under seal are written documents signed, sealed and delivered by the parties. Such a contract is based on form alone. No consideration is necessary in such contract.

(ii) Simple Contract:

All contracts which are not formal contracts, i.e., which are not made under seal are simple contracts. These can be made orally or in writing and must be supported by consideration.