Short essay on various kinds of Contracts

Kinds of Contracts from the Point of View of Enforceability:

From the point of view of enforceability, a contract may be valid or voidable or void or unenforceable or illegal.

1. Valid Contract:

A valid contract is an agreement enforceable by law. An agreement becomes enforceable by law when all the essential elements of a valid contract, as enumerated above, are present.

2. Voidable Contract.

According to Section 2(i): “An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract.” Thus, a voidable contract is one which is enforceable by law at the option of one of the parties. Until it is avoided or rescinded by the party entitled to do so by exercise sing his option in that behalf, it is a valid contract.

Usually a contract becomes voidable when the consent of one of the parties to the contract is obtained by coercion, undue influence, misrepresentation or fraud. Such a contract is voidable at the option of the aggrieved party i.e., the party whose consent was so caused (Sees. 19 and 19A). But the aggrieved party must exercise its option of rejecting the contract (i) within a reasonable time, and (ii) before the right of third party intervenes otherwise the contract cannot be repudiated.

Illustrations :

(a) A threatens to shoot B if he does not sell his new Bajaj Scooter to A for Rs. 2,000. B agrees. The contract has been brought about by coercion and is voidable at the option of B.

(b) A, intending to deceive B, falsely represents that five hundred quintals of indigo are made annually at A’s factory, and thereby induces B to buy the factory. The contract has been caused by fraud and is voidable at the option of B.

3. Void Contract:

Literally the word ‘void’ means ‘not binding in law.’ Accordingly, the term ‘void contract’ implies a useless contract which has no legal effect at all. Such a contract is a nullity, as there has been no contract at all. Section 2(j) defines. “A contract which ceases not to be enforceable by law becomes void, when it ceases to be enforceable.” It follows from the definition that a void contract is not void from its inception and that it is valid and binding on the parties when originally entered but subsequent to its formation, it becomes invalid and destitute of legal effect because of certain reasons.

The reasons which transform a valid contract into a void contract, as given in the Contract Act, are as follows:

(a) Supervening Impossibility (Sec. 56):

A contract becomes void by impossibility of performance after the formation of the contract. For example, A and B contract to marry each other. Before the time fixed for the marriage, A goes mad. The contract to marry becomes void

(b) Subsequent Illegality (Sec. 56):

A contract also becomes void by subsequent illegality. For example, A agrees to sell B 100 bags of wheat at Rs. 650 per bag. Before delivery, the Government bans private trading in wheat. The contract becomes void.

(c) Repudiation of a Voidable Contract:

A voidable contract becomes void, when the party, whose consent is not free, repudiates the contract. For example, M, by threatening to murder B’s son, makes B agrees to sell his car worth Rs. 30,000 for a sum of Rs. 10,000 only. The contract, being the result of coercion, is voidable at the option of B. B may either affirm or reject the contract. In case B decides to rescind the contract, it becomes void.

(d) In the case of a contract contingent 011 the happening of an uncertain future event, if that event becomes impossible:

A contingent contract to do or not to do something on the happening of an uncertain future event becomes void, when the event becomes impossible (Sec. 32). For example, A contracts to give Rs. 1,000 to B, if B marries C. C dies without being married to B. The contract becomes void.

4. Illegal or Unlawful Contract:

The world ‘illegal’ means ‘contrary to law’ and the term ‘contract’ means ‘an agreement enforceable by law.’ As such to speak of an ‘illegal contract’ involves a contradiction in terms, because it means something like this – an agreement enforceable by law and contrary to law. There is apparent contradiction in terms. Moreover, being of unlawful nature, such an agreement can never attain the status of a contract. Thus, it will be proper if we use the term ‘illegal agreement’ in place of ‘illegal contract’. An illegal agreement is void.

An agreement is illegal and void if its object or consideration:

(a) Is forbidden by law; or

(b) Is of such a nature that, if permitted, it would defeat the provisions of any law; or

(c) Is fraudulent; or

(d) Involves or implies injury to the person or property of another; or

(e) The court regards it as immoral, or opposed to public policy (Sec. 23). Thus an agreement to commit murder or assault or robbery or to make a gift in consideration of illicit intercourse would be illegal and void ab-initio.