Kinds of Contracts

The contracts can be classified into

different categories as follows:

1: According to Enforceability

According to enforceability, a contract is

divided into following kinds:
a: Valid Contract

A valid contract is enforceable by law. An agreement

becomes enforceable by law when all the essentials of a
valid contract are present.

Obligation of Parties: in valid contract all parties are

legally responsible for the performance of the contract. If
one of the parties breaches the contract, the other party
can enforce it through the court of law.

For example, A agrees to sell a car to B. If it fulfills all the

essentials of a contract, it is a valid contract. If A fails to
deliver the car, B can sue him and if B fails to pay, A can
sue him.
b: Void Contract

The word void means not binding in law. A void contract is not void from the beginning. It is valid
contract when it is made but subsequently it becomes void due to certain reasons. A contract
becomes void under the following circumstances.

Impossibility of Performance: A contract becomes void due to impossibility of performance. A

contract becomes void before performance, when it becomes impossible to be performed by any
party due to any reason. For example, A agrees to sell his house to B after two days. His house is
burnt next day. The contract becomes void.

Subsequent Illegality: A contract becomes void by subsequent illegality. A contract may become
illegal before performance, due to certain reasons. Fro example, A agrees to sell 100 bags of
wheat to B. Before delivery the government bans private trade in wheat. The contract becomes
void.

Rejection of a Voidable Contract: A voidable contract becomes void when the party whose
consent is not free rejects the contract. For example, A forcibly buys Bs car for Rs. 200000. The
contract is voidable at the option of B. B may accept or reject it. If B rejects the contract it
becomes void.

Impossibility of depending Event: A contingent contract is that, the performance of which

depends upon the happening or non-happening of a certain event. It becomes void, when that
event does not happen. For example, A agrees to give Rs. 10000 to B, if B gets admission in
Mashal University. B fails to get admission. The contract becomes void.

Obligation of Parties: In void contract both the parties are not legally responsible to fulfill the
contract. Under this contract the party who has received any benefit is bound to return it to the
other party.
C: Voidable Contract

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.

A contract is voidable when the consent of one or more of the parties is not free. It is a valid
contract until it is avoided by the party having the right to avoid it. When it is avoided it becomes
void. If the party decides to confirm it, it remains valid. A contract becomes voidable under the
following circumstances.

A contract becomes voidable when the consent of one or more of the parties to a contract is
obtained by coercion, undue influence, misrepresentation or fraud. For example, A deceives B by
stating that his factory produces 500 kg of sugar daily and thus induces B to buy it. The contract is
voidable at the option of B.

When a party to the contract promises to do a certain thing within a specified time, but fails to do
it, then the contract becomes voidable at the option of the promisse, if time is essence of the
contract. For example, A contracts to paint Bs house within one weak. A does not come within the
specified time. The contract is voidable at the option of B.

Obligation of Parties: the following are the obligation of parties

It is valid for both the parties if it continues.

The law gives an option to one of the parties to avoid it.
The party entitled to cancel the contract is not bound to cancel. If he confirms it, the other party
remains bound to perform.
The aggrieved party can get damages from the other party.
If one has received some benefit he must return it to the other.
d: Unenforceable Contract

An unenforceable contract is that which cannot be enforced in a

court of law because of some technical defects such as absence of
writing, registration, requisite stamp, etc. when these defects are
removed, the contract can be enforced.

For example, A borrows Rs. 1 billion from B and makes a pronote on

a Rs. 10 stamp paper. It is unenforceable because pronote is
undervalued.

Obligation of Parties: in unenforceable contract, the parties may

perform the contract. But in beach of such contract, the aggrieved
party is not entitled to the legal remedies.
e: Illegal Agreement

An agreement is illegal when its performance is forbidden by any law. Such

an agreement can never become a contract. An agreement is illegal and
void if it is forbidden by law or is of such a nature that, if permitted, it would
defeat the provisions of any law or is fraudulent or it involves injury to the
person or property of another or the Court regards it as immoral, or opposed
to public policy.

For example, A gives money to B, a smuggler to buy smuggled goods.

Such agreement is illegal and the money cannot be recovered.

Obligation of Parties: The parties to this agreement are not responsible to

perform their promises. There is a punishment for the parties according to
law also.