ILE CONTRACT LAW REVIEW Published by

VOLUME I AND ISSUE I OF 2023 Institute of Legal Education

APIS – 3920 – 0030 | ISBN - 978-81-961791-2-0 https://iledu.in

A BRIEF INTRODUCTION TO CONTRACT AND ITS TYPES

AUTHOR – DHIVYALAKSHMI T, STUDENT AT GOVERNMENT LAW COLLEGE, COIMBATORE

Best Citation - DHIVYALAKSHMI T, A BRIEF INTRODUCTION TO CONTRACT AND ITS TYPES, ILE CONTRACT
LAW REVIEW (ILE CLR), 1 (1) of 2023, Pg. 1-7, APIS – 3920 – 0030 | ISBN - 978-81-961791-2-0.

Abstract

Contracts are legally binding agreements between two or more parties that outline the rights,
obligations, and responsibilities of each party involved. They serve as a framework for
conducting business and personal transactions, ensuring clarity and enforceability. Contracts
provide a sense of certainty and protection. By clearly defining the terms and conditions of an
agreement, contracts reduce the risk of misunderstandings and disputes, ensuring that all
parties are on the same page. Contracts establish legal rights and obligations. They outline the
expectations of each party, setting forth the actions and performances required to fulfill the
agreement. This promotes accountability and allows parties to seek legal remedies in case of
breach or non-compliance. Furthermore, contracts help manage risks and allocate
responsibilities. They address potential contingencies and liabilities, providing a framework for
addressing unforeseen circumstances that may arise during the course of the agreement.
Additionally, contracts contribute to building trust and maintaining healthy relationships. By
formalizing agreements in writing, contracts foster transparency, demonstrate commitment,
and create a sense of professionalism and reliability.

Keywords: Contract, Types of Contracts, Indian Contract Law, 1872, Breach of contract

I. INTRODUCTION: A. Offer and Acceptance: There must be a

The Indian Contract Act, enacted in 1872, is a clear and unequivocal offer made by one party
crucial piece of legislation that governs the and a corresponding acceptance of that offer
formation and enforcement of contracts in by the other party. The terms of the offer and
India. It lays down the fundamental principles acceptance should be definite and specific.
and rules applicable to agreements between B. Intention to Create Legal Obligations:
parties, including individuals and organizations. The parties involved in the contract must have
The Act defines a contract as an agreement the intention to create legal obligations. A social
enforceable by law and outlines essential or domestic agreement generally lacks this
elements such as offer, acceptance, intention.
consideration, and intention to create legal C. Lawful Consideration: Consideration
obligations. It also specifies various types of refers to something of value given by each
contracts, their validity, performance, and party to the contract. It can be in the form of
consequences of breach. The Indian Contract money, goods, services, or a promise to do or
Act plays a pivotal role in facilitating business not do something. Consideration must be
transactions, ensuring fairness, and providing a lawful, i.e., it should not be illegal, immoral, or
legal framework for contractual relationships in against public policy.
India. D. Capacity of the Parties: The parties
entering into a contract must be competent to
II. ESSENTIALS OF VALID CONTRACT:
contract. They must be of sound mind, not
The essentials of a valid contract, as outlined in
disqualified by law, and not minors. If a party
the Indian Contract Act, are as follows:

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lacks capacity, the contract may be voidable or elements of a valid contract may be classified
unenforceable. as void contracts.
E. Free Consent: The consent of the parties E. Voidable Contract: A voidable contract
must be free, voluntary, and not obtained is one that is initially valid but can be legally
through coercion, undue influence, fraud, avoided or canceled by one or both parties due
misrepresentation, or mistake. Consent to certain defects or deficiencies. Examples
obtained under such circumstances may include contracts entered into under duress,
render the contract voidable. fraud, misrepresentation, or undue influence.
F. Lawful Object: The purpose or object of Mohori Bibee v. Dharmodas Ghose (1903) is
the contract must be lawful. It should not be case established the principle that contracts
illegal, immoral, or against public policy. entered into by minors (persons below the age
G. Certainty: The terms of the contract of majority) are voidable at the option of the
must be certain and capable of being minor. The court held that a contingent contract
understood by the parties. Vague or uncertain executed by a minor for the repayment of
terms may render the contract unenforceable. money lent to him was voidable and
H. Legal Formalities: Certain contracts unenforceable.
may require compliance with specific legal F. Unilateral Contract: A unilateral
formalities, such as writing, registration, or contract is a type of contract where only one
attestation, as prescribed by law. Failure to fulfill party makes a promise or performs an act in
these formalities may affect the validity or exchange for the other party’s acceptance by
enforceability of the contract. performance. The offeree is not obligated to
III. TYPES OF CONTRACTS: accept the offer, but if they do, it creates a
Under Indian contract law, various types of binding contract. Carlill v. Carbolic Smoke Ball
contracts are recognized. Here are some Company (1893) case established the principle
common types: of unilateral contracts. The court held that a
company's advertisement promising a reward
A. Express Contract: An express contract is
to anyone who used their product and still
formed when the terms and conditions of the
contracted the flu created a binding contract,
agreement are explicitly stated, either orally or
even though the company did not know the
in writing, by the parties involved.
specific individuals who accepted the offer.
B. Implied Contract: An implied contract is
G. Bilateral Contract: A bilateral contract is
created based on the conduct or behavior of
the most common type of contract, where both
the parties, rather than through explicit words or
parties exchange promises and are mutually
written agreement. It arises when the parties’
obligated to perform certain acts or provide
actions indicate an intention to enter into a
something of value. It involves a promise from
contractual relationship.
each party to the other.
C. Valid Contract: A valid contract is a
H. Executed Contract: An executed
legally binding agreement that meets all the
contract is one in which both parties have
essential requirements, including offer,
fulfilled their contractual obligations, and the
acceptance, consideration, intention to create
agreement has been fully performed.
legal obligations, and lawful object.
I. Executory Contract: An executory
D. Void Contract: A void contract is
contract is a contract in which one or both
considered null and void from the beginning,
parties have yet to fulfill their obligations. The
having no legal effect. It is devoid of any legal
performance of the contract is still pending.
enforceability, and the parties are not bound by
J. Unenforceable Contract: An
its terms. Contracts that are illegal, involve
unenforceable contract is a valid contract that
unlawful consideration, or lack the necessary
cannot be enforced due to certain legal

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restrictions or limitations. While the contract person’s freedom to carry on a lawful trade,
may have all the essential elements, it may be business, or profession are void. Reasonable
unenforceable due to technicalities like the restrictions, such as those imposed through
absence of required legal formalities or the non-compete agreements, may be
operation of the statute of limitations. enforceable.
K. Quasi Contract: A quasi contract is an E. Agreements by incompetent parties: An
obligation imposed by law to prevent unjust agreement entered into by parties who are
enrichment. It is not a true contract but legally incompetent, such as minors, persons of
resembles one, as it creates rights and unsound mind, or those disqualified by law, is
obligations similar to those in a contract. These void. However, in some cases, such agreements
are some of the common types of contracts may be enforceable against the incompetent
recognized under Indian contract law. Each type party but not against the other party.
carries its own legal implications and F. Agreements contingent on an
consequences. impossible event: Agreements that depend on
IV. VOID AGREEMENTS: the happening of an event that is impossible or
Under Indian contract law, certain agreements uncertain to occur are void. However, if the
are deemed void from the beginning and are impossibility arises after the formation of the
devoid of any legal effect. The Indian Contract agreement, it may be discharged by law. In
Act, 1872, identifies the following categories of Taylor v. Caldwell (1863) case, it introduced the
void agreements: concept of impossibility of performance. The
court held that when a contract becomes
A. Agreements with consideration and
impossible to perform due to an unforeseen
objects that are unlawful: Any agreement that
event, such as the destruction of the subject
involves consideration or has an object that is
matter, the parties are discharged from their
prohibited by law or is against public policy is
obligations.
void. For example, an agreement to commit a
A void agreement is different from a voidable
crime or engage in fraudulent activities.
agreement. Void agreements are null and have
B. Agreements without consideration: An
no legal effect from the beginning, while
agreement without lawful consideration is
voidable agreements are initially valid but can
generally void unless it falls within specific
be avoided or cancelled by one or both parties
exceptions, such as agreements made out of
due to certain defects or circumstances.
natural love and affection, or a promise to
compensate for a past voluntary act. V. WAGERING CONTRACTS:
C. Agreements in restraint of marriage: In Indian contract law, a wagering contract is an
Agreements that impose unreasonable agreement where two parties mutually agree to
restrictions on marriage are considered void. pay or receive money or goods based on the
However, certain agreements related to divorce, outcome of an uncertain event. It involves
separation, or personal rights incidental to placing a bet or gambling on the occurrence or
marriage may be valid.In Balfour v. Balfour non-occurrence of a future event.
(1919) case, the court emphasized the
Wagering contracts are specifically addressed
distinction between domestic and commercial
in Section 30 of the Indian Contract Act, 1872.
agreements. It held that an agreement between
According to this provision, agreements that are
spouses during separation, where the husband
contingent upon the determination of uncertain
promised to pay maintenance to his wife, was
events, in which parties have no control or
not a legally enforceable contract as it lacked
interest other than the wager itself, are deemed
the intention to create legal relations.
void. Such contracts are considered against
D. Agreements in restraint of trade:
Agreements that unreasonably restrict a

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public policy as they promote gambling and event. These contracts are governed by the
are viewed as detrimental to society. provisions of the Indian Contract Act, 1872.

However, it’s important to note that the Act The Indian Contract Act defines a contingent
provides certain exceptions for certain types of contract in Section 31. According to this section,
wagering contracts, including agreements a contingent contract is a contract to do or not
related to horse racing or lotteries conducted to do something if an event, collateral to such
by state governments. These exceptions are contract, does or does not happen. In simpler
based on specific statutes or state laws that terms, it is a contract in which the performance
regulate and permit these forms of gambling. of the contract is contingent upon the
occurrence or non-occurrence of a particular
In general, wagering contracts that do not fall
event.
within the statutory exceptions are considered
void and unenforceable in India. Parties cannot For example, if A agrees to sell a car to B, but
seek legal remedies for the enforcement of such only if B’s loan application is approved by a
agreements, and any money or goods wagered bank, the contract between A and B is a
cannot be recovered through the court system. contingent contract. The performance of the
contract (selling the car) is contingent upon the
The treatment of wagering contracts varies in
approval of B’s loan application.
contract law across different jurisdictions. Here’s
a brief overview of how they are dealt with in In a contingent contract, there are two possible
India, the UK, and the USA: outcomes:

 India: Wagering contracts, also known as  The event occurs: If the event specified in
gambling contracts, are generally considered the contract happens, then the contract
void and unenforceable under Section 30 of the becomes enforceable, and the parties are
Indian Contract Act, 1872. However, certain bound to perform their obligations as per the
exceptions exist for horse racing and lotteries terms of the contract.
held by state governments.  The event does not occur: If the event
 UK: Wagering contracts are generally specified in the contract does not happen, the
enforceable in the UK unless they fall within contract becomes void, and the parties are
specific statutory exceptions, such as gambling discharged from their obligations. In such a
involving minors or illegal activities. The UK case, neither party can sue the other for non-
Gambling Act 2005 regulates and provides a performance.
framework for gambling activities. A. Contingent contracts under Indian
 USA: The legality of wagering contracts contract law have certain distinct features. Here
in the USA varies by state. While some states are the key features of a contingent contract:
permit and regulate certain forms of gambling, 1. Contingency: A contingent contract is
others prohibit it outright. Contracts related to based on the occurrence or non-occurrence of
illegal gambling activities are generally a future uncertain event. The performance of
unenforceable, but in states where gambling is the contract depends on the happening or non-
legal, wagering contracts may be enforceable. happening of this event. If the specified event
VI. CONTINGENT CONTRACT: takes place, the contract becomes enforceable;
Under Indian contract law, a contingent otherwise, it becomes void.
contract is a contract that depends on the 2. Conditional nature: The rights and
occurrence of a future uncertain event. The obligations of the parties are conditional upon
rights and obligations of the parties involved in the occurrence or non-occurrence of the
a contingent contract are contingent upon the specified event. Until the event is determined,
happening or non-happening of a specific the contract remains in a state of suspense.

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3. Uncertainty of the event: The event 2. Contingent contracts based on the

upon which the contract is contingent must be non-happening of an uncertain future event
uncertain at the time of entering into the (Section 33): A contingent contract may also be
contract. It should be something that is not based on the non-happening of an uncertain
within the control of the parties involved. The event. If the event does occur, the contract
uncertainty adds an element of risk to the becomes void.
contract. 3. Contingent contracts based on the
4. Collateral event: The event on which the performance of a condition precedent (Section
contract depends must be collateral or 34): A contingent contract may be conditional
incidental to the contract. It should not be an on the performance of a condition precedent.
essential term or condition of the contract itself. The contract becomes enforceable only when
The event should not directly affect the the condition is fulfilled.
performance of the contract. 4. Contingent contracts based on the
5. Future performance: Contingent non-performance of a condition precedent
contracts involve future performance. The (Section 35): A contingent contract may be
contractual obligations are not immediately conditional on the non-performance of a
enforceable but become operative only if the condition precedent. The contract becomes
specified event occurs or does not occur. Until void if the condition is performed.
then, the parties are not bound to perform their 5. Contingent contracts based on the
respective obligations. expiration of a specified time (Section 36): A
6. Non-enforceability until the happening contingent contract may be based on the
of the event: A contingent contract is not expiration of a specified time. The contract
enforceable until the occurrence or non- becomes void if the time elapses without the
occurrence of the event. If the event does not occurrence of the specified event.
happen, the contract becomes void, and the These sections provide the legal framework for
parties are released from their obligations. different types of contingent contracts, covering
However, if the event does occur, the contract a range of situations where the performance of
becomes enforceable, and the parties are a contract is dependent on the occurrence or
bound to fulfill their respective obligations. non-occurrence of specific events or conditions.
7. Legal validity: Contingent contracts are It is essential to understand these provisions to
legally valid and enforceable if the specified determine the enforceability and validity of
event occurs. Once the event happens, the contingent contracts under Indian contract law.
contract assumes the same legal status as any
VII. CERTAIN RELATIONS RESEMBLING THOSE
other valid contract, and the parties are
CREATED BY CONTRACT
obligated to perform their respective duties as
Sections 68 to 72 of the Indian Contract Act,
per the contract terms.
1872, pertain to “Certain Relations Resembling
B. Under Indian contract law, Sections 32 to
Those Created by Contract.” These sections
36 of the Indian Contract Act, 1872, outline
deal with contracts that create relations similar
different kinds of contingent contracts. These
to those created by actual contracts. Here is an
include:
overview of these sections:
1. Contingent contracts based on the
happening of an uncertain future event 1. Section 68: Claim for Necessaries
(Section 32): A contingent contract may be Supplied to a Person Incapable of Contracting:
based on the happening of an event that is This section allows a person who supplies
uncertain. If the event does not occur, the goods or services that are necessary for the
contract becomes void. support of a person incapable of contracting
(e.g., a minor or a person of unsound mind) to

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claim reimbursement from the property of that upon in a valid contract. The Indian Contract
person. Act, 1872 governs the law relating to contracts in
2. Section 69: Reimbursement of Person India, including the consequences of a breach.
Paying Money Due by Another, in Payment of
A. Under Indian contract law, a breach of
Which He is Interested: This section allows a
contract can take several forms:
person who is interested in the payment of
money due by another to make the payment 1. Actual Breach: This occurs when a party
and seek reimbursement from that person. The fails to perform its obligations as stated in the
person making the payment is entitled to contract within the specified time or in the
reimbursement as if he/she were the principal agreed-upon manner.
debtor. 2. Anticipatory Breach: Also known as
3. Section 70: Obligation of Person anticipatory repudiation, this happens when
Enjoying Benefit of Non-Gratuitous Act: This one party clearly communicates to the other
section applies when a person lawfully does party, either through words or actions, that they
something for another person or delivers will not fulfill their contractual obligations in the
something to him/her, not intending to do so future.
gratuitously. The person receiving the benefit is 3. Fundamental Breach: A fundamental
bound to compensate the other person for the breach is a severe violation of the terms of the
act or thing done. contract that goes to the root of the agreement.
4. Section 71: Responsibility of Finder of It is a breach that substantially deprives the
Goods: This section applies to a person who innocent party of the benefits it expected from
finds someone else’s goods by chance. The the contract.
finder of the goods is subject to certain 4. Partial Breach: A partial breach occurs
responsibilities and obligations, such as making when a party performs the contract but fails to
reasonable efforts to find the true owner and fulfill all the obligations stated in the agreement.
returning the goods. This breach may entitle the innocent party to
5. Section 72: Liability of Person to Whom claim damages for the incomplete
Money is Paid, or Thing Delivered, by Mistake performance.
or Under Coercion: This section deals with 5. Time-based Breach: If a party fails to
situations where money is paid or a thing is perform within the agreed-upon time frame or
delivered by mistake or under coercion. The within a reasonable time if no specific time
person receiving the money or thing is bound to frame is mentioned, it is considered a breach of
repay or return it to the person from whom it contract.
was received. A. When a breach of contract occurs, the
These sections establish legal principles for innocent party may be entitled to various
situations that resemble contractual remedies, including:
relationships, but where an actual contract may 1. Damages: The non-breaching party
be absent or invalid. They provide remedies and may claim monetary compensation to cover
obligations in cases involving necessities the losses suffered as a result of the breach.
supplied to incapacitated individuals, Hadley v. Baxendale (1854)dealt with the
reimbursement for payments made by concept of foreseeability of damages. The court
interested parties, non-gratuitous acts, finding held that a party can only recover damages
and returning goods, and the return of money that arise naturally from the breach or that were
or things received by mistake or under coercion. within the contemplation of both parties at the
time of entering into the contract. Damages
VIII. BREACH OF CONTRACT:
that are too remote or speculative are not
In India, a breach of contract occurs when one
recoverable.
party fails to perform its obligations as agreed

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2. Specific Performance: In some cases, notes-study-materials-and-case-laws/ (Last

the court may order the breaching party to fulfill Accessed on 1 July, 2023 – 7.46 PM)
st

its contractual obligations as agreed upon. This

is typically applicable when monetary
compensation would not adequately remedy
the situation.
3. Rescission: Rescission means canceling
the contract and returning the parties to their
pre-contract position. This remedy is usually
available when there has been a serious breach
that makes it impracticable to continue with the
contract.
4. Injunction: In exceptional cases, the
court may grant an injunction to prevent the
breaching party from engaging in certain
actions or to enforce specific performance.
IX. CONCLUSION
The Indian Contract Act, 1872 is a fundamental
piece of legislation that governs contracts in
India. It establishes the rights and obligations of
the parties involved and provide a
comprehensive framework for the formation
and enforcement of contracts, fostering
certainty and fairness in business transactions.

X. REFERENCE:
1. Balfour Vs. Balfour [1919] 2KB 571
2. MOHORI BIBEE Vs. DHARMODAS GHOSE ILR
(1903) 30 CAL 539 (PC)
3. Carlill v Carbolic Smoke Ball Company
[1892] EWCA Civ 1
4. Taylor v Caldwell [1863] EWHC J1 (QB),
(1863) 3 B & S 826, 122 ER 309 (6 May 1863), Court
of Queen's Bench
5. Hadley & Anor v Baxendale & Ors [1854]
EWHC J70
6. Rachit Garg, All about different types of
contracts, https://blog.ipleaders.in/all-about-
different-types-of-contracts/(Last Accessed on
1st July, 2023 – 7.44 PM)
7. Seha Mahanwar, Types of breach of
contract that you should know about
https://blog.ipleaders.in/types-breach-
contract-should-know-about/ (Last Accessed
on 1st July, 2023 – 7.45 PM)
8. Law of Contracts Notes, Study Materials
and Case Laws, Law Bhoomi,
https://lawbhoomi.com/law-of-contracts-

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