Real Estate Basics: The Various types of Contracts In India

Contracts are defined in The Indian Contract Act, 1872 under section 2(h) as “An agreement enforceable by law’. This means that anything which is an agreement and can be enforced under the law of the land is a contract. A contract is a legal document which comprises of rights, duties and obligations of the parties entering into a contract. This legal document is prepared based on mutual consent and agreement between the parties to a contract. It is however necessary for a contract to be signed by both parties to the contract for it become enforceable by law. It is also very important to mention that all contracts in India are governed under the Indian Contract Act, 1872. 

There are ten basic types of Contract:

1. Valid Contract:

A valid contract is the one which can be enforced by the law of the land. A valid contract must fulfill  certain conditions under section 10 of Contract Act. 
- There is Consideration in a contract.
- There is Free Consent.
- Parties are Competent to enter into a contract.
- The object of the Contract is Legal.

2. Voidable Contract:

A voidable contract is defined under section 2(i) of the Contract Act. An agreement which is enforceable by law of land by one party, but not by the other party is considered to be a voidable contract at the option of the party which cannot enforce it.
A contract which is voidable remains in force and has the same value as a valid contract till the time it has not been rescinded by party having an opportunity to rescind. On the contrary the party having an opportunity to rescind can give up this right and make a voidable contract valid.

3. Void Contract:

A void contract is explained under section 2(g) of the act which cannot be enforced by either parties to the contract because of various reasons like lack of  consideration, illegal object, lack of free consent, incompetence of either parties to a contract amongst others.
Under section 20 of Act mistake of fact in an agreement is considered to be a void ab initio.
Under section 24 -30 of the act void agreements are dealt with in detail:
Section 24: Unlawful agreements in part.
Section 25: Lack of Consideration in agreements.
Section 26: Restraint of marriage in agreements.
Section 27: Restraint of trade in agreements.
Section 28: Restraint of legal proceedings in agreements.
Section 29: Unmeaning Agreements.
Section 30: Wagering agreements.

4. Unenforceable Contracts:

Unenforceable contracts are not illegal or wrong in substance but cannot be enforced due to technical issues such as being time barred, absence of registration, absence of signature, absence of written agreement amongst others. All unenforceable agreements can be rectified and initiated again after curing their defects and they can then become valid contracts. No contractual or legal obligations are created out of unenforceable agreements.

5. Unlawful Contracts:

Unlawful contracts find mention under section 23 of the Act. All unlawful contracts are those which are prohibited by the law of the land. It is pertinent to note that not all void contracts are unlawful but all unlawful contracts are void ab initio. Unlawful agreements cannot be enforced by law and therefore have no value.

6. Express Contracts:

Express contracts are mentioned in the first part of section 9 of the act. These contracts deal with those promise which are made expressly either in words or in written.

7. Implied Contracts:

Implied contracts are mentioned in the second part of section 9 of the act. All promises which are made by parties not in written or oral form but based on the acts of either parties is considered as an implied contract. The terms of an implied contract are derived from the acts of the parties.

8. Quasi Contracts:

It is pertinent to note that quasi contracts as a term have not been defined under the act. However, the courts do recognise quasi contracts as an important fact in the interest of justice. 
A quasi contract is not created by any agreement but rather is formed based on certain circumstances based on which courts consider such a situation as a contract.
Such contracts can create a right in personam meaning they can be availed against a particular person and not against the whole world at large. These contracts are based on the idea of equity, justice and good conscience.

9. Unilateral Contracts:

Unilateral contracts are one sided contracts. Such a contract does carry any legal effect till the time the other party to which such a promise has been made carries out any act to enforce such a promise. However, once an act has been initiated by the promisee in response to the promisor’s promise then the agreement becomes legally enforceable and the promisor is liable to fulfill the promise provided all the requirements of a valid contract are met.

10. Bilateral Contracts:

A bilateral contract can be enforced legally. Here both the parties to a promise are promisor and promisee to each other. It is a contract based on the principle of reciprocity as mutual obligations are created on both pa
rties to fulfill their part of the contract. 

It is pertinent to note that this list of contracts is by no means exhaustive and through this list this article only aims to highlighting the major types of contracts made by the people of the society.

The aim of this list to provide a basic understanding of how a contract functions and the factors responsible for a valid contract to be formed. It also mentions certain aspects over which contracts cannot be created or will be considered illegal. In the event of breach of contract the parties to a contract can claim damages in the court of law. In recent times most of the contracts have a provision for arbitration which provides a faster and cheaper method to solve contract related disputes. All contracts also have specific clauses which deal with termination and exit clause which provide the option for parties to amicably exit contracts if they are unwilling or unable to continue with the contract. 

"This article is authored by Adv. Akshay Hariharan (Advocate Delhi High Court), you can reach out to him at"


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