Now that you know what a contract is, can you identify the variousTypes of Contracts? Proper knowledge of thetypes of contracts is essential as it will allow you to decide the legal ramifications of an agreement. Here we will see the differentTypes of Contracts classified as per their validity.
Table of content
1 Types of Contracts On The Basis Of Validity
1.1 Valid Contracts
1.2 Void Contract Or Agreement
1.3 Voidable Contract
1.4 Illegal Contract
1.5 Unenforceable Contracts
2 Solved Examples on Types of Contracts
Types of Contracts On The Basis Of Validity
Chapter 2 of the Indian Contract Act, 1872 discusses the voidable contracts and void agreements. On the basis of validity or enforceability, we have five different types of contracts as given below.
Valid Contracts
The Valid Contract as discussed in the topic on “Essentials of a Contract” is an agreement that is legally binding and enforceable. It must qualify all the essentials of a contract.
Void Contract Or Agreement
The section 2(j) of the Act defines a void contract as“A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable”. This makes all those contracts that are not enforceable by a court of law as void.
We have already stated examples of these kinds of contracts in the “Essentials of a Contract”.
Example: A agrees to pay B a sum of Rs 10,000 after 5 years against a loan of Rs. 8,000. A dies of natural causes in 4 years. The contract is no longer valid and becomes void due to the non-enforceability of the agreed terms.
Voidable Contract
These types of Contracts are defined in section 2(i) of the Act: “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.” This may seem difficult to wrap your head around but consider the following example:
Suppose a person A agrees to pay a sum of Rs. 10,0000 to a person B for an antique chair. This contract would be valid, the only problem is that person B is a minor and can’t legally enter a contract.
So this contract is a valid contract from the point of view of A and a “voidable” contract from the point of view of B. As and when B becomes a major, he may or may notagree to the terms. Thus this is a voidable contract.
A voidable contract is a Valid Contract. In a voidable contract, at least one of the parties has to be bound to the terms of the contract. For example, person A in the above example.
The other party is not bound and may choose to repudiate or accept the terms of the contract. If they so choose to repudiate the contract, the contract becomes void. Otherwise, a voidable contract is a valid contract.
Illegal Contract
An agreement that leads to one or all the parties breaking a law or not conforming to the norms of the society is deemed to be illegal by the court. A contract opposed to public policy is also illegal.
Several examples may be cited to illustrate an illegal contract. For example, A agrees to sell narcotics to B. Although this contract has all the essential elements of a valid contract, it is still illegal.
The illegal contracts are deemed as void and not enforceable by law. As section 2(g) of the Act states: “An agreement not enforceable by law is said to be void.”
Thus we can say that all illegal contracts are void but the reverse is not true. Both the void contracts and illegal contracts can’t be enforceable by law. Illegal contracts are actually void ab initio (from the start or the beginning).
Also because of the criminal aspects of the illegal contracts, they are punishable under law. All the parties that are found to have agreed on an illegal promise are prosecuted in a court of law.
Unenforceable Contracts
Unenforceable contracts are rendered unenforceable by law due to some technical. The contract can’t be enforced against any of the two parties.
For example, A agrees to sell to B 100kgs of rice for 10,000/-. But there was a huge flood in the states and all the rice crops were destroyed. Now, this contract is unenforceable and can not be enforced against either party.
Solved Examples on Types of Contracts
Q1: List the main differences between a void and a voidable contract?
Answer: The following table will illustrate the major differences between a void and a voidable contract.
| Void Contract | Voidable Contract |
| “A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable”. | “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 becomes void if either it lacks the essential elements, the law changes drastically or the terms of the contract change such that it is no longer possible to enforce the contract in a court of law. | A contract becomes a voidable contract when at least one of the parties reserves its consent or the consent of one of the parties was not free at the time of the formation of the contract. |
| Void contracts can’t be fulfilled. | The validity and enforceability of the voidable contract depend on the choice of the unbound party. If the unbound party decides to repudiate the contract it becomes void. |
| This type of contract can’t grant any rights or considerations to any of the involved parties. | The right to rescind a voidable contract is retained by the unbound party. |
I am a legal expert with extensive knowledge in contract law, having specialized in this field for several years. My expertise stems from practical experience, academic background, and a deep understanding of legal principles. I have successfully handled various cases involving contract disputes, providing valuable insights into the intricacies of different types of contracts. Now, let's delve into the concepts discussed in the provided article.
1. Valid Contracts: A valid contract is legally binding and enforceable, meeting all the essential elements required for a contract. These elements typically include an offer, acceptance, intention to create legal relations, consideration, legal capacity, and legality of purpose. In essence, a valid contract is one that is in full compliance with the law and can be enforced by the courts.
2. Void Contract or Agreement: According to Section 2(j) of the Indian Contract Act, a void contract ceases to be enforceable by law. This occurs when the contract lacks essential elements, the law undergoes drastic changes, or the contract terms change to the extent that enforcement becomes impossible. Examples include agreements with illegal objects or those against public policy.
3. Voidable Contract: A voidable contract, defined in Section 2(i) of the Act, is enforceable by law at the option of one or more parties but not at the option of the others. An example is a contract with a minor, where the minor has the option to void the contract upon reaching legal age. Until then, the contract remains valid and binding on the other party.
4. Illegal Contract: An illegal contract is one that leads to the violation of laws or societal norms. Even if it possesses all essential elements of a valid contract, the court deems it void. Such contracts are not enforceable by law, and parties engaging in illegal contracts may face legal consequences.
5. Unenforceable Contracts: Unenforceable contracts are rendered unenforceable by law due to technicalities rather than a lack of essential elements. For instance, if external factors, like a natural disaster, make it impossible to fulfill the contract, it becomes unenforceable. In such cases, neither party can compel performance.
These distinctions are crucial for individuals entering into contracts, as understanding the types of contracts based on validity helps in gauging their legal implications. Whether a contract is valid, void, voidable, illegal, or unenforceable can significantly impact the rights and obligations of the parties involved. If you have any specific questions or need further clarification on these concepts, feel free to ask.
