Contracts can be classified based on formation, validity, and performance. Formation includes express, implied, and quasi-contracts. Validity looks at valid, void, voidable, and illegal contracts. Performance distinguishes executed, executory, unilateral, and bilateral contracts.
A breach of contract occurs when a party fails to perform their obligations under the contract. Remedies for breach include rescission of contract, damages, specific performance where a breaching party must fulfill their duties, injunction to prevent prohibited acts, and quantum meruit for partial performance. Damages are further specified as ordinary, special, exemplary, and nominal depending on the type and circumstances of loss from the breach.
Measures of Central Tendency: Mean, Median and Mode
Classification of contract
1. CLASSIFICATION OF CONTRACTS
Contracts may be classified on the basis of their;
(a) Enforceability or Formation
(b) Validity
(c) Performance or Execution
Formation Validity Performance
Express Contract
Implied Contract
Quasi Contract
Valid Contract
Void Contract
Voidable Contract
Illegal Contract
Unenforceable Contracts
Executed Contract
Executory Contract
Unilateral Contract
Bilateral Contract
Classification of contracts
2. CLASSIFICATION ACCORDING TO FUNCTION
According to the mode of formation of contracts, contracts may be classified into three namely,
1. Express Contract
2. Implied Contract
3. Quasi – Contract.
Express Contract
A contract is said to be an express contract, if the terms of a contract are expressly agreed upon
between the parties (either by words spoken or written) at the time of formation of the contract.
Example 1: The contract of sale of a property is made expressly by using clear words written on a
stamped paper.
Example 2: If A asks B whether he will purchase his pet dog and B accepts it, it can also be
termed express contract. Oral promise and acceptance, if made clearly, constitute a legal contract
expressly made.
Express contracts reduced into writing are easier to prove in law than oral contracts.
3. Implied Contracts
Section 9 of the Act states that any promise or acceptance which is made otherwise than in words.
If a contract can be inferred from the conduct of the parties or circumstances, they are called
implied contracts.
Example: If a person boards a bus, the law implies a promise on his part to pay the fare and also
on the part of the bus operator to carry him safely to the required destination. This is inferred from
the conduct of the parties and is accepted by law in the form of implied contract.
Quasi – Contract
A quasi-contract is one, which is created by law. In the quasi-contract, there is no intention on
either side to make a contract. In a quasi contract, rights and obligations arise not by an agreement
but by operations of law.
For example, where certain letters are delivered to a wrong addressee, the addressee is under an
obligation to return the letters.
4. CLASSIFICATION BASED ON VALIDITY
Valid Contract
A contract, which satisfies all the legal requirements laid down in section 10 of the act, is known
as valid contract. Agreements made by the free consent of parties who are competent to contract
and must be made for a lawful consideration with a lawful object.
Void Contract
It is an agreement not enforceable by law. Agreements shown below are void as per the Act:
An agreement made by an unsound person.
An agreement made by mistake of fact.
An agreement made with unlawful object and consideration.
An agreement made without consideration.
An agreement in restraint of trade, marriage or Profession, legal proceedings.
Any wagering agreement.
Any contingent agreement to do or not to do something in case of happening of an impossible
event.
5. Voidable contract
An agreement, which is enforceable by law at the option of one or more of the parties to the
contract, but not at the option of other or others, is a voidable contract.
Example: A being the father of B asks him to enter into a contract with C, which B believes to be,
not worthy. Yet B could continue the contract despite the undue influence of his father A. Thus,
the contract is voidable at the option of B as he could repudiate the contract and prove the undue
influence of his father.
Illegal Contract
It is an agreement, the consideration or object of which
(i) Is forbidden by law
(ii)Defeats the provisions of any law
(iii)Is fraudulent
(iv)Involves or implies injury to the person or property of another
(v)The court regards it as immoral or opposed to public policy.
Example: A enters into an agreement with B to produce a specially brewed liquor, which is
banned in the State.
6. Unenforceable Contract
Unenforceable contracts are such contracts, which are not enforceable in law due to some
technical defects. If the law requires a contract to be in writing, an oral contract in its place cannot
be enforced.
An unenforceable contract is a valid but for certain technical reasons such as want of proof, expiry
of the period within which enforceable, insufficiency of stamp becomes unenforceable.
CLASSIFICATION ACCORDING TO PERFORMANCE OR EXECUTION
Executed Contract
An executed contract is a fully completed contract which has met all the requirements of a contract as per
law. Both the parties to the contract have discharged their obligations and ther remains nothing to be
performed y either party.
Example 1: A enters into a contract with B who is a videographer to cover a marriage function. The
payment will be made if B delivers the video footage to A after editing. This is a fully completed contract
which is executed.
Example 2: in the case of purchase of a house, the house owner signs a sale agreement with the buyer and
purchase money is paid in full at the time of execution. This is a fully completed contract and is called an
executed contract.
7. Executory Contract
An executory contract is one, which is either wholly unperformed, or something remains in there to be
done by both the parties to contract. Sometimes, a contract may be partly executed and partly executory.
Example: A wants to buy an immovable property of B. A gives token advance and enters into an
‘agreement of sale’ with B to purchase the property on or before a specific date. Here full obligations are
not complete as A has not paid the full amount and B has not delivered the title to A.
Unilateral Contract
It is also called as one-sided contract. Only one person/group or side has promised to perform. The other
part has not really promised to do the act.
Example: A lost his gold chain and he publishes a newspaper advertisement that he will pay a certain
sum to the finder of his gold chain. Here A has promised to do the act. But the other part is uncertain.
This is a unilateral contract.
Bilateral Contract
A bilateral contract is a normal contract where both parties are involved by their respective
promises/offer and acceptance.
For example, A promises to stitch a cloth and B promises to pay Rs.30. Here A promises to stitch the
cloth and B promises to pay. Thus, each party is both a promisor and a promisee.
8. BREACH OF CONTRACT
A breach of contract is a violation of any of the agreed-upon terms and conditions of a binding
contract.
A contract is breached or broken when any of the parties fails or refuses to perform its promise
under the contract. Breach of contract is a legal cause of action in which a binding agreement is
not honored by one or more parties by non-performance of its promise.
The most common forms of breaches of contract are:
1. Defective performance: where the contract is partly performed but not to the standard
required by the contract
2. Delayed performance: where a party does not perform on time, in accordance with the time
frames required by the contract
3. Complete non-performance: a party does not do anything to perform the contract.
9. Types of Breach Of Contract
The breach of a contract is defined as one or more parties involved in a contract do not honor a binding
agreement.
There are four types of contract breaches recognized by the law today:
Minor breach
Material breach
Fundamental breach
Anticipatory breach.
Actual Breach
Minor Breach of Contract
Also sometimes called a Partial Breach of Contract or an Immaterial Breach of Contract, a Minor Breach of
Contract refers to situations where the deliverable of the contract was ultimately received by the other party,
but the party in breach failed to fulfil some part of their obligation.
A minor or partial breach is when the non-breaching party of the contract is not entitled to an order for
performance of its obligations but only to collect the damages for which they are owed.
For instance, if a homeowner hires a contractor to install new windows in a home and asks for wind resistant
windows but the contractor uses windows that are not wind resistant the homeowner will ask the contractor
for damages incurred.
10. Material Breach of Contract
A material breach occurs when one party receives significantly less benefit or a significantly different result than
what was specified in a contract. Material breaches can include a failure to perform the obligations laid out within
a contract or a failure to perform contracted obligations on time.
For example, if the contractor mentioned above uses windows that aren’t wind resistant and the windows break,
the homeowner can collect damages for replacing the windows with the wind resistant ones.
A Fundamental breach of a contract is when the person that has had the contract breached against can sue the
breaching party for damages incurred as well as terminate the contract if they wish to do so.
Anticipatory Breach of Contract
In the case of an Anticipatory Breach, an actual breach has not yet occurred, but one of the parties has indicated
that they will not fulfil their obligations under the contract.
An anticipatory breach of a contract is when the non-breaching party realizes that the other party of the contract
will fail to perform his or her part of the contract in the future and can terminate the contract and sue for damages
before the breach happens.
Actual Breach of Contract
An Actual Breach of Contract refers to a breach that has already occurred, meaning the breaching party has either
refused to fulfill their obligations by the due date or they have performed their duties incompletely or improperly.
11. REMEDIES FOR A BREACH OF CONTRACT
When an individual or business breaches a contract, the other party to the agreement is entitled to relief
(or a "remedy") under the law. The remedies for a breach of contract are:
When one of the party commits a breach of the contract, the other party becomes entitled to any of the
following reliefs:
Rescission of the contract.
Damages for the loss suffered.
Suit for the specific performance.
Suit upon quantum meruit.
Suit for injunction.
1] Recession of Contract
When one of the parties to a contract does not fulfil his obligations, then the other party can rescind the
contract and refuse the performance of his obligations.
Sec. 64 of the Act provides that the party who rescinds the voidable contract, shall if he has received
any benefit there under from the other party, restore such benefit to the person from whom it was
received.
12. 2] Sue for Damages
The term “Damages” means monetary compensation payable by the defaulting party to the
affected party for the loss suffered by him when contract was breached. Therefore, the aggrieved party
may bring an action for damages against the party who is guilty of the breach of contract.
Types of Damages
There are four types of damages, which.can be claimed by the aggrieved party.
1. Ordinary Damages or General Damages: Damages that arise in the ordinary course of events from
the breach of contract are called ordinary damages.
2. Special Damages: Special damages are those damages that are payable for the loss arising on
account of some special or unusual circumstances. That is, they are not due to the natural and probable
consequences of the breach of the contract.
3. Exemplary or Vindictive Damages: These damages are awarded against the party who has
committed a breach of the contract with the object of punishing the erring as defaulting party and to
compensate the aggrieved party.
4. Nominal Damages: Nominal damages are awarded to the aggrieved party when there is only
technical violation of the legal rights.
13. 3] Sue for Specific Performance
This means the party in breach will actually have to carry out his duties according to the contract. So if any of the parties
fails to perform the contract, the court may order them to do so. This is a degree of specific performance and is granted
instead of damages.
For example, A decided to buy a parcel of land from B. B then refuses to sell. The courts can order B to perform his duties
under the contract and sell the land to A.
4] Suit for Injunction
The term “Injunction” may be defined as an order of the Court instructing a person to refrain from doing some act that has
been the subject matter of contract.
An injunction is like a decree for specific performance but for a negative contract. An injunction is a court order
restraining a person from doing a particular act.
Therefore, a court may grant an injunction to stop a party of a contract from doing something he promised not to do.
Example: A contracted to sing only at B’s theatre and nowhere else for a certain period. Afterwards A made a contract
with C to sing at C’s theatre and refused to sing at B’s theatre. The Court refused to order specific performance because
the contract was of a personal nature but granted an injunction against A to restrain him from singing anywhere else.
5] Suit upon Quantum Meruit
In literal sense, the expression “Quantum Meruit” means, “as much as earned “. In legal sense, it means payment in
proportion to the work done.
Therefore, the party must be paid a reasonable remuneration for the part of the contract he has already performed. This
could be the remuneration of the services he has provided or the value of the work he has already done.