DIFFERENT TYPES OF LEGAL CONTRACTS
When we talk about different types of legal contracts, we talk about the difference in one of the essential elements of the business – the contract. A contract is a manner of mutually agreeing to do or not to do something by setting out terms and conditions. That difference can be understood based on how the terms and conditions have been set out or on their enforceable or number of parties and more such. So let us discuss different types of contracts:
Based on setting out of terms and conditions
Terms and conditions can be set out either expressly or impliedly. When terms and conditions are explicitly stated in writing or orally, such contracts are known as express contracts. On the other hand, when contacts are entered into based on terms inferred from facts, actions and circumstances, they are implied contracts.
The contracts that arise due to the interference of Courts of law in the interest of justice rather than by the parties’ acts are called quasi-contracts.
Based on a number of parties
When a person assures to do something and provide something of value under a contract, such contracts are unilateral contracts.
Generally, contracts are entered between two parties; such contracts are bilateral contracts. Whereas, if there are more than two parties in a contract, they are multilateral contracts.
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Based on the nature of terms and conditions
Where terms and conditions of a contract are unfairly advantageous to one party, they are unconscionable contracts. These types of contracts are generally unenforceable. An example of such a contract is the contract to limit the damages payable to the party.
When one party to contract is in higher bargaining power than the other party and uses that power to his advantage, leaving the other party in the situation of ‘leave it or take it, such contracts are adhesive contracts. These are also unenforceable contracts. These are also called non-negotiable contracts. An example of such contracts is: Suppose a student struggles to find an affordable guest house to live in. One such found requires approval to a non-negotiable contract that there will not be more than five members at a time or no pets are allowed. In this situation, the landlord has higher bargaining power, and the student was in a ‘leave it or take it’ situation. These contracts are different from unconscionable contracts because there is higher bargaining power in hand to one party in the case of adhesive contracts and not in Unconscionable contracts. Another difference is that adhesive may or may not be unfair, while unconscionable contracts are always unfair.
A contract that comes in force only on the happening of unavoidable events is called an aleatory contract. The best example of this type of contract is an insurance contract. In which liability of insurance company only occurs on the happening of mentioned situation.
The contract by the terms of which the price of the transaction is fixed is called fixed-price contracts.
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Based on enforceability
The contract that has fulfilled all the requirements under the Indian Contract Act, 1872, such as consideration, free consent, the competence of parties and lawful object, etc.: Such contracts are enforceable by the court of law are called valid contracts.
The contracts which are enforceable at the option of one or more parties but not at the option of another or other party are voidable contracts. Such contracts generally arise in situations where contracts occur without the free consent of one or more parties to contract. For example, an avoidable contract becomes valid where the party whose free consent is absent has given up his right to rescind the contract.
The contracts that do not fulfill the contract required under the Indian Contract Act, 1872 and are, therefore, unenforceable are called void contracts.
The contracts that are good in law but cannot be enforced due to technical and situation defects are called unenforceable contracts. For example, when contact is time-barred by the limitation Act.
When the abject or consideration to contract is forbidden by law, such contracts are illegal or unlawful. These are different from void contracts in the way that illegal contracts are punishable if entered into, whereas if void contracts are entered into, they are not punishable but are not enforceable.
