Types of Contract

21 Aug 2018  Read 2083 Views

A contract is simply an agreement between two parties where an offer and acceptance to do or refrain from doing a particular thing along with some form of consideration or remuneration to be given on the fulfillment of the promise.

There are different types of contracts which are admissible under the Indian Contract Act, while others are considered void under the same.

The different kinds of contracts are…

Contracts by seal

Traditionally, a contract only served as an enforceable legal document when it was stamped with a seal indicating that the parties agreed to enter into such a contract and entail its legal consequences.

The importance of the seal has diminished with the advent of different kinds of contracts, however, a seal on the contract still serves as an indicator of the solemn acceptance of the legal consequences of any contract.

Express Contracts

These are contracts which are expressly created by the parties, where the specific terms of the contract have been laid out and there is express consent on the part of both the parties to enter into the contract.

Such a contract can be made orally or in writing. An example of an express contract can be the standard sale contract where two parties enter, with all the terms of the sale expressly stated.

Implied Contract

An implied contract could be explained with the example of a person who chooses to travel by bus. Here, by purchasing a ticket such a person has entered into an implied contract with the conductor that by paying a certain amount of money there has been a contract entered between both the parties to travel a certain distance.

Therefore, as distinguished from express contracts, here the contract is formed through the obligations arising from the mutual agreement and promise which has not been expressly stated in those words. Such a contract becomes enforceable once there is a conduct by the party which binds them to the contract.

Bilateral Contracts

When there is an exchange of mutual and reciprocal promises between two parties in order to fulfill the terms of the contract, it forms a bilateral contract. Here both parties’ give consent and have an obligation to fulfill the terms of the contract.

Taken literally from its name, it can be determined that such a contract is a two-sided contract.

Unilateral Contract

A contract which states that there will be a reward for anyone who finds my lost dog forms a unilateral contract. The same being with the posters of missing people or missing items, all these offers constitute a promise made only by one party without placing an obligation on any particular person to fulfill such promise.

Essentially a unilateral contract is only binding on the person who makes the promise. On the other hand, the person to whom the offer or promise is made can refrain from acting and cannot be sued for the failure to perform, i.e. no action can be taken against the person to whom the promise is made because they did not accept such an offer or made a promise in return.

Aleatory Contracts

A contract of insurance such as a fire insurance in which a company promises to insure certain proceeds is an aleatory contract as it can only be enforced when a fire occurs which is an uncertain event.

Essentially, a mutual agreement which is triggered at the happening of an uncertain event is an aleatory contract. Here, one or both parties assume some kind of risk and uncertainty.


Restrictions of the Indian Contract Act

The above-mentioned contracts are all those which are enforceable under the Indian Contract Act. There are some contracts however which are considered void or voidable under the Act, meaning that they cannot be considered as legally enforceable documents.

Wagering Contracts

Wagering agreements which state that any claim made on the basis of something alleged to be won through wager will be considered void, with the exception of horse racing.

Such principles which formulate into restrictions on contracts are primarily policy based. The restrictions help protects the people from entering into inequitable agreements for the wrong reasons. Such reasons include coercion, undue influence, fraud, misrepresentation, etc.

Unconscionable Contracts

A contract which is unduly one-sided due to the superior bargaining power of one of the parties is voidable at the option of the party whose consent was gained through such undue influence.

Such contracts are usually the result of exploitation by certain powerful enterprises who believe they have the authority to swindle the people who do not have much of a standing in the marketplace.

Agreement in restraint of marriage

Obviously taken from the principle of public policy, any agreement which restraints the marriage of a person, other than a minor is considered to be void.

Agreements of Restraint of trade

Similar to the previous, any contract which restrains the lawful profession or trade of a person is void. Such principle contains the exception of when one sells the goodwill of their company, the buyer can restrict the buyer from engaging in the same business within the local limits for a specified period of time, i.e. the buyer can place reasonable restrictions on the seller from setting a similar business as the one whose goodwill they sold.


Therefore, the Indian Contract encapsulates most agreements between two people made for something legal and which has a reasonable remuneration for the same. Its restrictions only come into play when there are terms which are illegal or when the consent of the parties is not procured in a fair manner.

About the Author: Akshay Mankar | 34 Post(s)

Akshay is a Language Enthusiast & an HNLU alumnus. He believes in simplicity & takes legal literacy very close to his heart.

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