Classification of Contract

In fact it is a hard job to classify the contract. Nevertheless, it has not been classified in any way. Generally, contracts can be classified into simple and specific contracts. To make its comprehensive studies and to reach to the depth of its knowledge it ought to be classified in any way. By involving different areas of the contract the following classifications have been presented below:

Classification of the Contract on the Basis of Enforceability or Legality

On the basis of legal enforceability contract can be classified, in other words from a legal perspective it can be classified which are given below:

a. Valid contract
b. Void contract

c. Voidable contract
d. Unenforceable contract

e. Unlawful contract

a. Valid Contract:

In this type of valid contract, there is no error in the contract and it is legally valid. All the prerequisite elements of a contract are found in it. In a real sense, it is the valid contract that is factual and true. The parties involved in the contract receive mutual liability and rights. In a valid contract, the parties feel more responsible. If this contract is breached, there can be a legal remedy for the innocent party who gets loss or harm or aggrieved. A contract that is enforceable by law is a valid contract.

b. Void Contract:

The contract which is null is void contract. This contract cannot be enforced by law. Therefore, this contract has no legal effect and it is meaningless also. There are miscellaneous circumstances of the revocation of such contract. Muluki Civil Code 2074, section 517 (2) from (a) to (L) have mentioned the situations under which the contract becomes void which are given below:

• A contract preventing anyone from engaging him in any occupation, profession, or trade which is not forbidden by prevailing law.
• A contract restraining marriage other than those forbidden by given or prevailing law.
• A contract preventing anyone from enjoying the facilities already being enjoyed by the general public.
• A contract seeks to prevent the legal rights of any person from being enforced by any government office or court.
• A contract concluded in matters contrary to or forbidden by the prevailing law.
• A contract concluded for immoral purpose or against public morality or interests.
• A contract which cannot be performed because the parties thereto do not exactly know the matter in relation to which it has been concluded.
• A contract that is considered to be impossible to fulfill even at the time is concluded.
• A contract that is vague as it does not provide specified and reasonable meaning thereof.
• A contract is concluded by an incompetent person to conclude such contract.
• A contract concluded with an unlawful objective
• A contract made mistakenly about the essential fact of the matter of the contract
• by both parties.

The contracts mentioned above are said to be void and they do not have any legal effects and meaning in the field of law. But sometimes even the law-binding contract can go void under following circumstances:

• The circumstances created by supervening of impossibility.
• If the matter of contract becomes unlawful after signing the contract.
• In the case of the contingent contract if the event happening in the time to come is sure to not happen or impossible to happen.
• If the court repeals it because of the lack of free consent and other essential elements of a contract.

c. Voidable Contract:

In this type of contract unless the innocent party goes to court for legal remedy and the court declares it as invalid contract, it has the legal effect and is law binding. Only after the decision of the court it becomes unlawful which can neither create rights nor the liability the parties need to performed. The particular thing to know if it is voidable or not, or differentiate the contract, one must to find out the prevalence of free consent of the parties. If the party shows that there was any circumstance prevailed to hinder the free consent of the party while concluding the contract, court favors the aggrieved party and cancels the contract. But the party who has created the hindrances cannot go to court to make it invalid. Muluki Civil Code 2074, section 518 (2) (a), (b), (c) and (d) mention the conditions of the voidable contracts in which situation the innocent party may seek the legal remedy in the court. The circumstances are as follows:

a. Contract under coercion
b. Contract under undue influence
c. Contract under misrepresentation
d. Contract under fraud

d. Unenforceable Contract:

The contract which cannot be enforced and sought legal remedy in the court is unenforceable or unchangeable contract. In legal point of view such contract does not have any meaning. The party involved in the contract cannot receive justice from such contract. Such contracts lack the legal formalities like official registration, seal, writing documents and any specified time frame to seek legal remedy in case of breach. Sometimes due to the mistake made by negotiating parties or technical errors the court cannot help the injured party. Finally such contracts cannot create any legal obligations too.

Classification of Contract on the Basis of Contractual Liability

On the basis of contractual liability, there can be contracts which are as below:

a. Unilateral Contract
b. Bilateral Contract

a. Unilateral Contract:

Unilateral contract is also concluded between two or more than two parties. Actually it does not matter with number of parties included in the contract. It only deals with the legal obligations (liability) of the party involved in the contract. In other words the liability goes with one party and the other is free from it. He does not need to bear the burden of liability. Here are no exchanges

between liability and liability or promise and promise of the negotiating parties, In short, one party takes the burden of liability and the other holds the rights. Here are the exchanges of promise of one party with the performance or fulfillment of the contract of another party. If any party breaks the terms and conditions of the contract, it is deemed to be the repudiation of contract where as the unwillingness to initiate work is not supposed to be the breach of contract. This is how it is one sided to offer him benefit only.

b. Bilateral Contract:

In bilateral contract both of the contracting parties take the burden of liability and rights simultaneously in the contract. Since both of the parties are equally responsible to the contract they have concluded. Here if one party breaks the contracts, the injured party can seek the legal remedy or the compensation of the damage or loss he has borne. Here, the promises of one party are exchanged with the promises of another to perform the terms and conditions of the contracts. In a nutshell, bilateral contract refers that contract which creates equal liability and rights between the negotiating parties. They are equally responsible for the completion of the contract.

Classification of Contract on the Basis of Creation of Contract

There can be classification of contract on the basis of creation of contract which are as follows:

a. Expressed Contract
b. Implied Contract
C. Quasi Contract

a. Expressed Contract:

If one party offers the agreement in oral or written form. to another party and it is accepted by the latter either orally or writing, it is said to be the expressed contract. Hence the agreement forged under writing or oral form is direct or expressed contract. The terms and conditions are offered in a clear way and they are accepted by contracting parties. Interestingly, it creates less dispute or discord between them. Let’s consider an example; if Shyam offers Ram to sell his motorbike for Rs 70,000 and Ram accepts it orally or writing and is ready to buy it, it is an expressed contract.

b. Implied Contract:

In this contract both the offer and acceptance are not in written or oral form but there is tacit contract by conduct of the parties. Therefore, it is called implied contract. It is based on behavioral activities. Offering and acceptance of the agreement are not directly expressed here. Thus, the contract created by tacit exchanges is called implied contract.

c. Quasi Contract:

In fact, quasi contract is not created by the agreement concluded by parties but is created by law. If the law favours the agreement and business between parties, it is called quasi contract. Yet it lacks core elements lawful objective, consideration, free consent, competent parties. Sometimes in the absences of such elements there can be contract between parties on the basis of their conduct and business that creates liability and rights between them. In this way quasi-contract is made on the basis of individual relation that creates legal relation. The activities and transactions of the parties are recognized by law.

Classification of Contract on the Basis of Formality

On the basis of formality also there can be contract. Here, the contracting parties highly consider the formality or processes of law about the subject matters and substance of the contract before concluding the contract. The contracts can be classified in the following way;

a. General Contract:

In general contract generally the contract is concluded between the offeror and the offeree who gives free consent and signs the contract whereby there are no formalities like writing document, official registration and seal etc. If there are competent parties, lawful objectives and the free consent of the proposee, the contract is law binding. In general contract, it is not necessary to follow the processes of legal formalities nor it has any specified method to conclude the contract.

b. Formal Contract:

Formal contract needs legal validity, legal procedures, formality and the definite form of documents. In this way, after preparing the written documents of terms in accord with the present law of the concerned country which has received the offer and promise of the parties is called formal contract. In England formal contract bears official seal which has written statement of terms and references. In Nepalese context, Contract Act 2056 Section 88 includes contract having specific nature that shall have legal procedures, official registration and other legal formalities to acquire legal mandate.

Classification of Contract on the Basis of Creation of Liability

Indeed contract can be classified on the basis of liability created while concluding it. In every contract it is not necessary to create liability at the time of concluding the agreement. The classifications are as follows:

a. General Contract
b. Contingent Contract

a. General Contract:

General contract refers the liability of the parties created at the time of contract which shall be executed by them later on. There is no need of being any event to create the liability to the contracting parties. It generally occupies the larger scope of contract. The liability begins with the statutory sign of the concerned parties.

b. Contingent Contract:

Though there is the provision in the contract Act 2056, it has not been defined in it. The things to be done in accord with contract shall have contingent nature and it must be uncertain too. Contingent contract is a contract to do or not to do something if some event collateral to such contract does not happen. Imagine if any event incidentally happens in future there is creation of liability and it is suppose to be contract but if this does not happen, there is neither creation of contract nor any liability. Thus it is a contract the performance of which is happening of an uncertain event collateral to such contract. In practice, insurance contract is contingent contract. There are preconditions of contract in insurance contract about the happening or not happening of the incident in future at the time of concluding contract. When the incident happens, then only liability starts.

Classification of Contract on the Basis of Execution

Contract can be classified on the basis of its execution and implementation which are given
below:

a. Executed contract:

All the terms and references as mentioned in the contract paper which have created the rights and liability, if they have been executed by either of the parties and there is no liability to be performed and executed, it is called executed contract. Therefore. in another term, it is a complete or perfect contract in which everything has already been performed. There is no need to perform in future. Because it has already performed by the parties at the time of make
contract.

b. Executory Contract:

There can be the condition between the two contracting parties that the liabilities created by contract have been left unexecuted or postponed or left without performing them. After signing the contract there are certain liabilities and rights to be performed and used by both parties. If they are executing it step by step and have not executed all of them, it is called executory contract. Hence it may be partially perform or not perform completely there may be remaining part to perform in future after making the contract.

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