Definition:
Literally: The word contract comes from a Latin word"Contractus" which means consent, agreement or to enter into an agreement with a particular person.
Traditionally: Salmond says , "A contract is an agreement creating and defining obligations between the parties"
Sir John Smith says,"A voluntary, deliberate and legally binding agreement between competent parties."
Example: Asif says to Hamid,"Will you purchase my car for Rs.500000?.it is an offer, Hamid says yes, the offer is accepted and a contract is formed.
The contracts can be classified into four categories:
ACCORDING TO ENFORCEABILITY:
According to enforceability, a contract can be divided as under:
a- Valid contract.----
A valid contract is enforceable by law. An agreement becomes enforceable when all the essentials of a valid contract are present.
Obligation of the parties.
In one valid contract, all the parties are legally bound for the performance of the contract. If one of the parties breaches the contract
,the other party can enforce it through the court of law.
Example:
A agrees to sell his car to B. If it fulfills all the essentials of a contract, it is a valid contract. If A fails to deliver the car, B can him and if B fails to pay, A can sue him.
b- Void contract:
The word void means not binding in law. Section 2(j) defines"A contract which ceases to be enforceable by law becomes void, when it ceases to be enforceable" It means that void contract is not void from beginning. It s valid contract when it is made but subsequently it becomes void due to certain reasons.
Obligation of parties. (MAQSOOD AHMED, B.COM, ACMA, 03333424200)
In a void contract both the parties are not bound to fulfill the contract. Under this contract the party who has received any benefit is bound to return to the other party.
A contract becomes void under the following circumstances:
1. Impossibility of performance.
2. Subsequent illegality.
3. Rejection of voidable contract.
4. Impossibility of depending event.
Voidable contract:
" An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at option of the other or others, is a voidable contract."
Example: A promises to sell his car to B for rupees 100000.Hi consent is obtained
by fraud.The contract is voidable at the option of A. He may avoid the contract or elect to be bound by it.
A contract becomes voidable due to following reasons:
1. A contract is voidable when consent is not free.
2. In case of attempted performance, the contract is voidable at the option
of promiser.
3. When the promiser fails to perform the contract within specified time, contract is voidable at the option of promisee.
Obligation of the parties.
It is a valid contract if it is not rejected by the party having the right to reject it. If the aggrieved party avoids the contract, he must restore the benefit received and it can claim damages from the other party.
Unenforceable contact:
It is a contract which can not be enforced in court of law because of some technical defects such as absence of writing, registration, attestation or stamp etc. It can be enforced when defects are removed. The aggrieved party is not entitled to legal remedies.
Example. Ali borrows Rs. one million from Baber makes a promissory note on a Rs.10 stamp paper. It is unenforceable because note is undervalued.
Obligation of parties. NO party is legally bound to perform the contract.
According to formation:
According to formation, a contracts has following three kinds.
Express contracts:
Where the offer and acceptance of an y promise is made in words spoken or written, the promise is said to be express. An express promise results in an express contract.
Example. ASIF tells through email to HAMID that he wants to sell his house and Hamid informs that he agrees to buy the house, it is an express contract.
Implied contract:
Contracts which are inferred from the acts or conduct of the parties or due to course of dealing or circumstances are called implied contracts.
According to section 9, "where the proposal and acceptance of any promise is made otherwise than words, the promise is said to be implied."
Example. A went to a tea cafe and had a cup of tea. It is an implied contract and A will pay for the cup of tea.
Quasi contract:
A quasi contract is created by law and is termed as "certain relations resembling those of contracts" It rests on the principle of equity that no person shall be allowed to enrich himself unjustly at the expense of another.
Example. A, finds lost bag of B. A is bound to return the bag to B.
According to performance:
According to performance, a contracts is of two kinds
Executed contract:
An executed contract is one in which both the parties to a contract have performed their respective obligations. It means nothing remains to be done.
Example. A paints a picture for B, and B pays for the picture.
Excutory contract:
The contract is executed where both the parties to a contract have yet to perform their obligation under the contract, it s an executory contract.
Example. A agrees to paint a picture for B and B agrees to pay him Rs. 500. The contract is executory.
According to parties:
According to parties, a contract is of two kinds.
Unilateral contract:
In a unilateral contract only one party makes a commitment. It is a contract where only one party is bound but the other party chooses to be bound by it.
Example. A promises to Rs. 1000 to any one who finds his lost bag. B finds the bag and returns it to A. It is a unilateral contract which comes into existence when the is found.
Bilateral contract:
A bilateral contract is one in which both he parties to the contract have yet to perform the obligations arising out of contract.
Example. A promises to make bed for B and B promises to pay Rs. 10000 to A.
Literally: The word contract comes from a Latin word"Contractus" which means consent, agreement or to enter into an agreement with a particular person.
Traditionally: Salmond says , "A contract is an agreement creating and defining obligations between the parties"
Sir John Smith says,"A voluntary, deliberate and legally binding agreement between competent parties."
Example: Asif says to Hamid,"Will you purchase my car for Rs.500000?.it is an offer, Hamid says yes, the offer is accepted and a contract is formed.
The contracts can be classified into four categories:
- According to enforceability
- According to formation
- According to performance
ACCORDING TO ENFORCEABILITY:
According to enforceability, a contract can be divided as under:
a- Valid contract.----
A valid contract is enforceable by law. An agreement becomes enforceable when all the essentials of a valid contract are present.
Obligation of the parties.
In one valid contract, all the parties are legally bound for the performance of the contract. If one of the parties breaches the contract
,the other party can enforce it through the court of law.
Example:
A agrees to sell his car to B. If it fulfills all the essentials of a contract, it is a valid contract. If A fails to deliver the car, B can him and if B fails to pay, A can sue him.
b- Void contract:
The word void means not binding in law. Section 2(j) defines"A contract which ceases to be enforceable by law becomes void, when it ceases to be enforceable" It means that void contract is not void from beginning. It s valid contract when it is made but subsequently it becomes void due to certain reasons.
Obligation of parties. (MAQSOOD AHMED, B.COM, ACMA, 03333424200)
In a void contract both the parties are not bound to fulfill the contract. Under this contract the party who has received any benefit is bound to return to the other party.
A contract becomes void under the following circumstances:
1. Impossibility of performance.
2. Subsequent illegality.
3. Rejection of voidable contract.
4. Impossibility of depending event.
Voidable contract:
" An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at option of the other or others, is a voidable contract."
Example: A promises to sell his car to B for rupees 100000.Hi consent is obtained
by fraud.The contract is voidable at the option of A. He may avoid the contract or elect to be bound by it.
A contract becomes voidable due to following reasons:
1. A contract is voidable when consent is not free.
2. In case of attempted performance, the contract is voidable at the option
of promiser.
3. When the promiser fails to perform the contract within specified time, contract is voidable at the option of promisee.
Obligation of the parties.
It is a valid contract if it is not rejected by the party having the right to reject it. If the aggrieved party avoids the contract, he must restore the benefit received and it can claim damages from the other party.
Unenforceable contact:
It is a contract which can not be enforced in court of law because of some technical defects such as absence of writing, registration, attestation or stamp etc. It can be enforced when defects are removed. The aggrieved party is not entitled to legal remedies.
Example. Ali borrows Rs. one million from Baber makes a promissory note on a Rs.10 stamp paper. It is unenforceable because note is undervalued.
Obligation of parties. NO party is legally bound to perform the contract.
According to formation:
According to formation, a contracts has following three kinds.
Express contracts:
Where the offer and acceptance of an y promise is made in words spoken or written, the promise is said to be express. An express promise results in an express contract.
Example. ASIF tells through email to HAMID that he wants to sell his house and Hamid informs that he agrees to buy the house, it is an express contract.
Implied contract:
Contracts which are inferred from the acts or conduct of the parties or due to course of dealing or circumstances are called implied contracts.
According to section 9, "where the proposal and acceptance of any promise is made otherwise than words, the promise is said to be implied."
Example. A went to a tea cafe and had a cup of tea. It is an implied contract and A will pay for the cup of tea.
Quasi contract:
A quasi contract is created by law and is termed as "certain relations resembling those of contracts" It rests on the principle of equity that no person shall be allowed to enrich himself unjustly at the expense of another.
Example. A, finds lost bag of B. A is bound to return the bag to B.
According to performance:
According to performance, a contracts is of two kinds
Executed contract:
An executed contract is one in which both the parties to a contract have performed their respective obligations. It means nothing remains to be done.
Example. A paints a picture for B, and B pays for the picture.
Excutory contract:
The contract is executed where both the parties to a contract have yet to perform their obligation under the contract, it s an executory contract.
Example. A agrees to paint a picture for B and B agrees to pay him Rs. 500. The contract is executory.
According to parties:
According to parties, a contract is of two kinds.
Unilateral contract:
In a unilateral contract only one party makes a commitment. It is a contract where only one party is bound but the other party chooses to be bound by it.
Example. A promises to Rs. 1000 to any one who finds his lost bag. B finds the bag and returns it to A. It is a unilateral contract which comes into existence when the is found.
Bilateral contract:
A bilateral contract is one in which both he parties to the contract have yet to perform the obligations arising out of contract.
Example. A promises to make bed for B and B promises to pay Rs. 10000 to A.
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