Types of Agreements under the Indian Contract Act, 1872

Agreement and contract are related, but not identical

Begin with the statutory vocabulary. Most confusion about the types of agreements comes from using the words agreement and contract as if they mean the same thing.

Section 2(e) of the Indian Contract Act, 1872 states that every promise, and every set of promises forming consideration for each other, is an agreement. Section 2(h) then defines a contract as an agreement enforceable by law. The relationship can therefore be expressed simply:

Every contract is consequently an agreement, but every agreement is not a contract. A dinner plan between friends may be an agreement in ordinary language but it ordinarily lacks an intention to create legal obligations. A sale agreement satisfying Section 10, on the other hand, creates enforceable duties.

The Act does not place all agreements into one exhaustive numbered list. Textbooks classify them on several different bases. One transaction can fit more than one classification at the same time. An online purchase, for example, may be express, bilateral, executory and valid.

Students should first understand the meaning and scope of a contract, then test formation, enforceability and performance separately.

The four-part classification map

Instead of memorising a flat list, ask four questions about the transaction. Each question produces a different set of labels.

Types of agreements based on enforceability

This is the most important classification for the Indian Contract Act because it identifies the legal effect of the transaction and the remedy, if any.

Valid contract

A valid contract is an agreement enforceable by law. Section 10 requires free consent of competent parties, lawful consideration and object, and an agreement that is not expressly declared void. Other essentials, including a lawful offer, absolute acceptance, certainty and possibility of performance, must also be satisfied where applicable.

The result is a binding obligation. If one party fails to perform, the other may seek the remedies recognised by contract and specific relief law. Formation is studied in detail through offer, acceptance, consideration and capacity.

Void agreement

Section 2(g) calls an agreement not enforceable by law void. It creates no contractual right that a court will enforce. The reason for invalidity, however, still matters. An agreement may be void because a party lacked contractual capacity, both parties were mistaken about an essential fact, the object was unlawful, consideration was absent, the terms were uncertain, or the promised act was impossible.

The Act also expressly declares several agreements void. These include agreements in restraint of marriage under Section 26, restraint of trade under Section 27, restraint of legal proceedings under Section 28, uncertain agreements under Section 29 and wagering agreements under Section 30, subject to the language and exceptions of each provision.

Void contract

Section 2(j) deals with a different situation. A contract becomes void when it ceases to be enforceable by law. It may have been perfectly valid when made but later lose enforceability because performance becomes impossible or unlawful.

This temporal distinction is exam-relevant. A void agreement never acquires enforceability in the relevant sense. A void contract begins as enforceable and later becomes void. Section 65 may require restoration of an advantage where an agreement is discovered to be void or a contract becomes void.

Voidable contract

Under Section 2(i), a voidable contract is enforceable at the option of one or more parties but not at the option of the other or others. It is not automatically void. The protected party has an election to affirm or avoid the transaction.

Coercion, fraud and misrepresentation commonly make a contract voidable under Section 19. Undue influence is governed by Section 19A. Other provisions also create voidability in particular circumstances, including refusal to perform a promise in its entirety under Section 39, prevention of reciprocal performance under Section 53 and failure to perform at an essential time under Section 55.

A student should identify who holds the option, whether that person affirmed the transaction after learning the truth, and what restoration follows from rescission. See the detailed guide to free consent.

Illegal or unlawful agreement

The Act defines when consideration or object is unlawful in Section 23. It is unlawful when forbidden by law, when permission would defeat the provisions of law, when fraudulent, when involving or implying injury to person or property, or when the court regards it as immoral or opposed to public policy.

Every agreement with unlawful consideration or object is void, but every void agreement is not illegal. The practical difference is visible in collateral transactions. Illegality may taint a connected transaction, while a transaction collateral to an agreement that is merely void may sometimes survive.

The Supreme Court applied this distinction in Gherulal Parakh v. Mahadeodas Maiya. A wagering agreement was void under Section 30 but was not, merely for that reason, forbidden by law under Section 23.

Unenforceable agreement

"Unenforceable agreement" is a useful textbook expression rather than a separate definition in Section 2. It usually describes a transaction whose substance may otherwise be valid but which cannot presently be enforced because a required formality, stamp, registration, proof or limitation requirement has not been satisfied.

It should not be casually equated with an illegal agreement. Some defects may be curable, while illegality goes to the lawfulness of the object or consideration. The exact result depends on the statute creating the formal requirement.

Types based on how the agreement is formed

The law recognises assent expressed in words as well as assent inferred from conduct. The real question is whether the outward facts objectively communicate agreement.

Express agreement

Section 9 states that promises are express when the proposal or acceptance is made in words. The words may be spoken, written or communicated electronically. A signed lease, an oral agreement to repair a vehicle, and a clickwrap agreement accepted by selecting "I agree" can all be express.

Express does not automatically mean valid. The agreement must still satisfy capacity, free consent, lawful object and every other applicable requirement. Some transactions must also comply with independent writing or registration rules.

Implied agreement

A promise is implied when the proposal or acceptance is made otherwise than in words. Conduct, established dealings and surrounding circumstances may show the parties' assent. A passenger boarding a bus and paying the notified fare enters a contractual relationship without negotiating each term.

Section 8 also recognises acceptance by performing the conditions of a proposal or accepting consideration offered with it. Courts look for conduct that objectively corresponds with the proposed bargain, not an uncommunicated private intention.

Electronic and standard-form agreements

Electronic contracts are not a wholly separate validity category. They are usually express or implied agreements formed through electronic records and conduct. Their enforceability depends on ordinary contract principles together with the Information Technology Act, 2000 and any applicable formality.

Browse the dedicated guides to online contracts and standard-form contracts for notice, assent and exclusion clauses.

Types based on performance and outstanding promises

These classifications describe the stage or structure of performance. They do not independently decide whether the agreement is legally valid.

Executed and executory contracts

An executed contract has been fully performed by the parties. In an immediate retail sale, payment and delivery may occur together. An executory contract contains an obligation that remains to be performed in the future. A contract for delivery next month is executory until the promised performance occurs.

A contract may be executed for one party and executory for the other. If a buyer pays in advance but the seller must deliver later, the buyer's principal obligation is performed while the seller's remains outstanding.

Bilateral and unilateral contracts

In a bilateral contract, a promise is exchanged for another promise. Both parties undertake obligations, such as a seller promising delivery and a buyer promising payment on a future date.

In a unilateral arrangement, the offer seeks an act rather than a return promise. A public reward offer is the familiar example. The offer is accepted by a person who knows of it and performs the stated condition. The classic common law illustration is Carlill v. Carbolic Smoke Ball Co.

Contingent contracts depend on a collateral uncertain event

Section 31 defines a contingent contract as a contract to do or not do something if an event, collateral to the contract, happens or does not happen.

The uncertain event must be collateral to the promised performance. It is not itself the reciprocal promise forming the whole bargain. Insurance is a common illustration: the insurer's obligation depends on the occurrence of an insured event, while the parties have a genuine interest extending beyond a chance to win or lose.

Sections 32 to 36 regulate enforcement according to whether the event happens, becomes impossible, does not happen within a fixed time, or depends on the future conduct of a living person. A contingent contract is not automatically void. Its enforceability waits upon the statutory condition.

Quasi-contracts are not agreements at all

The expression quasi-contract is convenient but can mislead beginners. Sections 68 to 72 create obligations resembling those created by contract even though the parties did not form an agreement. The law imposes the obligation to prevent one person from unfairly retaining a benefit at another's expense.

Examples include reimbursement for necessaries supplied to a person incapable of contracting, payment by an interested person, compensation for a lawful non-gratuitous act, responsibility of a finder of goods, and repayment of money delivered by mistake or under coercion.

Continue with the complete guide to quasi-contracts.

Complete comparison of the principal types

Use this table for revision, but support the label with the relevant statutory provision in an exam answer.

Five worked examples

Classification becomes easier when the label is connected to its legal consequence.

Landmark judgments and their real use

Learn what each authority proves. A case name without the relevant proposition does not improve a legal answer.

How to answer "types of agreements" in an exam