Types of contracts based on validity

According to Indian Contract Act, 1872, there are four types of contracts based on validity: valid contracts, void contracts and voidable contracts. Contracts form the backbone of commercial transactions and personal dealings in everyday life. They are essential for establishing legally binding agreements between parties. 

In this article, we will discuss types of contracts based on validity with definitions, examples and case laws along with relevant provisions.

Types of contracts based on validity under Indian Contract Act, 1872

Valid Contracts

A valid contract is a legally binding agreement that satisfies all the essential elements of a contract. These essential elements include an offer, acceptance, consideration, free consent, capacity, and a lawful object. A contract that satisfies these elements is enforceable by law, and both parties must fulfill their obligations under the contract.

Examples of valid contracts include employment contracts, sales contracts, lease agreements, and service contracts. For instance, when you rent a house, you enter into a valid contract with the landlord. The contract outlines the terms and conditions of the rental agreement, such as the rent amount, duration of the lease, and maintenance responsibilities. If either party violates the terms of the contract, the other party can seek legal remedies.

When two parties agree to enter into an agreement which can be enforced by law, it is known as a valid contract.

Rajat Kumar Rath v. Government of India (2000)

In this case, an agreement which, although invalid, is not prohibited by law, can be applied as a valid agreement, if it is merely a collateral agreement to anyone other than the one which provides an assist in the enforcement of this object of the other agreement.

Provisions related to valid contracts are outlined in Sections 10 to 30 of the Indian Contract Act, 1872. These sections define the essential elements of a contract and lay down the rules for offer and acceptance, consideration, and other aspects of a contract.

Void Agreements

A void agreement is a contract that has no legal effect from the beginning. It is null and void ab initio, which means it is not enforceable by law, and the parties cannot be compelled to fulfil their obligations under the contract. Such contracts are deemed void because they lack one or more essential elements required for a contract to be valid.

Examples of void agreements include contracts with minors, contracts made under coercion, contracts that are against public policy or morality, and contracts with unlawful objects. For instance, a contract that requires a person to commit a crime or fraud is void because it is against the law.

The provisions related to void agreements are outlined in Section 2(g) of the Indian Contract Act, 1872. This section defines a void agreement as an agreement that is not enforceable by law.

The maxim VOID-AB-INITIO is used for these agreements which means that these agreements are void from the beginning.

For example: Contracts entered by minors are considered void. A, is a fourteen-year-old boy, who enters into a contract with b, an adult. A takes a loan from B and fails to pay it back. B cannot sue A since he is a minor and the contract between them is void.

Voidable Contracts

A voidable agreement is a contract that is enforceable by law until one of the parties decides to void the contract due to some defect or lack of free consent. Such contracts are valid unless and until one of the parties decides to avoid them.

Examples of voidable contracts include contracts made by a person who is not of sound mind, contracts made by a person under duress or undue influence, and contracts made by misrepresentation or fraud. For instance, a contract entered into by a person who was coerced into signing it is voidable at the option of the coerced party.

The provisions related to voidable agreements are outlined in Sections 2(i) and 19 to 30 of the Indian Contract Act, 1872. These sections define the rules for free consent, coercion, undue influence, and misrepresentation in contracts.

Conclusion

Under Indian Contract Act, a valid contract is a legally binding agreement that satisfies all the essential elements of a contract, and both parties are bound to fulfil their obligations under the contract. A void contract is a contract that lacks one or more essential elements and is not enforceable by law. A voidable contract is a contract that is valid until one of the parties decides to void the contract due to some defect or lack of free consent. A quasi-contract is not a contract in the true sense of the term, but it is a legal fiction created by the courts to prevent unjust enrichment.